Economic Environment and Outlook

The recovery of the global economy continued in the first half of 2021, following the pandemic-related collapse in the first half of 2020. Industrial production grew significantly compared with the prior-year period, whereas activities across large parts of the retail industry, food services and other consumer-oriented service sectors continued to be restricted by health and safety measures. Global gross domestic product is expected to have grown by around 7% year on year in the first half of 2021.

Based on preliminary data as well as some estimates, global industrial production expanded by around 10% in the first half of 2021 compared with the prior-year period. Due to the varying degree of contraction in production across customer industries in the first half of 2020, growth rates also varied compared to the prior-year period. The global automotive industry recorded especially strong growth of over 30%. Its recovery was relatively strong compared with China due to greater base effects in the United States and Europe. In absolute terms, however, the Chinese market showed the most robust growth at 2.3 million units. Consumer goods production also increased by a double-digit rate, for example in the furniture and textiles sectors as well as in the electronics and electric industries. Due to low interest rates and government economic stimulus packages, the construction industry also expanded at a relatively high rate. Growth in agriculture, the food industry, as well as the detergent and cleaner industry was above the longer-term average, but lagged behind other industries. This was because these sectors were impacted to a lesser exent by the lockdowns in the spring of 2020.

Global chemical production in the first half of 2021 also expanded by around 10% compared with the prior-year period. The momentum of global chemical production varied by region: The Chinese market recorded growth of more than 20% in the first quarter of 2021. In the second quarter of 2021, high demand and base effects subsequently led to double-digit growth rates in Europe. By contrast, overall chemical production in the United States declined slightly in the first half of 2021. This was caused by a multi-week loss of petrochemical capacities on the Gulf coast of Texas due to a sudden frost in mid-February.

The price of oil averaged $65 per barrel (Brent crude) in the first half of 2021, significantly above the average for the prior-year period ($40 per barrel). The growing demand for oil due to economic factors alongside the largely constant supply led to a rise in the price of oil from $55 per barrel in January to $73 per barrel in June.

The assessment of the global economic environment in 2021 was adjusted as follows (previous forecast from the BASF Quarterly Statement Q1 2021 in parentheses):

  • Growth in gross domestic product: +5.5% (+5.0%)
  • Growth in industrial production: +6.5% (+5.0%)
  • Growth in chemical production: +6.5% (+5.0%)
  • Average euro/dollar exchange rate of $1.20 per euro ($1.18 per euro)
  • Average annual oil price (Brent crude) of $65 per barrel ($60 per barrel)

Due to the strong business development in the first half of 2021, the ongoing upturn of the global economy, and the considerable increase in earnings expectations in the Chemicals and Materials segments, the forecast for the 2021 business year was adjusted as follows (previous forecast from the BASF Quarterly Statement Q1 2021 in parentheses):

  • Sales growth to between €74 billion and €77 billion (between €68 billion and €71 billion)
  • EBIT before special items of between €7.0 billion and €7.5 billion (between €5.0 billion and €5.8 billion)
  • Return on capital employed (ROCE) of between 12.1% and 12.9% (between 9.2% and 11.0%)
  • Increase in Accelerator sales to between €21.0 billion and €22.0 billion (between €19.0 billion and €20.0 billion)
  • Stabilization of CO2 emissions at between 20.5 million metric tons and 21.5 million metric tons (unchanged)

For the second half of 2021, BASF anticipates largely stable industrial economic development and assumes in its forecast that economic activity will not be restricted by coronavirus pandemic prevention measures. However, a high degree of uncertainty remains due to dynamic infection rates and lasting disruptions in global supply chains.

Risks result from the volatility of raw materials prices and a faster-than-expected price decrease due to weaker market development. Opportunities could arise from continued positive development of margins and demand as well as from a short-term elimination of supply bottlenecks, primarily in the chip industry. For the remaining risk factors, the statements on opportunities and risks made in the BASF Report 2020 continue to apply overall. According to the company’s 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, even in the case of another global economic crisis.