[Foreign language]
Let me inform you about the emergency routes. The emergency exits are on the left-hand side where you see the windows. In the case of an alarm, we ask you to stay calm and wait for instructions of the safety personnel. If necessary, please leave the room via the marked emergency exits and go to the assembly point. The assembly point is outside of the site's perimeters on the grass in front of the [Foreign language]. Thank you very much. Good morning and a warm welcome. We've meet face to face for our press conference eventually. We are very pleased for you to be here. You will be talking to Martin Brudermüller, the Chairman of the Board of Executive Directors, and Hans-Ulrich Engel, the CFO of BASF. Later, when we have our Q&A, Ms. Melanie Maas-Brunner will join us.
She's also a member of the Board of Executive Directors, and she is also Site Manager. Before we start, let me give you some technical instructions. Most of you will know it already. This conference is going to be broadcast live on the Internet. The conference language is German with a simultaneous interpretation into English. If in the Q&A station, session you want to ask your question in English, the other participants will get a translation via the headsets that you find on your place. We do have this microphone set to ask questions.
In order to ask questions, you have to make sure that you take the card that you received together with your name tag, that you slide it into your microphone console, and as soon as the display says Welcome and gives your name, and then later on, if you want to ask a question, you just press the button Speak. You can already do that during the presentation to announce your question. Okay, thank you very much. I'll give the floor to Martin Brudermüller.
Good morning, ladies and gentlemen. Hans Engel and I are very happy to welcome you here in Ludwigshafen. We are very pleased that after two years of hosting entirely virtual annual press conferences because of the pandemic, we are now finally able to meet in person again. However, this meeting takes place on a sad day. Exactly one year ago, Russia invaded Ukraine. War is still raging in the middle of Europe. We condemn Russia's attack. For the Ukrainian people, it's a catastrophe. The past year has taught us all a harsh lesson. Peace and economic stability must never be taken for granted. The consequences for the global economy have been tremendous. 2022 was marked by great uncertainties, rising energy prices, inflation, and concerns about widespread economic distortions. On January 17th already, BASF released preliminary figures for the full year 2022.
Today, Hans Engel and I will first provide you with further details regarding our business development in Q4 and the full year 2022. In the second part of today's press conference, we will also take time to present the measures that we are taking to strengthen our competitiveness in Europe and particularly in Germany, as announced last autumn. Let's start with the challenging macroeconomic environment. Over the course of 2022, the global macroeconomic environment deteriorated significantly. There are currently no signs of substantial improvement in the short term. Russia's war against Ukraine, high inflation, and the sharp increase in energy prices led to a significant slowdown in consumer demand, particularly in Europe. To combat inflation, central banks raised interest rates considerably, which further dampened consumer spending. Demand in our customer industries softened in the course of 2022, with two exceptions.
Global automotive production reached 82 million units in 2022, according to current data. This represents an increase by 6% compared with the very low level of the previous year. Supply shortages, particularly for semiconductors, have gradually eased. For 2023, we expect a slight increase to around 84 million units. Global agricultural production also continued to grow moderately in the course of 2022. However, overall production growth was lower than in 2021, partly reflecting normalization following higher than average growth in 2021. In addition, production growth was impacted by longer spells of drought in several regions, as well as production disruptions in Ukraine as a result of the war. Let's now take a look at chemical production by region. Based on currently available data, global chemical production grew by only 2.2% in 2022.
While the markets in China and North America grew, chemical production declined massively in Europe and also fell in Asia, excluding China. Chemical production growth in China slowed slightly in 2022 compared with a strong baseline in 2021. This was mainly due to lower demand as a result of COVID-related lockdowns. In North America, chemical production increased compared with 2021. Growth in 2021 had been negatively impacted by the freeze in the first quarter and the hurricanes in summer and autumn. Chemical production in Europe declined substantially. Lower demand and high energy prices led to shutdowns of selected production capacities, especially in the second half of 2022. This was particularly apparent in Germany, where chemical production declined by around 12% in 2022. Lower demand and higher energy prices were also the main reasons for the decline in chemical production in Asia, excluding China.
As the following remarks will mainly focus on BASF's business performance in the fourth quarter of 2022, I will also briefly comment on chemical production in the last quarter of the year. In the fourth quarter of 2022, global chemical production increased by only 1%. A considerable increase was only seen in China, which was surprising in the overall weak environment. This was partly driven by a base effect as chemical production in China had been negatively impacted by electricity cuts in the fourth quarter of 2021. All other regions recorded a decline in chemical production, which was most pronounced in Europe. Ladies and gentlemen, moving on to BASF. In the fourth quarter of 2022, our sales decreased by 2% to EUR 19.3 billion, mainly on account of lower volumes. Sales volumes declined by 15%.
With the exception of Agricultural Solutions, all segments recorded lower volumes. Sales prices increased by 9%. All segments were able to increase prices except for chemicals, where prices declined on account of weak demand. Portfolio effects of -1% were mainly caused by the sale of the kaolin minerals business, which had been part of the Performance Chemicals division until the divestiture. Currency effects of +4.5% had a positive impact on sales and were primarily related to the U.S. dollar. Let's now move on to our earnings development by segment in the fourth quarter of 2022, compared with the strong prior year quarter. The overall decline in EBIT before special items resulted largely from considerably lower contributions from the chemicals and materials segments.
