Company News
August 6, 2025
Korean Spandex Producer to Exit China
Taekwang Industrial to Withdraw from China, Halts Spandex Operations
PUdaily | Updated: August 6, 2025
Taekwang Industrial has made the final decision to completely halt operations of its Chinese subsidiary, Taekwang Synthetic Fiber (Suzhou), and withdraw from business in China after 20 years of presence. This drastic measure was taken due to global oversupply and weak demand, which resulted in operating losses of 93.5 billion won over the past three years.
Taekwang Industrial announced on July 31 that its board of directors held a meeting on July 30 and resolved to cease operations of Taekwang Synthetic Fiber (Suzhou). The company plans to halt all production at its factories in August and conclude sales activities for inventory disposal by October. Currently, 502 employees work at Taekwang Synthetic Fiber, and the company aims to complete the collection of accounts receivable and terminate employee contracts by the end of the year.
The board of directors also resolved to raise 100 billion won through a rights offering to facilitate the withdrawal from China. The funds will be used to repay loans due to accumulated deficits and for operating capital. A Taekwang Industrial official stated, “The decision to withdraw from China is a measure to prevent further accumulation of losses and strengthen the competitiveness of our core businesses,” adding, “Based on this decision, we will improve management efficiency and accelerate the discovery of new growth engines.”
Taekwang Industrial was the first in Korea to successfully commercialize spandex in 1979. In 2003, when former Chairman Lee Ho-jin was serving as the representative, the company established its Chinese subsidiary and began commercial production in 2005, securing an overseas spandex production base.
Taekwang Synthetic Fiber has been producing 27,000 tons of spandex annually. Since its establishment until last year, it recorded cumulative sales of 2.6143 trillion won and cumulative operating losses of 68.6 billion won. Recently, operating losses reached 93.5 billion won over the past three years, and in the first quarter of this year, it recorded a loss of 7.2 billion won, falling into a state of complete capital impairment with negative total equity.
August 4, 2025
Urethane Highlights from Covestro Call
Covestro AG (CVVTF) Q2 2025 Earnings Call Transcript
Aug. 01, 2025 6:20 AM ETCovestro AG (CVVTF) Stock, COVTY StockCVVTF, COVTY
Covestro AG (OTCPK:CVVTF) Q2 2025 Earnings Conference Call July 31, 2025 9:00 AM ET
Company Participants
Carsten Intveen – Investor Relations Director
Christian Baier – CFO & Member of Management Board
Markus Steilemann – CEO & Chairman of Management Board
Ronald Koehler – Head of Investor Relations & Corporate Controlling
Markus Steilemann
Thank you, Ronald, and good afternoon to everybody, and a warm welcome to our second quarter call. With the end of today, Covestro’s Chief Commercial Officer, Sucheta Govil, will go into her well-deserved retirement after 2 consecutive terms on the Board of Covestro. I would like to express my sincere gratitude to Sucheta for her exceptional contributions and her dedication to shaping our company.
On behalf of the entire Board of Management, I now have the great pleasure to introduce the new Chief Commercial Officer of Covestro, Monique Buch, to the investor community. Monique is an esteemed top manager with an impressive track record and a long-standing experience in the materials business. In her last position, she served as Executive Vice President, Nonwoven at Lenzing AG Austria. This position had been preceded by various leading positions at Freudenberg and Dow Corning. She obtained a master in Industrial Engineering & Management from the University of Twente.
The other members of the Board of Management of Covestro and I are delighted that Monique will take an active role in improving our business performance while transforming Covestro to the circular economy and execute our sustainability — sustainable future strategy. Turning to the next page. Positive news are coming from our M&A team. We always said that we are looking for bolt- on acquisitions for our Solutions and Specialty business. Now with the acquisition of Pontacol, a Swiss manufacturer of multilayer adhesive films, we have done another step in this direction. This move expands our specialty films product and technology portfolio, enhancing our European market presence.
The acquisition offers attractive value creation through portfolio, organizational and procurement synergies. The addition of production sites in Switzerland and Germany strengthens our global manufacturing network and improves regional availability of adhesives films. This expansion enables us to deliver more powerful customer solutions, increase competitiveness and grow sustainably. We expect sales growth in the low double-digit euro million range by accessing growing applications, including security glazing, flexible printed electronics and wind blade leading edge protection.
The EBITDA contribution of these attractive applications is expected in the mid-single-digit million euro range. The closing is expected in the second half of this year. After these encouraging news, let us now turn to the key effects of the last quarter. Turning to next page. The key effects of the second quarter were sales volumes remained stable. We had lower sales of EUR 3.4 billion, and they were caused by lower prices and unfavorable currency. We achieved an EBITDA of EUR 270 million, which is in the upper half of our guidance range. The free operating cash flow came in negative at EUR 228 million. Following our July 11 announcement, we adjusted our guidance for EBITDA, free operating cash flow and return on capital employed above WACC. We were the first of several chemical companies that have since revised their guidance in response to adverse market conditions.
Turning over to the next page. We are looking at the business and the volume development in the second quarter of 2025. Year-over- year, global sales volume remained flat, almost balancing negative developments in Europe, Latin America and Asia Pacific with positive volume trends in North America. Across different industries, construction showed the highest growth with a mid-single-digit percentage increase, mainly driven by regional supply and demand patterns without major import-export trade flows. All industries depend on imports/exports declined. Automotive saw a low single-digit decline. Furniture followed with a mid-single-digit decline and Electronics was most affected with a high single-digit decline.
Regional performance varied significantly. Europe and Latin America presented a mixed picture. Furniture/wood showed a slight increase. Automotive remained flat, while construction declined slightly and electronics dropped significantly. North America sales volumes, especially in Performance Materials, increased significantly, driven by strong growth in construction due to gaining market share from competitors relying on imports. Furniture/wood increased slightly. Electronics developed flattish, while automotive
showed significant decline. Asia Pacific maintained a slight sales volume increase due to significant growth in construction, automotive with slight growth, but strong negative trends persisted in electronics and furniture.
Christian Baier
After Solutions and Specialties, we now turn to the Performance Materials segment. Year-over-year sales declined by 11.8%, driven by negative contributions of minus 6.6% from pricing, minus 3.0% from FX and minus 2.2% from volumes.
Quarter-over-quarter, sales increased in APAC and North America, while EMLA declined. The Q2 ’25 EBITDA of EUR 149 million is lower year-over-year, mainly due to a negative pricing delta, while positive volume effects from reducing low-margin or loss- making business. Sequentially, the EBITDA in Q2 ’25 rebounded after the Q1 impact from onetime costs related to the closure of our PO JV with Lyondell. It increased due to positive effects from others, mainly from bonus provision release and cost contingency, positive volumes and pricing delta following the high energy costs during the winter period. We are also reducing the EBITDA guidance from EUR 400 million to EUR 700 million and now expect PM to contribute between EUR 200 million to EUR 500 million. This adjustment is based on the low probability of a margin recovery for H2 2025.
