Natural gas shortages loom for Germany’s chemical industry

A winter shortage of natural gas is looming for Germany’s chemical industry, even though Russia has reopened the 1,220 km Nord Stream gas pipeline into Germany after a 10-day maintenance shutdown.

The problem is Russia’s recent policy of limiting the flow of gas through Nord Stream to about 40% of capacity. If the policy remains in place, there may not be enough gas to meet Europe’s needs during peak demand this winter, and rationing would be required.

This is a major concern for Germany’s chemical industry, which accounts for 14% of the nation’s gas consumption. The German government has stated that, in the case of rationing, the needs of households and institutions such as hospitals will be placed above those of industry.

In anticipation of tight gas supplies across Europe this winter, the European Union has asked member states to reduce their gas consumption by 15% until April 2023.

But that may still not be enough to save the day for Germany’s chemical sector. If Nord Stream maintains its 40% supply rate, the industry will have to cut production by about 25%, according to a recent analysis by the investment firm Jefferies Group. A further 20% reduction in Nord Stream’s supply implies a 50% cut in chemical production across Germany, Jefferies states.

The companies with the most to lose from cuts in gas supplies are BASF, Covestro, and Evonik Industries, the analysis says. BASF stated in March that it would be forced to shut its plants in Germany if gas supplies dropped below 50% of its needs.

As if this is not a big enough issue for the German chemical sector, companies including BASF, Evonik, and Lanxess spot another potential problem on the horizon: water levels along the Rhine River are low and dropping and could soon curtail the shipping of materials to and from some of their key plants.