In the fourth quarter of 2022, these two segments contributed only EUR 65 million to BASF Group's EBIT before special items, compared with EUR 933 million in the prior year quarter. This was mainly due to lower volumes and margins on the back of low demand and high energy and raw materials prices. In total, earnings in BASF's four downstream segments improved by EUR 229 million and amounted to EUR 393 million. While the Agricultural Solutions and Surface Technologies segments were able to increase earnings, EBIT before special items in the Nutrition and Care and Industrial Solutions segments declined compared with the prior year quarter. In the full year 2022, EBIT before special items decreased by EUR 890 million to EUR 6.9 billion, compared with a very strong performance in 2021.
Considerably higher earnings in BASF's downstream segments only partially compensated for significantly lower earnings in BASF's upstream segments. Margins in the chemicals and materials segments were extraordinarily high in 2021 and in the first half of 2022, but they declined significantly in the second half of the year. I'd like to hand over to Hans Engel for further details on our financial performance in 2022.
Thank you very much, Martin. Good morning, ladies and gentlemen. I will now provide you with further details of BASF Group's financial figures in the fourth quarter of 2022, compared with the prior year quarter. I will start with EBITDA before special items, which decreased by 36% and amounted to EUR 1.4 billion. EBITDA amounted to around EUR 1.4 billion, too, a decrease of EUR 862 million. At EUR 373 million, EBIT before special items declined by 70%. Special items in EBIT amounted to -EUR 254 million, compared with +EUR 1 million in the fourth quarter of 2021. The special items were mainly related to non-cash effective impairments on plants in Ludwigshafen.
In the fourth quarter of 2022, EBIT decreased by 90% to EUR 119 million. Income from non-integral companies, accounted for using the equity method amounted to -EUR 4.7 billion, compared with plus EUR 112 million in the fourth quarter of 2021. The strong decline was driven by non-cash effective impairments on the shareholding in Wintershall Dea AG in the amount of about EUR 4.7 billion in the fourth quarter of 2022. These impairments resulted in particular from the deconsolidation of the Russian exploration and production activities of Wintershall Dea due to the loss of actual influence and economic appropriation. The remaining value of the Russian participations of Wintershall Dea declined significantly, and further write-downs were made on the European gas transportation business.
You have probably noticed that the impairments I just mentioned are lower than the amount we had in our pre-release on January 17th. This deviation results from the further analysis of the accounting implications of the deconsolidation. Net income amounted to -EUR 4.8 billion, compared with EUR 898 million in the fourth quarter of 2021. The decline was driven by the impairment charges I just mentioned. Let's now look at BASF's operational earnings development from a regional perspective. Our competitiveness in Europe, and particularly in Germany, has declined. In 2015, Germany, Europe excluding Germany, and the other regions each contributed around 1/3 to BASF Group's EBIT before special items. In the strong business year, 2021, Europe, including Germany, contributed only 1/3 of earnings, while the other regions already contributed 2/3.
After BASF recorded its strongest ever first half, earnings softened significantly in further course of 2022, and we saw a particular deterioration of profitability in our German operations. In the second half of 2022, the contribution of Germany was negative, and we ended the year with an overall EBIT before special items contribution of -EUR 126 million. Ladies and gentlemen, this development shows how important a balanced regional production footprint is for BASF's risk management. We will therefore continue to strengthen our business growth in fast-growing regions outside of Europe while adapting our business in our home region to reflect the low market growth and the challenging framework conditions. One main reason for the earnings decline in Europe is the elevated energy costs in the region. In 2022, our operational earnings were burdened by additional energy costs of EUR 3.2 billion globally.
Europe accounted for around 84% or EUR 2.7 billion of this increase which mostly impacted our Verbund site in Ludwigshafen. Higher natural gas costs accounted for 69% or EUR 2.2 billion of the overall increase in energy costs. Again, the main impact was in Europe and Ludwigshafen. In 2022, we reduced our natural gas consumption by around 1/3 in Europe. This was primarily due to lower production volumes. Nevertheless, we incurred EUR 2 billion in additional costs for natural gas in Europe alone compared with 2021. I would now like to provide some more details on the current situation for Wintershall Dea in Russia. In practical terms, Wintershall Dea no longer has any means of exerting influence on its holdings. De facto, Wintershall Dea has been expropriated in Russia.
Wintershall Dea, therefore, intends to fully withdraw from Russia in an orderly manner, as BASF did in 2022, with the exception of businesses that support food production. What are the consequences for BASF? We had to revalue our stake in Wintershall Dea. Non-cash effective impairments amounted to EUR 6.5 billion in 2022, reducing a net income from shareholdings accordingly. Let me also mention that Wintershall Dea had a strong operating performance outside of Russia and paid around EUR 1 billion in dividends to BASF from its non-Russian businesses. The company thus made a strong contribution to BASF Group's cash flow in 2022. We stand by our decision to exit the oil and gas business and are sticking to our strategic goal of divesting our share in Wintershall Dea. Let's now look at the details of our cash flow development in the fourth quarter of 2022.
Compared with the prior year quarter, cash flows from operating activities improved by EUR 1.1 billion to EUR 4.5 billion. The increase was mainly driven by changes in net working capital, in particular as a result of a decline in accounts receivable and significantly lower inventories. Cash flows from investing activities amounted to -EUR 1.9 billion, compared with -EUR 692 million in the fourth quarter of 2021. In the prior year quarter, cash flows from investing activities benefited from a cash inflow of EUR 1.1 billion from the sale of BASF's 49% share in Solenis. Payments made for property, plant, and equipment and intangible assets rose by 26% to EUR 1.9 billion. free cash flow thus increased by EUR 749 million to EUR 2.6 billion in the fourth quarter. Let's turn to BASF's financial and non-financial targets. As explained before, the market environment was challenging.