Markus Steilemann
Thanks a lot, Christian. We are continuing with the outlook for Covestro’s core industries on Page 12 of the presentation. Global GDP forecast has decreased to 2.5% from February’s 2.8% outlook. This reduced global outlook also affects most of Covestro’s core industries. Automotive growth forecast decreased to 0.6% from 2.7%, primarily due to U.S. tariff policies disrupting global supply chains and demanding weakness in Europe and North America.
EV and battery electric vehicles outlook remains strong at 24% growth. Construction industry growth forecast increased to 0.6%, partly due to stabilization in the Chinese housing market, though ongoing conflicts and political uncertainty limit further growth. Furniture industry growth forecast decreased to 0.5%, which is 1 percentage point below earlier forecast, mainly due to weaker production in APAC and North America regions. Electronics industry growth forecast is now at 3.7% with persistent uncertainty regarding U.S. trade policy and potential tariffs affecting investments. Household appliances showed slightly higher expected growth at 2.4%.
Let’s turn to the next page. As already mentioned, we have adjusted our guidance as published on July 11 due to downgraded industry growth expectations following U.S. tariff announcements and the lack of substantial margin recovery prospects. The EBITDA guidance is now between EUR 700 million and EUR 1.1 billion, down from EUR 1.0 billion to EUR 1.4 billion after the first quarter. The free operating cash flow guidance has been adjusted in line with EBITDA and is now expected between minus EUR 400 million and plus EUR 100 million.
Unfortunately, the day after our ad hoc release, we were impacted by a fire in the transformer station in Dormagen owned by the chemical site operator, Currenta. The sudden lack of electricity led to a shutdown of our polyol plants, but mainly damaged our chlorine production, which subsequently impacts our TDI as well as several solutions and specialty value chains.
We are still uncertain about the full financial impact. However, first preliminary evaluations revealed a possible high double-digit to low triple-digit million euro EBITDA burden for the full year 2025.
Christian Faitz
Two questions, please. First of all, at the low end of your EBITDA guidance for the Materials segment, you’re not expecting much of a positive contribution in H2. So just about EUR 40 million at best, I guess, kind of H2 ’22 situation. What are the assumptions for this lower end? And I take it this includes the force majeure effects, correct?
And the second question would be, are there any signs of a demand revival into Q3 from any key customer industries, furniture, electro/electronics, automotive?
Markus Steilemann
Yes. Thanks, Christian. This is Markus speaking for your questions. Let me start with the second part or second question, the revival signs of any industries going into the third quarter. I hope we could provide you with an overview about where the different industries in terms of overall industry outlook look like. And I’m here specifically referring to one of the slides that we have in our presentation that supports the respective call.
And there you see that many of the industries that we are serving mainly take automotive, construction, furniture, electro — and electronics, there is a positive growth outlook for the full year 2025. However, in general terms, we have to say that this industry growth outlook has been revised downwards for some major industries. And that downward revision having now Q1 and Q2 behind us, for sure, would impact the second half of this year stronger. So if you do the math, you would figure out that currently, there is limited to no signs of a significant uplift. It might be regionally slightly different here and there. But in general terms, we have to say that the world is still challenged. And one of the major reasons is the ongoing uncertainty due to ongoing negotiations of U.S. tariffs.
So that is the underlying thing. And that all comes on top of the uncertainties that we have seen so far and the prolonged crisis, and I don’t want to reiterate it since when we already have consecutive crisis going on 2021 with Corona, energy peak and so on and so forth. So long story short, the market currently is in a very challenged overall situation. So that means for second half, I personally would not see a significant broad-based across the board uplift in demand. And once again, there might be here and there some regional differences by industry or in general. But I do not think that this is sufficient to provide a broad positive overall uplift of the markets for our industries and for our main customers, yes.
Well, let’s not forget, Covestro is doing a lot on self-help. We have just — and I have been mentioned today is this program is strong. We also have made it very clear where we stand in terms of the rest of the year outlook with our updated guidance. And now coming back, let’s say, to your first question, the costs that we had to digest this year for example, restructuring costs for PO11 are nonrecurring then, let’s say, for the next year, most likely.
And the Dormagen case that I just mentioned has not been included in the midpoint, but should be covered at the low point. So there will be ongoing margin pressure also for our materials like polycarbonate and polyols. So it will remain a challenging year. And at the same time, we have to also make clear that we do everything that is in our own power to make sure that we deal with the current
situation. So the underlying is relatively stable, yet at, for us, also low levels. And therefore, we would expect that Q3 is therefore similar to the second quarter, but excluding the Dormagen incident. So I hope that gives you somewhat a picture and a flavor.
Chris Counihan
I just wanted to ask about Dormagen and specifically how long you expect the plant to be out for, firstly? Obviously, you’ve given a financial impact, but just I wasn’t sure if I heard how long you expect it to be on force majeure for as of today.
And then secondly, obviously, that’s about 1/3 of your TDI capacity. If I look at my supply demand. Is there the potential for the other 2/3 to benefit from the market being a bit tighter?
Markus Steilemann
Yes, Chris, thanks for your question. Very roughly speaking, we expect Dormagen to be out for several months. And now comes the big but. What is mainly affected for the several months is the chlorine supply. The chlorine supply is absolutely essential to run the TDI plant. However, there’s other chlorine customers internally as well as externally, and that’s why we also issued that force majeure because there is onward opportunity to gradually at least bring back some of the other internal value chains, for example, in the Solutions and Specialty area, but that will also be a matter of weeks, so not days, but really weeks.
So gradually, we expect that more and more plants will come up on stream, but the big volume and also a margin contributor, TDI that is definitely out from today’s perspective for several months. With regard to your second part, we have just observed that Asia prices have rebounded based on the prices that were quoted by traders. First, we have to take a look at it, is it sustainable? And in the U.S., we have, let’s say, in the entire industry, not so fast-moving prices due to contractual basis, and I’m talking more about what I perceive as a general industry pattern rather than our own situation. And therefore, we have not seen any reaction so far. And also, please bear with me, we’re not going into any further details because the TDI market is a very, let’s say, narrow market. And therefore, anything I say could be one word too much around this. And from that perspective, please allow me that I leave it with that.
August 3, 2025
Urethane Highlights from Huntsman Investors Call
Huntsman Corporation (HUN) Q2 2025 Earnings Conference Call Transcript
Aug. 01, 2025 1:41 PM ETHuntsman Corporation (HUN) StockHUN
Q2: 2025-07-31 Earnings Summary
EPS of -$0.20 misses by $0.08
| Revenue of $1.46B (-7.37% Y/Y) misses by $36.74M
Huntsman Corporation (NYSE:HUN) Q2 2025 Earnings Call August 1, 2025 10:00 AM ET
Company Participants
Ivan Mathew Marcuse – Vice President of Investor Relations & Corporate Development
Peter R. Huntsman – Chairman, President & CEO
Philip M. Lister – Executive VP & CFO
Peter R. Huntsman
Ivan, thank you very much, and thank you all for joining us. Our second quarter results were not unexpected and came in about where we thought they would. We did see a nice rebound back to what we would see as more normalized earnings from Advanced Materials, offsetting the disappointing sluggishness of construction activity and tariff uncertainty, especially in polyurethanes.
