Lanxess to cut 870 jobs amid German chemical industry downturn

GERMAN speciality chemicals group Lanxess plans to cut 870 jobs worldwide. The firm has blamed a deepening crisis in the country's chemicals sector due to rising energy prices brought on by Russia’s invasion of Ukraine. 

Lanxess, which had sales of €8.1bn (US$8.8bn) and a net income of €250m in 2022, said that just over half of the planned job cuts will be in Germany. The company currently has around 13,100 employees in 32 countries. 

In August, the firm called on German politicians to support the struggling industry after its quarterly profits fell by more than half. "We urgently need sustainable framework conditions – above all an internationally competitive electricity tariff for the industry," CEO Matthias Zachert said in a statement. 

The announcement is a further blow to Germany’s chemical industry which, despite its status as Europe’s largest chemical producer, is struggling with higher energy prices brought on by its reliance on gas supplies from Russia. 

While many other countries were affected by the invasion, some were able to source alternative gas supplies from Norway and Algeria. However, until recently, Germany did not have its own port to receive LNG directly, and instead relied on the Nord Stream 1 pipeline in the Baltic Sea to supply much of its natural gas. This too was thwarted when a series of “unexplained incidents” caused both Nord gas pipelines to be shut down in September 2022. 

The knock-on effects have left Germany’s chemical industry experiencing a severe crisis, according to industry expert Anna Wolf of economic thinktank the ifo Institute. Amid low order backlogs and a drop in export expectations, she said “bright spots were essentially non-existent in September”. She added: “Germany’s chemical industry is experiencing a severe crisis.” 

Exodus

With enormous energy costs causing a decline in production and disruption to supply chains, some firms are already looking to scale back operations in the country. 

Earlier this year, BASF announced cost-cutting measures in Europe, primarily at its Ludwigshafen site – the world's largest integrated chemical complex – which would lead to the loss of 2,600 jobs. Trinseo, a manufacturer of synthetic rubber, plastics, and latex binders, closed its styrene facility in Böhlen, while Olin, a global manufacturer and distributor of chemical products, announced it would cease methylene chloride and chloroform production in Stade.