BASF exits amino acids with lysine plant closure

By Jess Halliday

- Last updated on GMT

Related tags Amino acid Protein Basf

BASF has announced that it will be ceasing production of lysine at
its plant in Gunsan, South Korea, marking the end of its amino acid
activity in the face of shrinking margins.

Lysine is the only amino acid BASF has ever produced.

It plays a role in calcium absorption, building muscle protein, recovery from injury, in production of hormones, enzymes, and antibodies.

But for some time it has been one of the factors dragging down the performance of BASF's fine chemicals division, which supplied it for both human and animal nutrition.

The despite having undertaken a cost reduction programme over the past three years, rising raw material costs, overcapacities and high dependencies on expert have at last led to the conclusion that the business is no longer sustainable.

The closure also casts uncertainty over the future of its vitamin B2, which is also produced at the site.

Although the two processes are discrete, a spokesperson for the German chemicals group said: "When you have two products, they share certain services.

We will have to see if it is possible to continue with only one."

Around 180 people are presently employed at BASF's Gunsan site.

While the company has said it is immediately commencing negotiations on "the situation arising from the shutdown of the lysine plant" , job losses seem inevitable.

However BASF does have other activities in South Korea, where it has operated in the country since 1954 and currently employs around 1,200 people.

It has said it remains committed to the country.

The spokesperson said that the closure of the lysine business was the final option, after several negotiations with potential buyers did not lead to any agreement.

BASF's capacity for the amino acid was around 100,000 metric tones per year, and the company claimed to be one of the world's top three producers.

Other firms remaining active in the market include Ajinomoto and Kyowa Hakko - although Ajinomoto has also communicated decreasing margins as a result of raw material costs.

BASF has been restructuring its fine chemicals business since January 2006.

Full year sales for the division were €1.85 bn, compared to €1.73 bn in 2005, while income from operations (EBITDA) was €184m, up from €89m last year.

However much of the good news stemmed from the newly acquired Engelhard Corp business, consisting of effect pigments and personal care materials.

On a comparable basis sales were actually down six per cent on last year.

"In order to turn around our fine chemicals business, we are focusing on a more cyclically resilient product portfolio in nutrition as well as on growth areas in cosmetics and pharmaceuticals," said Dr Wolfgang Büchele, president of fine chemicals division.

"By concentrating on the production and marketing of important non-amino acids such as vitamins, carotenoids, enzymes and organic acids, we are positioning ourselves as a reliable supplier of ingredients to the nutrition industry with a long-term commitment."

Other measures in the restructuring to date include the combining of its human and animal nutrition businesses into one unit simply called Nutrition, and the divestment of a major part of its premix business in February 2007 to Nutreco.

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