Therefore, we were only partly able to achieve our targets. In 2022, BASF sales volumes declined by 7%, while global chemical production grew by 2.2%. Excluding precious metals, BASF Group sales volumes declined by 3.6%. The lower production rates, particularly at our sites in Europe, were the main reason for the decline in volumes. EBITDA before special items declined by around 5% to EUR 10.8 billion, mainly on account of lower contributions from the chemicals and materials segments. Our 2022 ROCE of 10% was above the cost of capital rate of 9%. As we have a separate slide on the dividend, in just a moment, I will move straight on to our CO2 emissions, which declined to 18.4 million metric tons in 2022 from 20.2 million metric tons in 2021.
This was mainly driven by the significant reduction in production volumes and the temporary shutdown of emission-intensive plants. We continue to expand the number of sites partially or fully powered by renewable energy and expect to see a further meaningful increase in the use of electricity from renewable sources in 2023. Ladies and gentlemen, despite the challenging market environment, we achieved a very solid free cash flow. We are committed to our shareholders and will propose a dividend of EUR 3.40 per share to the annual shareholders meeting. Based on the year-end share price, this offers a high dividend yield of 7.3%. In total, we will pay out EUR 3 billion to our shareholders. This amount is more than covered by the free cash flow generated in 2022.
I will now give you more detailed information on our 5-year CapEx budget in the year 2022 and the uncertainties from that. We have decided, however, that the share buyback program is going to be ended this year. Since the start of January 11th, 2022, BASF has bought back own shares amounting to EUR 1.4 billion. I will now give you more detailed information on our 5-year CapEx budget. Between 2023 and 2027, we plan capital expenditures of EUR 28.8 billion. CapEx in this period will be higher than in the prior planning period of 2022 to 2026, in which we budgeted EUR 25.6 billion. The main reasons for this increase are our two major growth projects, the Verbund site in Zhanjiang and our battery materials activities.
These two growth pillars are key to drive BASF's future organic growth and will, on average, account for roughly EUR 2.7 billion of capex per year during the next 5 years. On average, the investments in our transformation towards Net Zero will amount to around EUR 400 million per year in this period and will then increase towards 2030. In particular, due to the construction of our Verbund site in Zhanjiang, the share of capex in the region Asia-Pacific will rise to 47% between 2023 and 2027. The European share is budgeted to reach 36% and the North American share 15%. The remaining 2% relate to South America, Africa, Middle East, and to investment projects that have not yet been assigned to a specific region.
Investments in BASF's existing businesses will amount to an average of EUR 2.7 billion per year. We will ensure a high level of discipline regarding the CapEx required to maintain and to profitably grow these businesses. For 2023, we plan total capital expenditures of EUR 6.3 billion compared with around EUR 4.1 billion in 2022. Now I will hand back to Martin for the outlook and an update on our measures to increase BASF's competitiveness.
Thank you, Hans. Ladies and gentlemen, in the current year, we anticipate only moderate growth in the majority of our customer industries. Our forecast assumes that the war in Ukraine will continue but not escalate further. Even so, the further development of the war and its effects on economic growth are still subject to a high degree of uncertainty. In addition, we are assuming that an acute gas shortage with regulatory cuts to energy-intensive industries in Europe will not materialize. We also expect that China's departure from its zero-COVID strategy will have a positive impact on demand and will stimulate growth globally. Based on these assumptions, we expect the global economy to grow by only 1.6% in 2023. We forecast growth of 1.8% for global industrial production, while global chemical production is likely to expand by just 2% in 2023.
Our planning assumes an average exchange rate of $1.05 per EUR and an average oil price of $90 for a barrel of Brent crude. We anticipate elevated and very volatile gas prices in Europe. In view of these factors, we forecast BASF Group to generate sales of between EUR 84 billion and EUR 87 billion in 2023. EBIT before special items is expected to decline to between EUR 4.8 billion and EUR 5.4 billion. We expect a weak first half of 2023, followed by an improved earnings environment in the second half of the year due to recovery effects, especially in China. Based on the forecast weaker earnings performance and slightly higher cost of capital bases of BASF Group in 2023, we anticipate a ROCE of between 7.2% and 8%.
We expect CO2 emissions of between 18.1 million tons and 19.1 million tons as a result of moderate growth in production and slightly higher capacity utilization at emission-intensive plants. Ladies and gentlemen, as previously mentioned, we would now like to present our measures to increase the competitiveness and profitability of BASF Group. I'll focus on two areas, and I will begin with the cost savings program focusing on Europe that we announced in October. Next, I'll provide details about our already announced plans to adapt our production structures in Ludwigshafen as part of the transformation of our Verbund. Let's start with Europe. The region's competitiveness is increasingly suffering from over-regulation, slow and bureaucratic approval processes, and in particular, high costs for most production input factors. All this has already hampered market growth in Europe in comparison with other regions for many years.
High energy prices are now putting an additional burden on our profitability and competitiveness in Europe. Our cost savings program therefore focuses on right-sizing our cost structures in Europe and particularly in Germany to reflect these changing framework conditions. We will implement the program from 2023 to 2024. Upon completion, the program is expected to generate annual cost savings of more than EUR 500 million in non-production areas, i.e., service, operating, and research and development divisions, as well as the corporate center. Roughly half of the cost savings are expected to be realized at the Ludwigshafen site. The measures under the program include the consistent bundling of services in hubs, simplifying structures in divisional management, the right-sizing of business services, as well as increasing the efficiency of R&D activities. Globally, we currently estimate the measures will have a net effect of around 2,600 positions.
