Furniture is the main downstream industry of polyurethane in Europe. In recent years, the struggling European furniture industry has seen several bankruptcy filings. This situation has become more pronounced this year.
IRO Mobelfabrik: Furniture manufacturer IRO Mobelfabrik, founded in 1923, filed for bankruptcy with the local bankruptcy court on March 8, 2024. The company has been producing and selling bedroom and kitchen furniture since the 1980s.
Dietrich: Furniture retailer Dietrich, with a history of 122 years, announced that it will cease operations by the end of 2024. Stefan Eichler, CEO at Dietrich, explained that the overall market continues to deteriorate. About nine months ago, the economy began to decline. Rising commodity prices and decreasing purchasing power of the public have led to reduced consumption. Apart from political and global uncertainties, the winter heating problem in Europe has caused consumers to reduce spending rather than make purchases.
Hund: German furniture group Hund has recently applied for bankruptcy reorganization under debtor-in-possession management in the country’s local court. The company’s brands, including Hund Möbelwerke GmbH & Co. KG, Hund Büromöbel GmbH, and OFF Büromöbelwerk GmbH, are all affected. However, the three brands can continue to operate independently under the supervision of the court-appointed administrator, and the production and delivery of Hund’s office furniture proceed as usual.
Schröder: German furniture manufacturer Schröder submitted an application to initiate bankruptcy proceedings to the local regional court on July 8, 2024.
In contrast to the furniture manufacturers mentioned above, some businesses are resuming furniture production in Europe. For example, RV Design recently made a strategic decision to resume furniture production in Europe, a shift that is already beginning to pay off. RV Design’s return to European manufacturing after a period of exclusive production in Asia was due to significant fluctuations in container shipping costs. European production allows the company to respond faster to local market demands, crucial for growth in the luxury segment.
European PU Suppliers are Adjusting Strategies and Undergoing Transformations
Dow
In October, Dow announced a strategic review of select assets in Europe, primarily those in its Polyurethanes business. The European assets account for nearly 20% of its sales in Europe, the Middle East, Africa and India (EMEAI). Jim Fitterling, CEO of Dow, emphasized the necessity of regional assets review and adjustments due to soft demand and ongoing absence of clear, consistent, and competitive regulatory policy. Dow reported a more than 15% decline in the EMEAI region’s sales in 2024 compared to 2021. The company’s review includes all value-creating options for these assets. Dow’s sales in EMEAI for 2023 amounted to USD 14.5 billion, and the sales generated from assessed assets were around USD 3 billion. Dow expects to complete the review by mid-2025.
BASF
Recently, during the analyst conference call Q3 2024, BASF Group was asked whether they have any interest in being a consolidator in Europe as a number of companies are strategically reviewing their upstream assets in Europe, particularly the U.S. companies. BASF responded, “The necessary consolidation in Europe in the chemical industry is an opportunity for BASF. This is based on the analysis that we did during our strategy work, that again confirmed the largely competitive nature of our key assets here in Europe and, of course, in anticipation of a wave of consolidations in the chemical industry in Europe in particular, but also globally. Based on our strength and our technology position, it is plausible that BASF is going to emerge as a consolidator rather than the opposite.”
In September, BASF initiated a new “Winning Ways” strategy, aimed at setting a new direction for portfolio steering, capital allocation and performance culture. The new strategy emphasizes strengthening core businesses, unlocking the value of standalone businesses, enhancing presence in Asian markets, and improving capital allocation. Indeed, BASF’s investment projects have been increasingly concentrated in the Asian market, particularly China, in recent years. These include: 1) Zhanjiang Verbund site (The project is BASF’s largest single investment to date with around EUR 10 billion upon completion. It will be operated under the sole responsibility of BASF. The project is steadily progressing according to plan. The site is now focusing on building its core of the Verbund and is expected to be put into operation by the end of 2025, including a steam cracker and several downstream plants. 2) Investment in synthetic biotech: BASF has invested in Bota Biosciences, a Chinese industrial synthetic biotech company founded by a professor and doctor from MIT, which is using machine learning and AI for systematic engineering of organisms to develop industrial biotechnology. 3) Expanded downstream chemical plants at BASF-YPC: The expanded downstream chemical plants at the Verbund site operated by BASF-YPC Co., Ltd. was completed in November 2023, including a new tert-butyl acrylate (TBA) plant, the first implementation of the advanced production technology outside of Germany. 4) Investments in expanding capacities of polymer dispersions, anode binder, and UVA filters: BASF’s strategic investments in the Greater China region also include expanding capacities of polymer dispersions, anode binder, and UVA filters. 5) Battery materials market: BASF has established a joint venture with Shanshan to serve the battery materials market and has set up an advanced R&D center at Da Chan Sha Site in Hunan. 6) Investment in renewable power: BASF is investing in its own renewable power assets and purchasing green power on the market through long-term supply agreements with plant operators, power purchase agreements or renewable energy certificates to power the entire Zhanjiang Verbund site with 100% renewable energy by 2025.
These investments underscore BASF’s long-term commitment and confidence in the Chinese market, aligning with its strategic emphasis on sustainable development and high value manufacturing.
