Asian generic API competition costs 200 BASF jobs
pharmaceutical ingredients (APIs) from Asian manufacturers, BASF
has decided to downscale production at its Minden production site,
implementing a restructuring programme that includes the scrapping
of 200 jobs.
The increased cost pressure by suppliers from Asia has led to an unsustainable situation in earnings according to BASF, indicating that the workforce at Minden will be cut mainly through dismissal due to operational reasons by mid-2007.
Although the world demand for APIs is forecast to increase at an average yearly rate of 8.2 per cent over the next five years, reaching a value of $46bn (€35.8bn) by 2010, most European API producers seem destined to play catch-up with their Asian competitors who enjoy lower production costs.
With sales of $2bn in 2005, the Indian API manufacturing industry is the third largest in the world and is expected to make sales of $4.8bn by 2010, while Chinese API companies made sales of $4.4bn in 2005 and are expected to bring in $9.9bn by 2010.
Still BASF believes that by axing jobs, increasing efficiencies and outsourcing some operations, it can make the Minden site competitive again.
"We shall immediately start negotiations with the employee repesentatives aimed at reaching a compromise and devising a redundancy plan," BASF spokeswoman Claudia Schneider told In-PharmaTechnologist.com.
"Support will be provided in the search for new jobs at other companies and employment opportunities will be examined for outgoing employees at neighboring BASF Group companies."
Representatives of the 520 employees who currently work at the Minden site have acknowledged that some action is needed because demand has fallen for the key APIs they produce, such as pseudoephedrine, theophylline and caffeine.
Restrictions in marketing pseudoephedrine in the US, the world's largest market, as well as huge volatility in the demand for caffeine among the beverage sector, are making it impossible to operate the plants profitably in Minden and employ a workforce of the current size, BASF claims.
"A rapid improvement in the market situation is not foreseeable at the current time," Schneider said.
"The painful but necessary adjustments in the generic API business reflect market performance for these products."
Of course achieving efficiency is easier said than done, particularly since the European API marketplace is already bursting at the seams, full of players with similar production capabilities, technology portfolios, and equally efficient chemical processes.
In fact, BASF appears resigned to the fact that APIs will not be the engine for growth of its Pharma Solutions business.
"Generic APIs are and will remain important," Schneider said.
"But our future areas of growth are pharmaceutical excipients and our custom synthesis range."