As we step back and look at the macro condition, it appears that the volatility caused by tariff and trade disputes over the past few months is starting to dissipate at least as of 12 hours ago. I believe that inventories remain very low in most of our downstream supply chain, while consumer confidence seems to be muted. We look into the third quarter, we see neither reason to panic nor to be overly optimistic. However, long term, we do anticipate an improvement in construction and perhaps some gradual change as China seems to be focusing more on their overcapacity.
Our focus will continue to be on our balance sheet. To this end, we will continue to be extremely prudent on spending capital beyond our normalized run rate of safety, maintenance and reliability. We remain focused on our cost structure and making sure that our business expenses are in line with market conditions and our cash generation. Our aggressive inventory and working capital focus allowed us to generate positive cash flow in the second quarter. This cost us about $25 million of EBITDA in the second quarter. This charge was offset by reduced bonus accruals and other smaller onetime benefits. This inventory impact will be less in the third quarter, again, offset by bonus accruals.
As markets improve or raw materials drop in value, we want to make sure that we’re in a position to take advantage as soon as possible. We will operate our business to create value over volume to the extent that we can. We continue to review our asset portfolio and engage with shareholders. The last thing we want to be doing is sitting around waiting for things to get better. Over the next few quarters, we will see usual seasonality, but also the possible influences of higher tariffs and duties for MDI coming into North American markets, a possible interest rate cut, the benefits of more of our cost reductions falling to the bottom line and hopefully, a greater focus on prices over volume. In short, we will manage our balance sheet as effectively as possible while also pushing for better P&L outcomes. With that, operator, why don’t we open the line up for any questions.
Kevin William McCarthy
Peter, would you comment on MDI utilization rates in the second quarter and how you see those progressing into the third quarter for the industry as well as Huntsman?
Peter R. Huntsman
Yes. Much of that, Kevin, a very good question, something that we struggle with because there’s not a great deal of information as to how people are running their plant and what capacity they’re running their plant. Obviously, with the tariff situation and so forth with product that was coming into North America from China, that product is either being scaled back in capacity or going into other markets. We’re not seeing a lot of that product, for instance, showing up in Europe, which is something that some of us feared a couple of months ago would be the case.
So it really is quite a fluid question. I would say that, by and large, the industry is operating somewhere in the low to mid-80 percentile. That’s going to probably be a little bit higher than that in North America, perhaps a little bit lower than that in China. But that’s — I believe that’s about where we are today.
Patrick David Cunningham
Can you give us an update on how your order books have progressed in July? I think we’re hearing some mixed signals on sort of if things are stable or things are getting worse in July? And what are some of the conversations you’re having from larger customers in auto and building and construction given the recent tariff implementation?
Peter R. Huntsman
I think that stable would probably be the best singular description of what we’re seeing across the board. I mean there are some pockets here and there. Just anecdotally, I think that there are a number of truckload orders, rail, which would tell you that people are ordering just in time, which should tell you that inventories are probably lower than usual.
In my personal opinion, I believe that the supply chains are pretty thin right now, people in times of uncertainty, especially where the overall energy market, the energy structure is down from where it was 6 months ago. People are probably not going to be holding a lot of inventory on the expectation that the energy costs will be coming down, chemical costs and so forth.
So I think that it’s very thin right now and people are kind of ordering just what they need for the next 30 days or so. But right now, I’m not seeing a pickup that would give me a great deal of optimism. Conversely, I’m not seeing a big drop-off in any one area that would give me pessimism.
Patrick David Cunningham
Great. Very helpful. And Peter, you seem to be optimistic on potential China supply rationalization, but it seems there’s still pretty healthy capacity build expectations in MDI. So where do you see this potentially having the most significant impact in terms of the key chains or what it might mean for Huntsman’s earnings levels going forward?
Peter R. Huntsman
Well, I would say that as we think about Chinese capacity and so forth, China, where you have the greatest concentration of production continues to be our most profitable market for MDI, and our business in China is performing quite well in comparison to North America and a very well in comparison to Europe. So I think that there’s a combination probably of volume discipline, pricing discipline and what have you. And we’re also seeing some greater trade movements and so forth.
At the time — as we look at the first 6 months of this year, we’ve seen Chinese imports into North America of MDI virtually stop. For some reason, we’ve seen imports coming in from Europe of all places increase. Now that’s not offsetting each other one for one, obviously. But — so there are some rather unusual trade patterns. But by and large, I don’t think there’s anything terribly surprising taking place right now.
Jeffrey John Zekauskas
I think earlier in the call, you said that utilization rates in polyurethanes were in the low to mid-80s. Is that where your utilization rates are?
Peter R. Huntsman
Yes. I’m not sure that we’re too dissimilar from — they’d probably be — we run our plant in China at pretty high rates because we’ve got good market demand there. The automotive sector in China continues to perform quite well and everything else is pretty stable. I wouldn’t say that it’s growing through the roof. Europe obviously continues to struggle. In North America, we’re probably running in the mid-80s, give or take a few percentage points. So I’m not sure that we’re terribly different than most of our peers.
Jeffrey John Zekauskas
What are your utilization rates in Europe?
Peter R. Huntsman
Those would probably be around 80%.
John Ezekiel E. Roberts
Peter, the prepared remarks mentioned Advanced Materials is the primary focus for bolt-on acquisitions. I don’t expect that you’d be making any bolt-on acquisitions near term, but are you no longer interested in Huntsman Building Services or Huntsman Building Systems, HBS as an area long term?
Peter R. Huntsman
Well, I think I learned from my father a long time ago, you never say never in the area of M&A. But at the same time, you do have to have a strategy. You can’t just look and buy anything that is available. I think that as we look at where we want to be moving as a company, we want to be able to take advantage of adhesives. We want to be taking advantage of aerospace, lightweighting, energy conservation.
And as we look at our most stable lens of our business, as we go down, we look at electronics, we look at elastomers, as we look at our adhesives, lightweighting, carbon fiber, composite materials and so those are all areas, I think, for us that we’ve been able to build a nice platform, and we’d like to continue to do that.
Now you look at something like polyurethanes, and of course, within our polyurethane business, we have elastomers. We have some of those applications. So that are further downstream. Those businesses are the best performing parts of our polyurethane business today. So I don’t want to sit here and say that we’d never do anything in polyurethanes. But if we do, it would probably be something that would complement that end of the business more so than the more volatile in commodity side of things.
David L. Begleiter
Peter, do you expect the tariffs you now have on Chinese MDI to lead to, at some point, a new U.S. MDI plant not by you, but maybe a competitor?
Peter R. Huntsman
Well, I can only give you — okay, I will tell you, it will not lead to a new plant by Huntsman. I can — at least not while I have anything to do with managing the company. But what competition decides to do, I have no idea. I personally believe that there’s more than enough MDI in the world today, and we’ll be just fine. But I — if you put barriers up around the U.S. on imports, let’s remember that the U.S. also exports its MDI into markets, for instance, into Latin America and into Canada and so forth.
