By Liz White, UT staffLudwigshafen, Germany-Despite massively higher raw materials prices-amounting to additional costs of over $1000 million in the first nine months of the year-BASG Aktiengesellschaft continued with strong growth in the third quarter of 2005, with polyurethanes making a significant contribution to sales growth and earnings. And Jürgen Hambrecht, BASF chairman, is optimistic that this positive performance will continue to the end of 2005. The picture shows (l-r) John Feldmann, board member for polyurethanes, Jürgen Hambrecht, chairman, and Kurt Bock, chief financial officer, at BASF's 2 Nov results announcement. A considerable increase in margins in the polyurethanes business during the first nine months was the main factor in better earnings in BASF's plastics division, Hambrecht pointed out, during the company's 2 Nov Q3 results press conference. For this division, EBIT for the quarter showed a "significant rise," of 48 percent on that of the same quarter last year, at Euros 267 million, "mainly due to the improvement in the polyurethanes business," Hambrecht said. Polyurethanes contributed Euros 1079 million of the Euros 2957 million sales for the plastics division in Q3, a 19-percent rise over Q3 2004, compared with only 5-percent overall growth in this division's sales. Sales in BASF's performance polymers also grew, by 15 percent, but sales of styrenics dropped by 11 percent in the quarter. BASF said polyurethane sales rose in all regions, thanks to significant price increases and slightly higher sales volumes, with some contribution from the TDI business bought from Huntsman in July 2005. In regional terms, BASG highlighted its successful polyurethanes business in Korea as well as its newly opened cracker site in Nanjing, China, as helping sales increase in Asia Pacific by 21 percent to Euros 1645 and EBIT to Euros 113 million, a 7-percent rise. Discussing North American results, Hambrecht said while the Gulf Coast hurricanes cause "relatively minor" plant damage, production losses from plant shutdowns at BASF sites, as well as those of customers and suppliers "were more significant." BASF is budgeting for earnings impairment of Euro 140 million, Euros 120 million of this affecting fourth quarter earnings. In spite of these negative effects-and those of raw materials prices increases-BASF's total earnings rose 11 percent Euros 10 400 million. Earnings (EBIT) before special items were up 13 percent to more than Euro 1300 million. China isocyanates plant on scheduleIn a separate interview, John Feldmann, board member responsible for polyurethanes, said the two isocyanate plants BASF is involved in at Caojing in China are on schedule to start up in the middle of 2006. One of these is a 240 kilotonnes per annum MDI (methylene diphenyl diisocyanate) plant being built in cooperation with Huntsman Polyurethanes and local partners. The other is a 160 ktpa TDI plant to be operated by BASF alone. Asked about recent reports of foamers having difficulty sourcing TDI in the US, Feldmann said the hurricanes had caused plant shutdowns and logistics problems: for example, BASF has a warehouse for isocyanates in New Orleans, which was affected by the flooding. But he sees the TDI shortage as only a short-term problem for the industry-despite the closure of Lyondell's TDI plant in Texas, announced recently. Feldmann went on to stress that the business has seen "totally unacceptable margins in TDI," in the US. Now TDI prices are going up, he said, and will continue to rise next year. But he feels there is still sufficient TDI capacity in North America to meet demand. And the same applies for polyols-capacity is sufficient to meet demand, he said. For BASF, the situation is that currently it is a major purchaser of propylene oxide (PO) to make polyols, Feldmann said. Now some of BASF's PO contracts are coming to term, and "we have to decide whether to invest in our own PO capacity," he said. This is the background to the group's recent announcement that, along with development partner Dow Chemical Co., it would invest in a 300-ktpa PO plant using the hydrogen peroxide route (HPPO) in Antwerp, Belgium. A decision is also being finalised on building a second HPPO unit at BASF's Geismar, Texas site, and on a third PO plant in Asia, probably in China, where the partners are "still looking at options," Feldmann added. Such HPPO plants are "one of the most expensive investments ever," Feldmann pointed out. And he agreed that, for the future, joint investments with other producers in, for example, world-scale plants such as the 240-ktpa MDI plant in Caojing, are the way to go. This approach allows a better balance between supply and demand in key raw materials. A product-sharing scheme being negotiated will allow Bayer Material Science AG to share the output from both isocyanate plants in Caojing, while Bayer itself builds a 350 ktpa MDI plant, scheduled to open in 2008, plus a 150 ktpa TDI plant for 2009."