Plastics & Resins Blog

I would think that the largest players in any industry purchase their basic raw materials at a far better pricing structure than smaller companies.

BASF evidently believes that the downturn has yet to "bottom out", both in europe and elsewhere.

Kind Regards....

You are right, Sparky, that the "Big Boys" have the best raw material prices. If they wanted to, they can often sell a polymer at a profit for less than it would cost a smaller competitor to make. However, big plants like to make a lot of a few things. They are slow to change directions. It is not efficient to switch from one formulation to another. They like the big volume applications. The smaller companies can't compete on price for big volume commodity products, but can do quite well on smaller volume niche/ specialty markets which are of less interest to the big boys. Smaller companies have less overhead, and require less business to base-load the plant to generate the minimal amount of conversion costs to keep the lights on. Smaller companies can be more nimble and respond to changing market demands while the big boys are having a meeting to discuss the business environment and run projects thru the stage-gate committee review process.

BASF takes a pretty unemotional approach to business and it pays off for them. I don't know their recent cash position, but I suspect they could buy the big three with one check if it fit their strategy. However, they don't usually make bad investments. They leave that up to the US government.

I agree beriberi,

Cold calculated and correct. I suspect their cash position just modified to take advantage of the perceived coming market dynamics. I wonder what indicators they set to implement their plan by?

Brad