You’ve got — you’ve also got to realize that if you’re putting imported materials are going into Latin America and Canada and so forth. There’s less export from the U.S. I think that a lot of people can make a mistake by just drawing a circle around the United States and somehow thinking that that’s going to be this fortress of what’s in the United States stays within the United States and nothing can penetrate it from Europe or any place else. Like I said, trade is a messy subject. And I don’t — I think presently, the world’s got plenty of MBI capacity doesn’t need anymore.
Salvator Tiano
Perfect. And if I may ask about the future of your European footprint, not on a little bit more downstream polyurethanes, but on the core MDI Rotterdam facility. I mean, there’s a bunch of PO shutdowns, a number of them more likely to come as well. So at what point do you think that European demand may permanently be impaired for MDI and there may not be enough demand for your own facilities there?
Peter R. Huntsman
I think that we have either the lowest or among the lowest production sites in Europe. And I believe that, that site is going to be competitive relative to other European producers for some years to come. I would be — if we get to a point where we can’t justify the operations of our European facility, I think that there’ll probably be other facilities that will come to that conclusion before we do. However, we do continue to look at all of our operating costs there. We look at our operating viability. And — but I see longer term, as I see today, that’s a very limited vision. But as I see today, that’s a site that we’re going to continue to operate. And it’s a segment of the market in polyurethanes that we’re going to continue to feed.
Michael Joseph Sison
Peter, when you think about China, they talked about involution. Is there a good amount of capacity there that could or maybe should be looked at and maybe taken out that could help the supply-demand situation we’re in now?
Peter R. Huntsman
Very good question. I think China is — I’ve heard more in the last 30 days and having been in the last couple of 2, 3 weeks ago, more discussion in country, certainly than I hear out of country about the government looking at overcapacity, looking at older facilities. As I look at the MDI situation in China, most — every facility in MDI in China is — it’s not only very good technology, but it’s also some of the largest scale — largest, best integrated facilities that are integrated all the way up to energy production, aniline production, coal production, all the way down through the line.
So I think that there will be a number of closures that will take place in the chemical industry over the next year, 2 or 3. I do not believe that, that will be the case for MDI, particularly if you compare the competitiveness of those facilities with 30-, 40-, 50-year- old facilities that are operating in Europe that are subscale and having to struggle with much higher raw material costs and supply chain costs and so forth.
Philip M. Lister
Mike, one area we are looking at is our joint venture in China on PO/MTBE has been significantly under pressure. It could be that over the coming years, there could be some of the older MTBE producing facilities that come out, but that will be over a number of years.
Hassan Ijaz Ahmed
Peter and Phil. Just wanted to stick to the theme of a recovery, however far it is. In your prepared remarks, on the polyurethane side of things, you mentioned that sequentially, volumes were up around 3%. And typically, Q1 to Q2, you see an 8% to 10% sort of uptick in volumes. So I’m just trying to get a sense of how far below normal volume levels are we just to get a better sense of as and when that recovery happens, how much higher these volumes can actually go?
Peter R. Huntsman
Yes. I think that for the most part, when we look — when we take out kind of onetime contracts and business that we won in the second quarter, you’re probably looking at somewhere between 5% and 8% that I would say is kind of missing in the numbers. And that typically is around housing and construction. We saw an incredibly anemic housing and construction market this year. I don’t think we’ve seen anything like this since COVID and since The Great Recession before that.
So there’s — I think there’s a great deal of uncertainty around people wanting to commit to what is usually the largest purchase in their lifetime during times of market volatility and uncertainty and also with higher interest rates. So I’m very hopeful that those markets will recover early this next year, and we’ll be in a much stronger position this next year. But we definitely — the single biggest impact in the second quarter that was — that I think — I’m not going to say surprised us because we were talking about this on our last call, but was the other lack of seasonality that we typically see at this time around construction.
Hassan Ijaz Ahmed
Understood. Very helpful. And as a follow-up, I mean, again, in the prepared remarks for polyurethanes, you guys talked about how through the course of the quarter, you saw a more intense competitive environment in Europe. And I guess you mentioned driven by domestic producers. So can you just expand on that? And do you see any sort of resolution around that in the near term as well?
Peter R. Huntsman
Unfortunately, I don’t see a great deal of resolution around that. We push very aggressively in the second quarter as we did in the first quarter, as we did in the quarter previous to that, for better, higher pricing margin expansion in Europe. And the — I believe that I can’t — again, I don’t know what the decision of our competitors are, but it seems like people are putting volume over value and they’re moving volume at any price sort of a thing. So surprisingly, in Europe, that is today our highest cost urethane production in the world and our lowest value of MDI in the world. So you kind of got — both sides are hitting you.
Philip M. Lister
So what do we do, Hassan? We continue to focus on the announcements we made, getting our cost base correct and all of the activities that we’re doing, including closing some of our facilities there and then work within the competitive environment that’s existing.
Peter R. Huntsman
Yes, 85%, 90% of our cost reductions right now across the company are focused in this market.
Aleksey V. Yefremov
Peter, I was hoping you could deconstruct for us Polyurethanes segment price declines of 5% year-over-year this quarter. I mean you just talked about Europe, but was this the sole reason for this decline? Were other regions particularly bad or good? And also from the perspective of just polymeric MDI versus systems, were these thesis better or worse than the 5%?
Peter R. Huntsman
Yes. I think that we did see a price fall from the first going into the second quarter. We started off the second quarter, the beginning of the second quarter, particularly in China, where we’ve gone from about RMB 18,000, RMB 18,500 down to about RMB 15,000. So was that 20% — 15%, 20% drop in price from the end of the first quarter going into the beginning of the second quarter. We came out of that quarter with stabilization, a bit of an increase through the quarter and stabilization as we look into the third quarter. I think that we’re hoping that we’ll see some price increases in China with that stabilization getting better. In the U.S. and Europe, we’re just seeing some very competitive pricing dynamics in place. A lot of people chasing little volume.
Philip M. Lister
Aleksey, if you were looking at the 5% year-on-year, which I think you are in our press release on polyurethanes, you go back to this time last year, it was about RMB 18,000 for polymeric. And today, we’re at about that sort of RMB 15,000, RMB 16,000. So you’ve seen a drop of 10% to 15%. So it’s mostly in the polymeric area. You would have had some pressure on system prices, some on MDI variance. But in general, the move that you’ve seen is polymeric MDI related.
Aleksey V. Yefremov
And here, in the past, said that it’s hard to move U.S. MDI demand offshore or at least it could be tariff-related repercussions. Can you update us on this view? Have you seen any demand maybe move to Mexico, Canada or it’s been pretty steady?
Philip M. Lister
Yes. So Aleksey, I think you’re asking about the trade flows there and whether some product instead of coming into the United States moves into Mexico or into Canada. Look, I think — yes, I think we’ve said if you look through the first sort of 6 months of the year, clearly, the imports coming into the U.S. are considerably lower. There will be some which would have gone into the Canadian business, into the lumber business there. A little bit into Mexico. Mexico is not an enormous market here at all and mainly driven by automotive and furniture actually, where in general, you have to spec in.
As we said in our earlier remarks, what we’ve been watching is that whilst the imports have dropped off from China. The European imports into the U.S. have actually increased in that time. And that, coupled with a lower demand environment, those 3 elements combined have led to a pricing environment, which is relatively stable rather than, say, the increases that I think the industry had hoped for.
