German chemical giant warns again: Gas shortages could collapse supply and production chains

The shortage of natural gas may cause some factories to have to close, leading to the collapse of the entire supply chain and industrial chain

Covestro stated in its second-quarter earnings report on August 2 that the conflict between Russia and Ukraine has fundamentally changed the geopolitical situation and has had a wide-ranging impact on the global economy

Covestro's second-quarter sales rose by 18.

In the second half of the year, macroeconomic risks increased significantly again, Covestro pointed out, especially its production sites in Germany faced extremely high uncertainty in energy costs and gas supply

The German production site accounts for about a quarter of Covestro's global production capacity

Covestro warned that rationing of natural gas over the next year could force individual production facilities to operate at low loads or even shut down completely, depending on how much gas supplies are cut

At a shareholder meeting in April, Covestro said at the time that the German chemical industry and other industries must reduce their reliance on fossil fuel feedstocks, especially Russian gas, but an immediate embargo on Russian gas "could lead to The entire production and supply chain collapsed

The picture shows a Covestro factory in Germany

The chemical industry plays a systemically important role in the German industrial system: The production of almost all industrial products in the country depends on chemical products, such as automobiles, computer chips, insulating materials, pharmaceuticals, and detergents and cleaning agents

According to data from the German Chemical Industry Association (VCI), the chemical industry accounts for about 15% of Germany's natural gas consumption, using about 2.

Due to the reduction of gas supply in Russia, the business of many European companies has been affected

Another German chemical giant, BASF Group, said on the 27th that it will reduce the production of ammonia, a raw material for fertilizers, to reduce demand for natural gas

Previously, BASF has issued several warnings that if the supply of natural gas falls below 50% of the maximum demand, BASF will have to reduce or even completely shut down the world's largest integrated chemical production base, the base in Ludwigshafen, Germany

Not only Germany, but the European fertilizer giant Yara International (YARA) also said not long ago that due to rising natural gas prices, it has cut the production capacity of several factories, cutting ammonia production capacity by 1.

Recently, Russia's gas supply to Europe has been reduced again