This figure includes the creation of new positions in particular in hubs. Program costs are expected to amount to around EUR 400 million. This figure includes training and qualification measures, relocation costs, and severance packages. Employee representatives in the relevant bodies have been and will continue to be involved regarding the various measures. Ladies and gentlemen, let's now move from the non-production areas to production at our largest site worldwide in Ludwigshafen. This slide shows a schematic picture of Ludwigshafen Verbund site today in terms of inputs and outputs. What do we need as inputs for production in Ludwigshafen? We require vast amounts of natural gas as an energy source to power our plants and as a feedstock for our products. We also require other fossil and inorganic raw materials. Today, renewable energy and renewable feedstocks still play a relatively small role.
In terms of outputs, we currently sell significant volumes of several base chemicals to the market. However, we mainly use base chemicals within the Verbund to produce a vast range of around 8,000 downstream products for European and global customers. As a collateral output, the site emits about 7 million tons of carbon dioxide per year. Based on 2021 figures, the Ludwigshafen site accounts for about 4% of Germany's natural gas consumption. In view of the large amount of gas we consume, it comes as no surprise that our competitiveness in Ludwigshafen suffers in times of elevated energy prices. European gas prices skyrocketed to unseen levels in August.
Since then, prices have declined, but in the long run, we expect them to stay considerably higher than they were in the past years, particularly in comparison to prices in other regions, chiefly the United States and the Middle East. Furthermore, lower market growth in Europe has negatively impacted supply and demand dynamics in several value chains. Ladies and gentlemen, therefore, in addition to the cost savings program we have initiated, we are also undertaking structural measures to make the Ludwigshafen site better equipped for the intensifying competition in the long run. We are doing this because we believe in the future of the Ludwigshafen site, which is now in its 158th year. We believe in the people who work here, and we believe in the European region. Let me state this very clearly.
We remain committed to this site despite all the speculation about a relocation, and we have the courage to further develop it. During the past months, we carried out a thorough analysis of our Verbund structures in Ludwigshafen. By assessing our asset base in detail, we reached a deep understanding of how to ensure the continuity of profitable businesses while making the necessary adaptations. Let me now highlight the major changes we will be implementing. Let's start by looking at the ammonia value chain. Ammonia is the largest consumer of natural gas as a raw material in Ludwigshafen. Currently, we operate two ammonia plants at this site. Ammonia is an important input factor for caprolactam and thus for polyamide 6, adipic acid, and nitrogen fertilizers. Caprolactam in particular has seen a tremendous buildup of capacities in Asia in recent years, especially in China.
As a result, European exports to Asia were already under pressure before the sharp increase in European energy prices. We must reduce our exposure to this market. We therefore intend to close our caprolactam production in Ludwigshafen. The capacity of BASF's caprolactam plant in Antwerp is sufficient to serve captive demand and merchant market demand in Europe going forward. By closing the caprolactam plant in Ludwigshafen, we will significantly reduce captive demand for the precursor ammonia. This in turn allows us to close one of the two ammonia plants as well as associated fertilizer facilities. At the same time, we will use these changes as an opportunity to optimize our polyamide 6 production network and further strengthen this important business for the BASF Group. High value-added products such as our standard and specialty amines and the AdBlue businesses, as an example, will be unaffected and remain competitive.
They will be supplied via the second ammonia plant at the Ludwigshafen site. Let's now move on to the next value chain, adipic acid. As one of the main precursors of polyamide 6-6, adipic acid is an essential part of our engineering plastics business. In addition to serving captive demand, we sell production volumes to the merchant market. In recent years, however, margins in this part of the business have been steadily eroded due to overcapacities in Asia and lower than anticipated domestic market growth. This situation became even worse with the sharp increase in European energy prices. In response to this changed market environment, we will reduce our adipic acid production capacity in Ludwigshafen and will close the precursor plant for cyclohexanol and cyclohexanone, as well as the production of soda ash. With these measures, we'll reduce our merchant market exposure while improving our overall earnings.
Adipic acid production at our joint venture with Domo in Chalampé, France, in the Alsace region, will remain unchanged and has sufficient capacity to supply our business in Europe. We'll also continue to operate our polyamide 6-6 production plants in Ludwigshafen. The third value chain I want to address is the TDI production complex in Ludwigshafen. Over the past years, both MDI and TDI have gone through significant demand and profitability cycles. Overall, market demand for MDI is healthy as expected and continues to grow. Demand for TDI, however, did not grow as expected and has been especially weak in Europe, Middle East and Africa. We do not expect this to change. As a result, our TDI complex in Ludwigshafen has been underutilized and has not met our expectations in terms of economic performance. This situation has further worsened with sharply increased energy and utility costs.
We decided to close our TDI plant and the precursor plants for DNT and TDA in Ludwigshafen. We'll continue to reliably serve our European customers via our global production network with existing TDI plants in Geismar, Louisiana, Yeosu, South Korea and Shanghai, China. As I mentioned earlier, we thoroughly analyzed our asset base in Ludwigshafen. All of the other value chains and plants will remain competitive in the long term, including the gas-based acetylene value chain, which is important for the site and olefins from the two steam crackers. In total, 10% of the asset replacement value on site will be affected by the measures and probably around 700 positions in production. We are very confident that we will be able to offer most of the affected employees employment in the other plants.