Arun Shankar Viswanathan
Just wanted to ask about 2 things. So first off, I understand that, obviously, Huntsman, it’s not the view that the world needs another MDI plant, especially under your leadership, Peter. But I guess others may not necessarily feel that way. Is there anything else that potentially — what’s kind of the pushing point when others kind of get to the same conclusion that you do? And maybe if you could frame that, whether it be cost per ton or pricing or anything like that?
And then similarly, on epoxies in your Advanced Materials business, there’s been some exits by others in the BLR market. Does that affect your sourcing at all? Or what can you share there?
Peter R. Huntsman
Yes. Well, I think that on the BLR side, I’ll take that first. On the BLR side, I think that we’ve got plenty of suppliers. We have seen some higher cost facilities that have cut back or slowed down. There’s plenty of BLR on the market, and I wouldn’t be — I wouldn’t assume that, that’s going to impact our earnings on our Advanced Materials at all, the few that have exited.
On MDI capacity, I just — Arun, I simply can’t imagine what takes place in a boardroom when people decide they’re going to take $1 billion, $2 billion and invest it in something that’s going to take 5, 7 years to build in a product that we’re swimming in today. I don’t know, maybe they got a crystal ball as to where we’re going to be in the decade from now, but I guess I can see the rationale that the Chinese have had over the last couple of decades as they wanted to become more independent, self-sufficient. I get that. But I look at the growth rates and so forth across Europe and North America and even China today, I just don’t see any justification for that. So I can’t speak to the rationale that would go into a decision like that.
Philip M. Lister
And Arun, I think there’s a reality none of the Western manufacturers as far as we know, have announced any new capacity, major capacity additions and major plants. There may have been some debottlenecking, but nothing from a major new plant perspective.
Arun Shankar Viswanathan
Right. But I guess I’m just curious, would they and yourselves get to a place here where that utilization rate remaining in the low 80s or high 70s is just not acceptable and would force some closures? Do you foresee that happening? And would it make sense for you guys as well? I appear not, I guess not just given your position on the cost curve, but do you foresee any supply takeout materializing that way?
Peter R. Huntsman
Yes. I would — I believe that there are some very high-cost facilities in Europe, but that’s just from information that I read publicly, I would have thought that would have happened before now, but it hasn’t. Chemical facilities, by and large, are very expensive to shut down. In Europe, it’s very problematic when you have to deal with government authorities and so forth. I was going to give into my own experience, but I won’t. We don’t have time.
But it’s — particularly in Europe, it’s expensive. And particularly in sites where you’ve got 4 or 5 other chemical companies that are dependent on your operations, you’re dependent on their operations and you may be able to or want to shut down, but you’ve got 15-, 20-year supply agreements and offtake agreements and shared site costs and so forth. So yes, a lot of these, it’s a tough and very expensive decision to just simply walk away. But I think you’re at that point where I can’t imagine they’re not companies today that are looking at those economics and decisions.
August 3, 2025
Brazil Anti-dumping Duties on Polyol
Polyol Prices Poised to Surge As Brazil Bars Cheap Imports
PUdaily | Updated: July 31, 2025
Brazil has joined the global wave of protectionist trade actions by imposing definitive anti-dumping (AD) duties on polyether polyol imports from China and the U.S., effective July 3, 2025, via GECEX Resolution No. 754. The measures cover polyether polyols with molecular weights of 300–4,500 g/mol and ≥90% purity, including blends, under NCM 3907.29.39. While some respondents, such as Wanhua, aimed to exclude “formulated” mixtures, authorities maintained a broad scope to ensure effective enforcement.
The decision followed a petition by Dow Brasil Sudeste, Brazil’s sole domestic producer, and a year-long investigation by SECEX under Decree 8058/2013, in line with WTO rules. The final ruling confirmed that dumped imports caused material injury to the local industry.
Comparative Historical Context
Brazil has deployed trade remedies in chemicals before. Most recently (May 2025), Brazil raised duties on suspension PVC from the U.S. to protect local resin producers. Like the polyol case, PVC-makers (Braskem, Unipar) petitioned against “artificially low” imports, leading to dramatic duty hikes. That PVC case shows how duties can swiftly shift supply chains: importers began sourcing from Egypt, Mexico or Taiwan instead of the U.S.. We expect polyol trade flows may likewise divert.
Internationally, anti-dumping on polyols is not new. For example, India has repeatedly investigated Chinese polyether polyols. In March 2024, India issued duties on Chinese Wanhua polyol and others, much like Brazil’s approach. This reflects global oversupply: China’s polyol exports have expanded rapidly, pressuring markets from Asia to Latin America. India’s experience shows similar concerns: domestic producers felt undercut by cheap Chinese polyol, prompting duties. On balance, Brazil’s action mirrors a worldwide trend where emerging industries use AD measures to defend local PU chemical sectors against aggressive imports.
Global Supply Chain Implications
The new Brazilian duties will reshape trade flows for polyether polyols. Imports from China and the U.S., which historically account for the bulk of Brazilian polyol intake, will become much more expensive. Market participants are likely to seek alternative suppliers. Possible candidates include producers in Southeast Asia or even domestic Mercosur neighbours. Analysts noted how Brazil’s PVC AD led buyers to Egypt, Mexico and Taiwan; a polyol case could see similar redirection. However, significant new sources may not exist in Mercosur: current heavy polyol capacity resides outside Latin America.
Logistically, trade routes could shift. Instead of U.S.-China barrel-ship shipments via the Panama Canal, we may see more long-haul deliveries from Asia or smaller traders from Europe. In addition, global suppliers might restructure contracts: for example, U.S. exporters facing high duties could redirect some tonnage to other markets, while Brazilian buyers may negotiate spot contracts. In short, Brazilian polyol imports will likely decline from China/US and either be replaced by other sources or simply shrink, causing tighter supply and longer lead times.
Higher duties also change the cost structure and competitiveness. Pre-duty, China and U.S. polyols were reportedly sold at substantially lower prices. Brazilian data cited in the resolution show U.S. import prices were consistently below Chinese levels, except briefly in Q1 of 2021. For instance, SECEX found U.S. polyol CIF prices were lower than those from China throughout the review period, with the U.S. share of imports around 30%. Post-duty, import prices effectively jump by the duty amounts, so Brazilian foam producers can expect steeply higher feedstock expenses. This creates inflationary pressure: Brazil’s mattress association (ABICOL) warned in April 2024 that combined AD and tariff measures could raise polyol costs and spark a chain of price hikes throughout foam manufacturing. They pledged to fight the measures politically and legally, stressing that protection should favour genuine Brazilian producers and not necessarily foreign-owned multinationals.
