The Basf group is one of the main industrial groups in Spain, with seven companies and 2,700 workers. Although the chemical sector is going through difficult times in Europe due to the high price of energy, Carles Navarro, general director of BASF Española, predicts that it will grow strongly in Spain, driven by the availability of renewable energy at competitive prices.
The chemical sector has always been one of the pillars of the Spanish industry, but the rise in energy prices has placed it in a difficult financial moment.
The chemical industry is in a phase of great transformation, due to the challenge of decarbonization, its effort to digitalize, the effort to circularize its operations and all raw materials and due to European legislation. All industries in transformation go through difficult times. But the Spanish industry has a very high level of competitiveness: production will close this year with an increase of 0.8%, while the European average is a drop of 12%. And 70% of Spanish production is exported.
Basf presented its global results last week, with double-digit declines in revenue and profits.
We suffer from the cost of energy, which skyrocketed after the war in Ukraine. In 2022 it already rose, but demand was strong and we were able to transfer part of those costs to prices. In 2023 energy has decreased but so has demand and we have not been able to maintain prices, so profitability has decreased.
Germany has been hit hard by the loss of Russian gas pipeline supplies. Will this cause a structural change in the location of factories in Europe that favors Spain?
It is still early to say, but I would say that Spain may have a special attraction in Europe for investments that are energy intensive because we are a renewable energy paradise: we will have much more than other European countries at competitive prices. Any chemical process that needs to be decarbonised will require electricity from renewable sources and this electricity will be cheaper here than in other parts of Europe. It is a very important competitive advantage that we must capitalize on.
The investments necessary to decarbonize chemistry are very high. Does the European industry have the resources to face them and remain competitive compared to other countries?
For me, this is the great challenge for European industry, maintaining its competitiveness in an environment in which other regions of the world enjoy much lower energy costs. Especially the United States, which has gas between 5 and 6 times cheaper than Europe. And its own legislation further encourages investment in decarbonization projects, through the Inflation Reduction Act. In response, and inspired by it, Europe has approved the Net Zero Industry Act, but European legislation is more complicated, heavier than the American. European industry has a challenge ahead: maintaining sufficient production capacity in Europe, to continue having strategic autonomy.
Europe is already a net importer in the chemical sector.
In chemistry we had been net exporters until a few months ago. This change could be structural if we do not manage to return to energy costs like those we had before the conflict with Ukraine.
So, is there a future for the chemical industry in Spain and Europe?
In Spain yes, as we have mentioned, due to the availability of renewable energies. In the rest of Europe we will have to count on the support of the European authorities. We are trying to make them see that chemistry is a basic industry, because it is involved in 95% of all manufacturing of anything. If this chemistry is not made locally, it will have to be imported and we will be in the hands of other regions. Administrations are understanding this strategic importance and the support that must be given to the sector to maintain its competitiveness.
How do you see the political and economic situation in Spain? Does it affect them?
We never speak out on political issues. We adapt and speak with the governments that exist at all times. Spain is an attractive country for BASF, regardless of the political situation, because it has arguments to be the recipient of large investments and have a positive industrial future.
Basf is one of the leading industrial companies in Catalonia, especially for its factory in Tarragona. But they are growing more in other communities.
The Tarragona factory is the largest of the group in southern Europe: our crown jewel. But chemistry is a sector in which products have a certain life and we have to continually look for new opportunities, for which we compete with the other European factories in the group. Tarragona must be the recipient of a lot of investment in the coming years for the decarbonization of the industry and also to meet the needs of its clients in the future. Therefore, we are convinced that Tarragona will be a net recipient of large investments and not only from BASF.
Your group barely had a presence in Madrid until the opening of its global digital hub in 2019. Did the political situation in Catalonia with the procés influence the decision to choose Madrid?
No. It was a global decision, because it was the first to be established outside of Germany, which was made with technical criteria, and we are very happy to have been able to bring it to Spain. We have found very good technicians, who do high-quality work for everyone. We already have 520 people. Spain is a good place to establish yourself. We are no longer a cheap country, but we have a combination of well-trained talent and reasonable costs that makes us very attractive.
It seems that in a few months its Tarragona plant will have a European gauge connection with the Mediterranean corridor.
In 2024, the European gauge is scheduled to arrive at the port of Tarragona. We have changed our initial project and will build an intermodal terminal in the port. It is a great strategic advantage for the territory, and for the chemical industry of Tarragona it is essential, to be able to transport large volumes of goods in both directions by train, which is cheaper, safer and creates fewer CO2 emissions. The train will greatly improve the competitiveness of the sector: we export 70% of production and our main clients are European countries.