It is very much in the company's interest to retain their wide-ranging experience, especially since there are vacancies and many colleagues will retire in the next few years. The measures will be implemented step by step by the end of 2026 and are expected to reduce fixed costs by more than EUR 200 million per year. The structural changes will also lead to a significant reduction in the power and natural gas demand at the Ludwigshafen site. Consequently, CO₂ emissions in Ludwigshafen will be reduced by around 0.9 million tons per year. This corresponds to a reduction of around 4% in our global CO₂ emissions. Since the start of the Russian war against Ukraine, we've analyzed in depth what factors influence the gas consumption of our Verbund.
When the discussions about a potential gas shortage first arose, you will remember, we said we'd need at least 50% of our average consumption volume to operate the Ludwigshafen Verbund site. Faced with the situation, the BASF team creatively searched for and found solutions. Today, we are able to continue operations even if gas supplies were to drop as low as 30% of our average consumption in 2021. Two examples of the optimization measures include, instead of natural gas, we use the byproduct ethane from our steam crackers to feed our acetylene plant. We recommissioned an idled section of the synthesis gas plant that is independent of natural gas. I can assure you that we will not run out of ideas. We are now expecting further projects to reduce gas consumption in Ludwigshafen even more.
By the end of this year, we will convert two of four natural gas turbines in our combined heat and power plants to allow operation with either natural gas or fuel oil. Gas allocation would nevertheless force us to shut down many production plants on site. Under optimal conditions and with major gas consumers taken offline, we would, however, still be able to run the Ludwigshafen site at a supply rate of around 10% of our average gas consumption in 2021. Thanks to a possible partial conversion to fuel oil, we'd thus be able to avoid a complete shutdown of the site. I want to congratulate the BASF team for their creativity, dedication and ability in developing such great solutions as in the past 12 months. Ladies and gentlemen, reducing the demand for natural gas is only one element in the transformation of the Ludwigshafen site.
We want to develop Ludwigshafen into the leading low emission chemical production site in Europe, and we are initiating further changes needed to achieve this. The green arrows on this slide indicate the timelines for preparations and investments. While the extended arrows indicate that the transformation along that particular lever has more or less entered steady state. We are exploring how we can best accelerate the transformation and how we can move forward most efficiently with regard to abatement costs. I can tell you already today we are making good progress. As part of the grey-to-green lever, we will secure further supplies of renewable energy for the Ludwigshafen site. We are establishing the platforms and infrastructure that we need to supply the site with renewable power and hydrogen. We are planning the use of heat pumps and cleaner ways of generating steam.
In a transition phase, we are also looking into possibilities of using carbon capture and storage for hard to abate CO2 streams before moving to carbon capture and utilization. In addition to this, we will employ new CO2-free technologies such as water electrolysis to produce hydrogen. We plan to use the flexibility of our Verbund to switch from fossil to circular and renewable raw materials. We are working towards Net Zero emissions by 2045 for the Ludwigshafen site to comply with the German government's target. However, to achieve this goal, we are highly dependent on external factors over which we have little or no influence. To give you but two examples, the timely availability of significant amounts of additional renewable energy and the public infrastructure that is needed to connect the Ludwigshafen site to supplies of hydrogen and electricity.
Our highly integrated production Verbund in Ludwigshafen offers great flexibility. That's what BASF has shown time and again over the past 157 years as we have changed raw materials from coal tar to coal and oil. Next, from coal and oil to natural gas, and now to alternative raw materials and renewable energies. There are enormous opportunities in our Verbund, and we keep using them in order to ensure a successful transition. Fossil resources will be increasingly replaced by renewable energy and renewable feedstocks. Production of base chemicals will be focused more on captive use within our production Verbund, meaning we will reduce sales volumes to the market for some products. The broad and varied portfolio of downstream chemicals will remain unchanged. Our products will have lower product carbon footprints thanks to the increasing use of non-fossil raw materials.
The CO2 emissions from the site will be considerably lower, and we will employ carbon capture and utilization to use a portion of the carbon dioxide that is emitted as a source of carbon for our production processes, and thus generate our own raw materials. Ladies and gentlemen, Ludwigshafen will remain the largest and most integrated site within the BASF Group. However, in future the site will focus more on supplying the European market. We are convinced that the measures we are taking will strengthen the long-term performance and resilience of the Ludwigshafen site. Ladies and gentlemen, the measures I've presented today help us not only to secure, but to increase our competitive globally, thus supporting BASF's future profitable growth. In short, we are initiating a cost savings program in Europe and undertaking smart changes to our production structures in Ludwigshafen.
Together with the initiatives that are already running in our global service units, we will reduce fixed costs by around EUR 1 billion by 2026. These steps are part of the constant evolution that BASF has undergone repeatedly over its long history. We are driving change proactively. We are convinced that this will enable us to weather the economic storms around us and prepare BASF Group for the future. In my concluding remarks, I'd like to re-emphasize what BASF stands for. You can rely on BASF to continue to deliver what it is known and respected for. Connectedness lies at the core of BASF, and we are connected with customers, partners, employees, and many other forces in society. We invented and perfected the Verbund to produce chemicals.