Impact on Brazil’s Domestic PU Industry
Domestic producers, primarily Dow Brasil Sudeste Industrial Ltda, stand to gain protected market share as imported polyols become less price-competitive. With China and the U.S. effectively sidelined, Dow may gain pricing power and expand sales volumes, though capacity constraints and the need for consistent quality remain challenges. While Dow and industry association Abiquim also lobbied to raise Brazil’s MFN tariff from 12.6% to 20%, GECEX rejected the request in November 2024 due to strong opposition from downstream users. As a result, only the anti-dumping duties were adopted. The mattress industry association ABICOL supported keeping the MFN tariff unchanged but remained active in the AD case, reflecting the sector’s mixed priorities. In the short term, domestic producers will likely raise prices closer to the new duty-inclusive level, though Brazilian polyol supply may remain tight.
Longer term, higher protected margins could spur new investment by existing or new producers. If economics are attractive, we may see either expansion of Dow’s plant or interest from global polyol makers, though global oversupply could dampen that. Higher local prices might also encourage some end-users to invest in modest in-house blending or to shift some formulations toward locally available chemistries.
Downstream Effects (Automotive, Furniture, Footwear, etc.)
Brazil’s foam-using sectors face the sharpest impact. Polyether polyols are key to flexible PU foam, used in mattresses, upholstered furniture, automotive seating and interiors, footwear, and more. Analysts warn that an immediate effect will be higher raw material costs for foam producers.
The mattress industry, represented by ABICOL, is especially vocal. In April 2024, it issued a bulletin noting that Dow’s petition claims dumping margins of 59% (China) and 31% (US) below domestic prices. ABICOL argued that imposing an AD duty (and higher tariffs) would “increase the price of Brazilian PU products and hurt the entire mattress sector”. It pointed out that Dow alone cannot satisfy even half of the national polyol demand, so restricting imports risks foam shortages. The association warned that Brazilian foam-makers would become vulnerable to competition from Mercosur neighbours who could supply final PU products without Brazil’s new import duties. In effect, ABICOL fears that the policy could transfer the raw material cost issue to a finished goods trade issue.
The automotive and shoe industries will also experience secondary impacts. Automakers and their seat suppliers may see foam sheet prices rise modestly, slightly increasing car production costs. Footwear uses some polyol-based PU; higher polyol costs could feed into minor cost hikes. While these sectors are less concentrated than mattresses, they rely on the same competitive market for raw foam. All told, consumers in Brazil may see higher prices for sofas, beds, car seats and certain shoes over the coming years. Economists note this will add upward pressure on Brazil’s inflation, 5.35% in June, which is already above the target of 4.5%.
Economic and Pricing Analysis
From a trade data perspective, the newly imposed anti-dumping duties are expected to significantly reduce imports of polyols from the United States and China. Before the investigation, Brazil’s polyol import volumes were on the rise, with official filings indicating that Chinese-origin imports grew by 29% more tonnage in 2024 compared to 2023. However, with final duties ranging from $1,408 to $1,469 per metric ton on Chinese exporters and $555 to $680 per metric ton on U.S. suppliers, these products are poised to become economically unviable in the Brazilian market.
Price-wise, domestic polyol will be repriced upward. The combined effect of duty and existing tariffs means the import cost could double for many suppliers. Dow and any other suppliers will likely take advantage, and foam producers will pass on much of the costs.
Given foam’s share in final products, macro effects are muted but visible. Furniture inflation could tick up, as could mattress prices. Brazil’s IPCA inflation index may see a small bump from higher intermediate chemical costs. The central bank will likely monitor any ripple into consumer prices. Notably, one risk is that high domestic polyurethane prices incentivise cross-border shopping or grey-market imports from Uruguay/Argentina using Mercosur free-trade, adding uncertainty to enforcement.
Outlook and Monitoring
The duties took effect immediately on 4 July 2025. Parties will watch for three key developments: First, SECEX’s public interest review (per Art. 4 of the resolution) may lead to adjustments if industry relief is justified. Second, actual import statistics will reveal whether U.S./China polyol shipments indeed collapse and if other countries fill the void. Third, downstream inflation gauges will be monitored. Notably, IBGE will report any uptick in furniture and automotive prices in late 2025.
Brazil will also announce a review schedule. Under Decree 8058/2013, AD duties are reviewed typically at 2-year intervals and sunset after 5 years unless extended. The first substantive milestone will likely be early 2027, when companies can request an interim review or expiry review. Affected stakeholders (importers and foreign governments) could mount challenges at that point if they can argue that circumstances have changed or that harm is limited. Meanwhile, Domestic foam producers may explore alternative feedstocks or adjust formulations to manage polyol shortfalls and cost increases.
In summary, the new anti-dumping duties mark a protectionist shift for Brazil’s PU supply chain. They will bolster the lone domestic polyol maker in the near term, but at a price: higher costs and potential supply tightness for foam users. The measure rebalances trade flows (likely reducing U.S./China exports, redirecting to other sources) and is emblematic of Brazil’s recent tougher stance on chemical imports. Monitoring will focus on trade statistics, commodity prices, and any legal countermeasures.
July 31, 2025
BASF Urethane Highlights from Earnings Call
BASF SE (BASFY) Q2 2025 Earnings Call Transcript
Jul. 30, 2025 7:08 AM ETBASF SE (BASFY) Stock, BFFAF StockBASFY, BFFAF
154.47K Followers
BASF SE (OTCQX:BASFY) Q2 2025 Earnings Conference Call July 30, 2025 2:30 AM ET
Company Participants
Dirk Elvermann – Member of the Board of Executive Directors, CFO & Chief Digital Officer
Markus Kamieth – CEO & Chairman of the Board of Executive Directors
Stefanie Wettberg – Senior Vice President of Investor Relations
Markus Kamieth
Thank you, Nina. Good morning, and welcome to our Teams or video call. Today, we are presenting our results for the second quarter and the first half year of 2025. On July 11, we pre-released some of our key figures due to the adjustment of our full year guidance. Dirk and I will provide you with more details today and the rationale for the revised outlook.
Before we take a closer look at the sales development, let me give you a brief overview of the quarter. BASF generated EBITDA before special items of around EUR 1.8 billion in the second quarter of 2025. The Agricultural Solutions segment considerably increased earnings. The Surface Technologies and Nutrition & Care segments achieved slightly higher earnings. In the base Chemicals businesses, margins remained under pressure due to high product availability on the market.
Let’s now take a look at the sales performance of BASF Group. Overall, sales were almost at the level of the prior year quarter, thanks to volume growth. Volumes grew particularly strongly in the Agricultural Solutions and Surface Technologies segments. Prices declined in 4 of 6 segments, particularly in the Chemicals segment. We managed to achieve price increases in the Surface Technologies and Nutrition & Care segments. Contrary to the first quarter, currency effects in the second quarter dampened sales in all segments and were mainly caused by the significant depreciation of the U.S. dollar.
Reflecting this underlying sales development EBITDA before special items came in at EUR 1.8 billion compared with EUR 2 billion in the prior year quarter. Here, you can see how the markets, volumes and specific margins of our segments developed in the second quarter of 2025. In general, the business environment in our business — upstream businesses was very challenging. Compared with the second quarter of previous years, we generated significantly lower EBITDA before special items in these divisions.
