BASF could cut output further amid fragile gas supply

By Ludwig Burger

FRANKFURT (Reuters) - BASF is monitoring the natural gas market closely and could cut production further if needed after Russia suspended deliveries through its main gas pipeline to Germany, the chemicals giant said on Monday.

Responding to questions from Reuters, the Germany-based company, one of the largest natural gas users in the country, added it was bracing for high and volatile gas prices.

European stocks fell on Monday and gas prices surged after Russia indefinitely extended a shutdown of Nord Stream 1, one of its main gas supply routes to Europe.

"BASF is monitoring the situation and will decide, depending on the situation, on any changes to the production value chain as appropriate," it said in a statement.

BASF is already reducing production of ammonia, which relies heavily on natural gas, and sourcing some it its ammonia needs from outside Europe, where gas prices are lower.

Ammonia is mainly used for nitrogen fertiliser but is also a vital input for engineering plastics and diesel exhaust fluid. Ammonia production yields food-grade carbon dioxide as a byproduct, which is needed by the meat and fizzy drinks industries.

BASF warned in July some lines of production could be subject to output cuts as it flagged lower ammonia production. It also mentioned syngas, a mixture of carbon monoxide and hydrogen, and basic petrochemical acetylene as candidates for cutbacks at the time.

Rival ammonia makers Yara and CF Industries said last month they were slashing ammonia production in Europe due to soaring gas prices.

(Reporting by Ludwig Burger Editing by Thomas Escritt and Mark Potter)