The flexibility of our Verbund is clearly demonstrated by the measures we've taken and will continue to take to reduce our natural gas demand. We'll build on the benefits it offers both in Ludwigshafen and at our Verbund sites worldwide. Our global footprint with production assets close to our customers in all regions proves to be the right setup in a world that is becoming increasingly multipolar. With our ongoing investments in China and the United States, we continue to improve our regional footprint. We are expanding our global presence in growing market segments, for example, in the battery materials value chain. Our transformation towards Net Zero will enable us to provide our customers with a complete portfolio of products that have a reduced or even Net Zero carbon footprint. This will differentiate us from our competitors.
Here again, the Verbund plays an important role, and we will be supported by our powerful global R&D teams. All of this would not be possible without our employees. I am therefore proud that we can count on such a great team at BASF, and I thank the team for its commitment in these challenging times. Thank you for your interest in our company, and thank you for your coverage. For the Q&A session, I'd like to ask Melanie Maas-Brunner to join us so that together with Hans Engel and myself, we can answer your questions.
Hello, Melanie.
Thank you very much. Hello, Melanie. Let us start with the questions. There have already been some questions on my tablet. The first is by Mr. Burger. I don't see you, Mr. Burger, just now. Oh, yes, here you are. You have the floor.
Hello, and thank you very much. Again, on the job reduction. If I understand it correctly, net 2,600, that's the figure, despite the 700 that you have or have announced today. Can you explain how many employees will have to leave the company in the framework of these measures and how? Globally, please. I know that enforced redundancies in Ludwigshafen are included here in Ludwigshafen, but how many are going to expect severance pays, for example?
On ammonia, I think there was one figure of so far capacity of 1.77 million tons. Correct me if I'm wrong for ammonia. Please explain what the shutdown of the plant will. What will be the effect of the shutdown on the quantities of ammonia?
Yes. Let me answer the question on the employees. It's two major packages of measures. First, the adaptation of production structures here at the site and the cost savings program. If you add it up, it globally affects 4,200 employees, and I'm talking about the gross figures here. We called it net figures in the press release.
I'm talking about gross figures because a person that is affected will not be willing to be called a net figure because he wants to be seen, and that's what we clarified also in the town hall that we had this morning. The 700 that are affected because of shutdowns in the plants, the production plants, are the ones, as Martin said, will be quickly via a 2 or 3-year period of closing, will be transferred into production. We have many vacancies, more than 1,000 in this area, so it fits very well. The 3,500 employees, that's the net figure. That's because part of the cost saving is achieved because we have financial service, but also engineering services shifted into hubs, for example, to Berlin or digital services to Madrid.
Nine hundred people are going to be added to these hubs, and this is why we have this net figure of 2,600. You were also talking about the severance program that we are trying here. We just intensively discussed that with the Works Council. We developed a key point paper, key issue paper. We say that we want to further qualify employees, that we want to strengthen further training. We will invest in that. We will try to offer people who are affected by the cost savings and not have their job any longer, qualify them for other job. Why will that work? We are very confident here that it will work. Here in Ludwigshafen, starting this year, we have retirement figures of around 1,000 people.
That's the baby boomers, will continue over the next years. We are very happy if we are able to further qualify some people staying here and using them for the BASF if they want to stay. Of course, severance payments will also be one part of the measures that will be individually arranged between the company and these employees. The site agreement for Ludwigshafen makes this very easy.
Mr. Burger, maybe I answer the second part of your question about ammonia. Please understand that I will be a little nebulous in some of the parts because it's always a question of competition, our competitors are not supposed to know all the details at this point. You know that the plants that we mentioned here are part of our Verbund via utilities, we have input and outflows and inflows.
Of course, all this has to be adapted beyond of what I already told you. That's more complex of course, and it shows the flexibility that we have. We have between 800,000 and 900,000 tons of ammonia here at the site. There's an older and a newer plant. The older is a little smaller than the newer one. That's all I want to say. The older one, a little smaller one, is the one that we are going to close. This also means that it has an effect on the volume of fertilizers. This is a large by-product fraction. Caprolactam is 2.5 kg of ammonium sulfate as a by-product into caprolactam, and that's the basic flows and streams going into fertilizers.
If you don't produce caprolactam, the all the rest, ammonium sulfate and these fertilizers will not be there either. That gives you maybe a rough figure of what we are planning in terms of production capacities to go away from Ludwigshafen.
Let's continue with Mr. Freytag of FAZ. We cannot hear Mr. Freytag. It's difficult. I'm sorry. Here we go now.
I have three question for Mr. Brudermüller. A year ago, you warned against drastic measures if the government allowed for a gas boycott. We didn't have that. There's no gas embargo, but the consequences are not so severe as we had all feared for. My question is really, have you, well, pushed politics? Did you push back on their measures, or how would you rate your statement of a year ago?
Second question, your regional setup and investment plans. Obviously, you're not going to cut down in China, but you invest only 15% in North America, even if the situation is good there and there's large subsidies paid out there. Is that up to date, or why are you so reserved in your business in the United States, in America? Third question, the production sites that you're going to shut down, this will have follow-up effects. What effect will that have on the net income of this year?
I'll take the first two questions. Hans will take the last one. Maybe on the gas boycott or embargo. I will not talk about all of what happened in the past, but let's talk about the period after 24th of February.
After a few weeks only, there was an emotional call for everybody that everybody has to go out of gas supply. Nobody even knew what that would mean in details. We didn't have the detailed information about the value-adding change that would follow up, we were very much concerned that if we did inconsiderate steps, that would have severe consequences for our economy. I think we were heard by the government, there was a very unilateral discussion, namely only to shut down this one. There was a second point, there was this trigger when we went into the details, namely when we discussed what that would mean for our economy. Let's take our example of BASF. I said we knew quite quickly that we went below 50% of gas allocation, then we would have to shut everything down in Ludwigshafen.
