The company focused on the extremely strong and continuous price increase for the raw materials and their feedstock - mainly benzene - since the beginning of 2004.
The price hike for Styrolux, a styrene-butadiene copolymer used in extrusion applications in food packaging, reflects an industry-wide increase in the cost of packaging materials. A month ago, BASF announced that it was to raise its European price for polystyrene (PS) by €200 per metric ton in response to what it calls totally unsatisfactory margins and earnings.
Polystyrene, a standard polymer in BASF's range of styrenic plastics, is used extensively in refrigerator linings and food packaging. As with Styrolux, one of the main raw materials for polystyrene is benzene, which is used in the production of styrene, the pre-cursor of polystyrene.
"We buy benzene in order make styrene," BASF spokesperson Dr Sabine Phillip told FoodProductionDaily.com last month. "Benzene prices are affected by oil prices and also of course supply and demand."
As a result of these two pressures, the price of benzene has now reached historically high levels. Prices have been rising steadily since the start of the year, and are now double what they were six months ago.
In other words, every manufacturer that uses polystyrene in some part of their production process will be affected.
Despite their ongoing difficulties however, BASF yesterday released solid second quarter results. Compared with the same quarter of 2003, sales increased by almost 13 per cent to €9.3 billion and income from operations (EBIT) before special items climbed 44 per cent to €1.2 billion.
Cumulative sales for the first half of 2004 amounted to €18.4 billion, or almost 8 per cent more than in the same period of 2003. EBIT before special items increased by 32 per cent to €2.3 billion in the first half.
But the company has also reported that more job losses are likely in Germany as cost-cutting measures fail to offset the negative effects of taxes and new chemical regulations. Chief executive Juergen Hambrecht told Berliner Zeitung last month: "The likelihood that the number of workers will further decline, is relatively high. We will, however, make the effort to realise this in a socially acceptable way as up to now."