In the third quarter of 2020, the global industrial economy recovered from the sharp downturn in the previous quarter. However, global production levels were still around 3% lower than in the prior-year quarter. Regional recovery rates were mixed. North America and Europe saw a strong quarter-on-quarter recovery, while Japan’s recovery was more moderate. In China, the pace of growth slowed slightly after strong gains in the second quarter of 2020, but remained at a high level overall.

The automotive industry, which was particularly strongly affected by the production closures in the second quarter of 2020, was still down around 2% from the prior-year period in the third quarter of 2020. In China, production was already well above the level of the third quarter of 2019, while volumes were on a level with the prior-year quarter in North America and still slightly lower year on year in western Europe. By contrast, the gap to the prior-year period was much larger in Japan, India and South America.

Demand for durable consumer goods picked up. Demand for consumables such as food and care products, some of which saw stronger demand as a result of the pandemic, gradually returned to normal. Following the dynamic recovery effects in the third quarter, momentum is expected to slow in the remaining months of the year.

Our assessment of the global economic environment in 2020 is therefore as follows (figures rounded to the nearest half a percentage point):

  • Growth in gross domestic product: –5.0%
  • Growth in industrial production: –5.0%
  • Growth in chemical production: –2.5%
  • Average euro/dollar exchange rate of $1.15 per euro
  • Average annual oil price (Brent crude) of $40 per barrel

Our forecast assumes that severe restrictions on economic activity to contain the coronavirus pandemic, such as lockdowns, are not reintroduced.

Some of the risks relating to short-term demand and margin development presented in the BASF Report 2019 have materialized as a result of the coronavirus pandemic; the same applies to the impairment risks discussed in the Half-Year Financial Report 2020. This development was a major contributing factor to the year-on-year decline in earnings.

The fourth quarter continues to present risks given the uncertainty surrounding the further recovery of the markets, the future course of the coronavirus pandemic and any renewed restrictions on economic activity to contain the pandemic.

This particularly affects the development of demand and margins in our key customer industries, the impact of which can vary from region to region.

Above and beyond this, we do not see any material new or increased risks as a result of the crisis, such as supply chain disruption risks or the risk of default on receivables.

According to our assessment, there continue to be no individual risks that pose a threat to the continued existence of the BASF Group. The same applies to the sum of individual risks.

For the fourth quarter of 2020, BASF now expects a further improvement in the BASF Group’s EBIT before special items compared with the third quarter of 2020.

For the full year 2020, the BASF Group expects a slight decline in sales compared with the previous year, mainly due to weaker demand as a consequence of the coronavirus pandemic. We anticipate a considerable decline in EBIT before special items for 2020. As well as weaker demand, the company expects pressure on margins to continue, especially for basic chemicals, which will be partially offset by fixed cost savings.

For the 2020 business year, we are therefore forecasting the following sales and earnings figures for the BASF Group:

  • Sales of €57 billion to €58 billion
  • EBIT before special items of between €3.0 billion and €3.3 billion
  • Return on capital employed (ROCE) of between 0.0% and 1.0%