March 1, 2006

 

BASF raises lysine prices 12 percent worldwide
 

An eFeedLink Exclusive
 

 

German chemical producer BASF announced through a Feb 24 press release a worldwide price increase of 12 percent for all its lysine products, citing "increasing costs for energy, transport and raw materials" as reasons that have made this step "necessary".

 

Despite intense competition from low-priced lysine from China, BASF does not expect its decision to up prices to erode its share in the lysine global market.

 

"Market share is not the issue but recovering increased costs is," says Karin Moeschke from BASF's Global Communications Fine Chemicals division, adding that the price increase has not resulted in any strong market reaction so far.

 

Though the company refused to divulge further details on how costs could have caused the drastic price rise, it revealed: "One important factor, however, is the significantly increased crude oil prices."

 

Just a few days before on Feb 22, the company broke news of record earnings for 2005, with sales of EUR42.7 billion--up 14 percent from the previous year--and income from operations (EBIT) before special items of more than EUR6.1 billion, up 17 percent from the previous year.

 

Earnings in the agricultural products division rose, while earnings and sales from its fine chemicals division fell EUR61 million to EUR1.732 billion, impacted by lower prices for lysine and vitamin C products, according to the company's 2005 annual report.

 

In addition to the decline in sales prices, earnings in this division were also negatively affected by the higher prices of raw materials and energy. To rectify the issue, the company has launched an extensive restructuring programme, which includes the closure of its vitamin C plant in Grenaa, Denmark, and a reduction in the workforce at its production site in Minden, Germany.

 

In 2005, lysine prices worldwide had continued the downtrend from previous years, falling on average 10-15 percent in Asia, Europe and North America as the supply glut from cheaper Chinese varieties continued to plague the market. Producers, hurt by drastically falling margins, are expected to rally prices this year. 

 

BASF is the second-largest foreign supplier of lysine to China.

 

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