This can be attributed to the high level of uncertainty and cautiousness of our customers in most markets globally. I’d like to highlight some segment-specific aspects. As mentioned, the market environment for base chemicals remained difficult. Nonetheless, volumes in the Chemicals segment were almost stable. Specific margins declined in both divisions, particularly in petrochemicals. Despite the tough market environment, the Materials segment showed robust volumes and earnings performance.
I will touch upon the stand-alone businesses only briefly as we have more detailed slides coming up. According to the latest data, global light vehicle production increased by 2.6% in the second quarter of 2025 compared with the prior year quarter, mainly on account of production growth in China. In this environment, the Surface Technologies segment recorded robust volume growth and outperformed the automotive market. Specific margins in this segment were almost flat.
In the Agricultural Solutions segment, we achieved strong volume growth and were able to considerably increase specific margins.
Now let’s take a look at EBITDA before special items by segment. Considerable earnings growth in Agricultural Solutions and slight growth in Surface Technologies and Nutrition & Care partially offset lower earnings in the remaining segments. Earnings in Agricultural Solutions increased across all regions, particularly in North America, followed by South America and Europe.
In the Surface Technologies segment, the main earnings driver was the higher contribution from the Environmental Catalyst and Metal Solutions division, which added to a continued strong performance by Coatings. In the Nutrition & Care segment, EBITDA before special items increased thanks to improved earnings in the Nutrition & Health division. Here, earnings were supported by a low
double-digit million euro insurance payment related to the fire that occurred 1 year ago at the iso-Phytol plant at the Ludwigshafen site.
In the meantime, production has resumed at our plants for vitamin A and E as well as for Aroma Ingredients. Force majeure for most products has been lifted. This will support volume growth in the Nutrition & Health division as of the second half of 2025. By contrast, earnings declined, particularly in the Chemicals segment because of the still unfavorable supply and demand situation for base chemicals. In addition, start-up costs related to our new Verbund site in Zhanjiang burdened earnings by around EUR 70 million in the second quarter of 2025. These startup costs will ramp up considerably during the next quarters to total around EUR 400 million in the full year 2025.
Lower earnings in the Industrial Solutions and Materials segments also contributed to the overall decline in earnings at group level. Compared with the second quarter of 2024, EBITDA before special items in Other was considerably weaker. This was mainly because of the reversal of bonus provisions in the prior year quarter. In BASF’s new remuneration system, the influence of group ROCE has been reduced, while EBITDA before special items, cash flows and nonfinancial targets are gaining in importance.
In the following, I’ll provide some additional color on the strong performance of the Agricultural Solutions and Surface Technologies segments. Compared with the prior year quarter, our Agricultural Solutions segment achieved remarkable growth of 21%. Volumes rose in all indications and sectors except for seed treatment. The absolute volume increase was most pronounced in herbicides. Compared with the second quarter of 2024, segment earnings improved by EUR 282 million to EUR 417 million. On a half year basis, earnings rose by a remarkable 8% to EUR 1.6 billion, resulting in a strong EBITDA margin before special items of 30%.
As forecasted in February, we continue to expect a slight increase in earnings for the Agricultural Solutions segment for the full year 2025.
Let’s move on to the strong performance in the Surface Technologies segment. All 3 divisions in this segment achieved volume growth. Overall, volumes increased by 6.5% even when excluding volumes from precious and base metals. Compared with the second quarter of 2024, EBITDA before special items in the Surface Technologies segment rose by around 10% to EUR 350 million. All divisions contributed to this increase. The highest contribution came from Environmental Catalyst and Metal Solutions.
Now I’ll provide a short update on our portfolio management. As announced at our Capital Markets Day in September 2024, our goal is to fully unlock the value of our stand-alone businesses. In the first step, we agreed in February to sell our Decorative Paints business to Sherwin-Williams. The purchase price amounts to USD 1.15 billion on a cash and debt-free basis. We are well on track to close the divestiture in the second half of 2025, pending approval from the relevant competition authority.
As planned and previously communicated, we approached the market in the second quarter of 2025 to explore strategic options for the remainder of our Coatings activities. These activities, which comprise automotive OEM coatings, refinish coatings and surface treatment generated sales of EUR 3.8 billion. We’ve received a considerable number of bids from private equity and strategic buyers and the process is well on track.
In the Agricultural Solutions segment, we are making good progress with our plans. This business has global scale, strong growth potential and attractive cash flow characteristics. We are currently focusing on executing the legal separation and the implementation of a dedicated industry-specific ERP system. In parallel, we are preparing for a potential listing. We remain committed to completing all internal preparations for a successful IPO by 2027.
Dirk Elvermann
Ladies and gentlemen, now let us talk about the measures we are taking to protect our balance sheet. Our top priority is maintaining BASF’s financial strength. We are fully committed to our financial policy. We aim for a single A credit rating, which is the best-in- class in the chemical industry. Standard & Poor’s recently confirmed our single A credit rating, which is also our rating at Moody’s and Fitch. Over the last 3 years, our financial debt and leverage ratio have increased. This was driven by lower earnings in a cyclical downturn and by our considerable investments, mainly in our Verbund site in South China.
This mega project is on time and below budget. We have already entered the commissioning phase and will start up most of the plants at the end of 2025. Our CapEx peaked in 2024, and we will bring it down below the level of depreciation as of 2026. At EUR 5 billion, payments made for property, plant and equipment and intangible assets in 2025 are expected to be EUR 200 million lower than forecasted in February. Furthermore, we will use part of the proceeds from divestitures to reduce our financial debt and to deleverage our balance sheet. We have also accelerated our cost savings programs.
We now expect to generate annual cost savings of EUR 1.6 billion by year-end 2025, EUR 100 million more than originally anticipated. Overall, we are well on track to achieve the targeted EUR 2.1 billion in annual cost savings by the end of ’26. And finally, we continue to have a strict focus on further reducing inventories while remaining a reliable and trusted partner for our customers also in challenging times.
Now I would like to share some information about our energy and feedstock supply. To safeguard our long-term competitiveness and operational resilience in Europe, we have established a very robust and flexible setup for procuring natural gas with 2 cornerstone supply agreements. The first agreement with Equinor will start this October. Equinor will supply us with up to 23 terawatt hours of Norwegian natural gas annually for the next 10 years. This contract ensures long-term supply security, competitive terms and a lower product carbon footprint due to Norway’s efficient infrastructure. It covers a substantial share of BASF’s European gas needs, particularly for our major sites in Germany and Belgium.
The second agreement signed with Cheniere will start in mid-2026. BASF will receive up to approximately 12 terawatt hours of liquefied natural gas per year through 2043. This agreement introduces strategic price diversification via Henry Hub indexing and gives us full control over an end-to-end LNG supply chain. It offers a critical hedge against European gas price volatility and complements our pipeline gas portfolio. These 2 agreements ensure long-term energy and feedstock security as well as high volume flexibility for demand-driven operations.
Further advantages include diversification across geographies, pricing models and delivery modes and last but not least, a lower carbon footprint. Together, these 2 agreements form the backbone of our gas supply strategy, balancing reliability, cost efficiency and sustainability.