I said, "Okay, now I tell you, BASF can now operate with less than 10% of the natural gas we had before the war." That is something that is happening all over the companies in our national economy. We have learned where the levers are, where we can save, and with every month of time that we have time to think, we gained understanding for the right measures to operate much more, in a much more differentiated manner. That's good service for the entire nation. This is why I think it was a good point to start this discussion. Looking at the Federal Network Agency, they learned about the value-adding chains, the never happening allocation patterns that were announced. Yesterday we got the figures, 24%, 25% less gas was consumed. I would say great, Germans did good.
Everybody contributed.
The citizens did contribute and also the industry at similar figures here. Let's also remain realistic with all the euphoria for the savings, where does most of the part come from in industry? That's shutting down of plants, so it's also related to a loss of wealth and also loss of GDP, which we generate, so we have to be aware of that. If you look at the figures of the chemical industry, it's a very energy-intensive industry, and this is why BASF and I myself went into the lead to warn against this situation because we might have a better insight into our site and into the value-adding chains. Looking at the chains here, -12% is gone in terms of the market, and we expect this to continue for the next year.
It will be a single-digit figure for the German market. That shows you these are matters of competitiveness. You can look at export and import, and you will see that major part of what volume was reduced is less export. It's not an increase in import because there's no demand for that, but it is export that falls away. That shows very clearly that we are losing competitiveness, and this is why I still believe that it was a good idea to have these nine month of time. At this point today, we can argue and reason much more reasonably, and we had a hands-on approach, which we will continue. Despite all the criticism that we hear, I will congratulate Mr. Habeck. I was wrong here.
I didn't think that we would have two LNG terminals in such a short time and have them connected to the grid. That was much quicker than I ever expected. One last thing, we were so lucky to have one of the mildest winters in recent years. I think New Year's evening, Berlin had 20 degrees centigrade plus, so we were lucky. Now we will need some luck for the future regarding supplies, and again, we need luck regarding the next winter. Two weeks ago, I added, we cannot sit back and idle, but we should continue along this co nstructive path in Germany. Hans?
Okay, I will take the question on write-offs regarding the plants to be shut down. Mr. Freytag, in Q4, that is in the 2022 financial statement, this has already been considered.
We expect around EUR 250 million of special effects, which covers the write-offs for the plants to be shut down. Something that has not been accounted for yet are the costs directly related to the shutdowns, and here we are talking of EUR 300 million-EUR 350 million, and we can only account for this once the projects have been finally developed. It will take some time. Some questions about what can we continue to use, what kind of material can be used, and so on. We still need to work on this, and step-by-step, we will see this over the next 18 months.
Mr. Freytag, one more thing on investment. You know, the lion's share in Asia is a Verbund site. You cannot build just 50% or 75% of a Verbund site. It's either everything or nothing.
Most of the expenses are related to the enormous infrastructure that is required when you start building such a site. We announced it in 2018 already, and on part of China, a lot of preparation was done regarding the development of the land there, more than 5,000 square meters. Our analysis is still positive when it comes to the market development in China, and this is why we decided to continue with the project, and we cannot now say we reduce it by 30%. Regarding the United States, okay, $1 billion will be spent every year, which is not a small amount.
Let me add the EUR 400 million in terms of expenses we mentioned on average for the transformation is not only for Ludwigshafen and Europe, but all sites around the world are working on how to reduce costs because we do not only save costs in Germany and Europe. There is a certain race between Europe and other regions. If other regions have good recipes, a good business case, for example, thinking of the IRA, we will do some decarbonization there because maybe in Europe, because of slow planning processes and over-regulation, it's not possible. Looking ahead, I think, well, it is not 100% exact yet, but, you know, from today's point of view, the figures are correct.
Mr. Hofmann, Handelsblatt, please.
Well, the TDI plant, I think you spend more than EUR 1 billion.
Were there write-offs in previous years or, why is the amount low at the moment? Regarding your investment strategy, in view of the very high investments next year and the years to come, and the unfavorable development of the economy, are you confident to be able to generate enough cash flow to be able to continue with the dividend payment? Why are you confident if you are?
CFO will take these questions.
Mr. Hoffmann, your question on TDI. TDI, as a matter of fact, in 2020 was partially impaired already. It is no longer in the books at its total value. If you consider this over a period of eight years on the books, of course, we already accounted for it in terms of the regular depreciation cycle.
Dividend, we proposed EUR 3.40 for the dividend in 2023, alongside more than EUR 3.3 billion free cash flow. If the AGM agrees to the dividend, it will account for almost exactly EUR 3 billion at a dividend of EUR 3.40. What about the further development of the dividend policy? We've always stressed that the dividend needs to be paid from the free cash flow. Now we have a dividend decision that people asked us about. What about the dividend in 2022? First of all, we are glad about this dividend decision and everything else, as my grandpa always said, we will deal with this later.
Okay, next question. Is it wrong to say this TDI plant? Well, it never ran 100% smoothly, right?
You wrote, well, these measures are for 2023 and 2024, and the cost savings of EUR 500 million for the first time will take an effect in 2026. The EUR 500 million, do they include the shutdowns in Ludwigshafen as well? Another question, Mr. Brudermüller, you are, I quote Ms. Maas-Brunner, also part of the baby boomer generation, which strikes. Your last 12 or 15 months are starting. Do you still have a goal or what would you like to see as a headline on your farewell portraits?
