BASF North American CEO predicts weak global demand for 2013

By DENNIS K. BERMAN

BASF's North American chief, Dr. Hans Ulrich-Engel, said he anticipates 2013 will be a weak year for global economic demand, and that is making it difficult to forecast performance for the world's largest chemicals company.

"We will have to get used to the fact that volatility is the new normal," said Dr. Engel in an interview with The Wall Street Journal. "The best expression is that we are living in a world of "Vuca:" volatility, uncertainty, complexity, and ambiguity."

Dr. Engel said that BASF customer behavior has changed in the years since the 2008 financial crisis. Where the company once had insight to its order flow on a rolling basis of three to six months, that is less true today.

"Currently we have good visibility for up to 60 days, max 90 days," he said. "But that's it."

Dr. Engel said that the company is still in its 2013 budgeting process and did not yet have specific guidance for the year ahead.

He did provide some color about the company's various divisions, saying that the company was so far making up for weakness in chemical orders with earnings from agricultural products and its oil businesses.

"Overall, chemicals activities are weaker overall than they were last year, but oil and gas and our agriculture solutions unit are significantly better than last year," he said.

Dr. Engel said that low natural-gas prices in the US were, on margin, a reason to consider more domestic investment in chemical manufacture. The possibility of exporting lower-cost chemicals to foreign markets was less feasible, largely because of insufficient infrastructure to transport chemicals for shipping.

Dr. Engel was more optimistic about the prospects for the euro zone, saying that he expects the currency to survive, even if some countries left the currency union. Greece, in particular, was diminishing as a worry.

"What does Greece actually mean for our business? Our company has $100 billion in sales," he said. "Greece for us is less than $100 million; it's relatively small."

"Greece leaving the euro zone 12 to 18 months ago would have caused havoc on the European banking system. Now we are in a totally different situation. Lots of measures have been taken to mitigate the effects."


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