Markus Kamieth
Okay. I will now comment on the outlook for the BASF Group that we pre-released on July 11. To account for the elevated macroeconomic and geopolitical uncertainties, we are now providing ranges for our assumptions regarding GDP, global industrial production and global chemical production in 2025. Particularly relevant for us is the continued high product availability in the chemical market, which is resulting in ongoing margin pressure, especially in the upstream businesses and base chemicals. Consequently, BASF expects earnings development to be weaker than previously forecasted and had adjusted its outlook for the full year 2025.
We now anticipate EBITDA before special items to reach between EUR 7.3 billion and EUR 7.7 billion. For free cash flow, we continue to expect a figure of between EUR 0.4 billion and EUR 0.8 billion due to lower expected payments for property, plant and equipment and intangible assets, among other reasons. The forecast for CO2 emissions remains unchanged.
As at our press conference in February, I’d like to emphasize today what we are focusing on in 2025. First, we will continue to execute our value-enhancing portfolio measures. We will also be starting up our new Verbund site in China. And we are working on structural cost reduction and establishing a winning culture across the entire BASF team. These are the things that are within our control, and we want to get them right, especially in this challenging environment.
To conclude, I have some news about the publication of our annual report and the format of our ASM. The audited BASF report 2025 will again be published at the end of February as you were accustomed to in the past. After successfully tackling the extended sustainability reporting requirements this year, the team is confident in its ability to accelerate the process. Furthermore, on the basis of the positive experience with the first virtual Annual Shareholders’ Meeting, the Board of Executive Directors has decided to annually alternate the format of the ASM of BASF SE over the next 4 years. We will thus hold an in-person ASM again in 2026 and ’28.
Unidentified Analyst
Two questions. First of all, regarding tariffs, Mr. Kamieth, maybe you can comment on the tariff situation for BASF and the industry as a whole. And secondly, your portfolio strategy. If we look at the interim report, we see that in the stand-alone businesses, the traffic light is green and in the core businesses, amber and red. So excluding the stand-alone businesses, BASF finds itself in a weak situation, a very weak situation. Does it concern you? And does this mean you will revise your portfolio strategy?
Markus Kamieth
Thank you, Mr. Freitag. Well, let me answer right away. First of all, tariffs. From my point of view, there are no big news. In recent months, we have stressed time and again that the direct impact of tariffs, especially tariffs between the EU and the U.S., but the overall tariff regime, which is being changed all the time, is limited for BASF because we have a good local footprint in every region, so we don’t rely on sending products or precursors through the region. So limited impact on part of tariffs.
This remains with the new deal that we probably have since Sunday. On the other hand, specifically the figures of the second quarter show that there is more and more uncertainty in global economy, which means that there is a restrained situation regarding our customers buying. And this volatility, of course, will reduce global growth. We all see this in the second quarter. And this will not change in the second half of the year.
Now we have to wait and see what the beginning deal between Europe and the U.S. looks like regarding our customers’ industries. I guess we will see a few weeks of high uncertainty. Over the last 24 hours, we’ve seen that things are pending. And so I advise everybody to wait, and we think that the uncertainty will not disappear immediately. And we think the second half of the year will be governed by this restrained economic situation. This is why we adjusted our forecast.
Portfolio, you are right. Right now, what we call stand-alone businesses, especially Ag Solutions and Surface Technologies, these segments are running very well. We are glad about this, and it shows that we have a strong market position. And compared to competitors, we are faring well. This is why we say these businesses have an extraordinary value, and this is why they are entitled to expect a premium in the evaluation. Of course, we have to understand that in what we call core businesses, a lot of cyclical business is included like basic chemicals. This is part of the strategy. Of course, in a cyclical business, there are some elements where you have a down cycle. This definitely is the case for base chemicals at the moment. But it doesn’t change our general assumption that due to our portfolio strategy, we can tap value by using other options for the stand-alone businesses and maybe looking at different owner structures.
So we are not getting nervous. It’s part of the ordinary business. And the performance that we see in a difficult environment in the core businesses also is an incentive to continue to make our businesses more competitive. So we regard this as a confirmation of our portfolio strategy.
The third question was tariffs, whether we already know which chemicals have exceptions. Well, Ms. Weiss, with the tariffs, it’s quite astonishing really. So on a daily basis, you get new information. What we said 3 or 4 months ago or 3 months actually is still holding true today. So the direct effects on the tariffs for us are still low. That is — well, a nonsignificant million figure, I will say. And what we really feel are the indirect effects, the uncertainty with the customers is very high. We typically have an order book visibility of 3 to 4 months. And now we are glad if we can look into it for a month’s time. And that, of course, also shows the exemption.
Some of the chemicals are privileged in part with lower tariffs. Sometimes they are completely exempt, but that’s a moving target. I’m still waiting for the day where we can say, okay, that’s it. And that’s the solution for us, for example. So the solution that we saw on the weekend, the alleged solution is not the final point yet, I guess. So we are absolutely — we see it as absolutely system critical. So the negotiators on both sides look at the chemical sector very closely and then choose which chemicals can be tariffed in order not to stop the entire apparatus.
But a final — well, view on it, we don’t have. Well, maybe a short story. When on 2nd of April, the Liberation Day, the U.S. tariffs were announced, there was an annex 2. So an annex to this, well, executive order and all the exceptions were listed. And I looked at it, it was, I think, 30 pages and an 80% — 90% of these pages were chemicals really. So the Americans look at very closely at which products cannot be produced in the United States. And so I expect that there will again be a long list of exceptions, which will be written, which we, however, don’t know yet. And we just heard about it on the weekend, and we don’t have any details whether the list is going to change, and we will learn about it over the next days and weeks and months.
Unidentified Analyst
I also have a question on an analyst conference question. Mr. Kamieth, you were talking repeatedly about a stagnant, a flat demand. And have I understood you correctly that basically real growth is only possible in China and the rest of the world is somewhere down there. And Mr. Elvermann, maybe you can say you said you are significantly below budget in South China. Maybe you can give us some figures there?
Markus Kamieth
Well, Ms. [ Doster ], maybe very briefly on the chemical industry and how I described it. This morning, I tried to put it into perspective because looking at the global figures in the chemical industry global growth, 2.5% to 3% was forecasted for this year is the best that we can read from the situation. And that only takes place or almost only in China. This is because China shows 50% of the worldwide chemical market. And if China grows as it grows, that leads to high growth figures worldwide or good figures, 2.5% to 3%. But if you separate it in China and rest of the world, you can see that just now our forecast for 2025 is that a slightly shrinking Chinese market, 0.2% or 0.3% is the shrinking here.
But it’s a difficult figure because there are so many subcategories, so we shouldn’t overinterpret it. But it shows the different dynamics, different momentum that we find in the market, no or very low growth in the rest of the world and growth in China. The problem is
that there is volume growth in China. But as I said, the margins in China are very low because there is a high product availability and in part also overcapacity. So the incremental volume that you can win there in terms of growth doesn’t lead to incremental profit so much. So that’s difficult.
And for the rest of the world, particularly in Europe, we see a contradicting or a contracting chemical market. We will have a negative growth in Europe because of the weakness of our customer industry — our industries here in Europe. And that shows how important it is to be successful in China because this is where growth will take place also in difficult global times.
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