Well, Melanie, maybe you start with the TDI question.
Well, TDI first. TDI investment total EUR 1 billion, a very complex project. In the course of the project implementation, some things were not as expected. It started with the equipment that we received from well-known suppliers.
It didn't work as we wanted it to work. We worked on this very intensely, and we have to be grateful for people working with this at full steam, that the plant kept operating better and better. It was optimized, but it does not fulfill our expectations regarding the competitive situation. As Mr. Brudermüller said, the European market environment has changed. Some situations are different from what we expected worldwide and in Europe, we decided the capacities that we have at the other three sites around the world, that they are sufficient in order to reasonably serve our TDI customers here. The cost savings program, EUR 5 million. It is cash effective, and it will run over several years, up until 2026.
In 2024, you will already save EUR 500 million?
We will step by step reduce costs. Of course, this is also a matter of personnel related issues. It will start slowly, then it will speed up, starting end of 2025, the EUR 500 million. For the first time, 2025.
Okay. For everything, including the structural measures?
No, no. Just for the cost savings program. Not for the shutdowns.
What will this provide in addition?
EUR 200 million. That's the EUR 1 billion Martin Brudermüller mentioned regarding the programs that we started earlier.
[Foreign language] , well, of course, I am part of the baby boomer generation. You saw me walking in. I mean, sometimes you need spare parts, even if you maintain a body very well. The striking feature of BASF is as follows.
Of course, you allocate certain periods to a CEO, but the development of BASF goes beyond individuals. You know, passing the baton always means there are a lot of tasks that were already started or ongoing or finalized, and it would be grotesque to arbitrarily allocate it to one individual. Two things I consider very important, and this is up to me in this one year of the prolongation. I mean, apparently we are facing very difficult times. It's difficult for BASF with all the different issues, and it's difficult for the economy in Germany and in Europe. You know, I have some experience over several years. When I leave the ship, of course, I would like to pass the baton in quiet waters to my successor.
I'm always very passionate about one thing, and that is to steer BASF in a way that we have a good CO2 footprint. Everybody knows that this is important. It has become part and parcel. It has become part of BASF's DNA. There's this question of maybe we can get a wind farm, maybe we can tick off several pilot projects so that I can pass this on to my successor and that the future Board of Executive Directors can continue. These are my requests, and I hope that we will have overcome several hurdles in this race. Well, maybe the successor will add some topics and do it a little differently, but in continuity, so as I did when I took over.
Yeah.
William Wilkes.
Germany seems to be faced with the biggest structural challenges since after the Second World War. To find the war for talent is there, the energy crisis, strict regulation. Do you worry about the long-term competitiveness of Ludwigshafen and also of the production site, Germany as a whole? Which parts outside of your personal control have to happen so that Ludwigshafen and Germany over the next 20-25 years remain competitive?
That's a major question we could, well, speak about for very long. Let's start with Germany. What we can already see in this difficult situation is that due to the big dependency from Russian natural gas, the upheavals for us were biggest. You can see that in the chemical industry. I gave you the figure just now. The EU countries went back by - 6%.
In Germany, it was -12%, so double as much. That's because of our industrial structure. We have the biggest industrial park, part of the GDP, as a share of GDP. We have functioning value-adding chain, starting very, at the very beginning with the energy-intensive industrial part, which are now very much affected. These are effects where you can see that Germany is more affected than others. At the same time, I believe that over the last years, we were a little, well, innocent when we looked into the future. We didn't take all the reforms that we should have done. You should take reforms before the problem comes because then you can shape it. We waited for too long, and thus we have too much on our plate now. We have the subject of digitalization, for example. Everybody is speaking about that.
If you go into smaller countries like the Baltic states, they are very far ahead. We are in the Stone Age yet here in Germany when it comes to digitalization. Schools, for example, they are not yet digitalized, even after the COVID-19 pandemic, where it was so evident that this was missing. I am an optimist, always, and this is why I never give up hope. I believe that we have a period of change in front of us, and I'm not so sure whether everybody is already aware of what's happening and whether the society as such is prepared to do this change. Are we prepared? We will do it, and then we will make it too. I'm quite confident about that.
There's a different element too, namely that a lot of the regulatory activities are done in, not in Berlin, but on a Europe-European basis. Let me say two things about that, also on your question about gas. We don't have a domestic market for energy. Is that a catastrophe? That should have started 10 years ago. I hope that we'll start now, but I don't see it yet. If you look into realities, Germany burns as much gas for France as never before, for example. Germany buys gas from Belgium that comes from the hubs. That's more than ever before. It flows from west to east instead of east to west as before. We see that part of the solution can be done in Europe, and we still can't make it.
We can't find the right momentum for Europe yet. I hope that we will find a good solution soon. On BASF, I think you've seen that just now. You see us here. We are not panicking. We are not in a state of upheaval. We will do what is to be done. It's part of the game, and it's difficult for the team, of course. The team over the last years hadn't prepared for this situation, but now we have activated everything. We have talked a lot these days. I think, Melanie, we can, maybe you can come back to that. The echo from our team is broadly confident, and they agree, and they see that we at the top of this company are trying all they can to get back to our situation that we had before and a better situation.
What we see in BASF now, and I'm so proud of the team, of the entire team. I hope that this enthusiasm goes out to the entire German country. Maybe I can come back to our cost savings, but also maybe on skilled workers that we need. What we do is Communication internally comes before external communication. That is what we always do. Sorry about that. We had a global town hall in which we informed all the employees on what we are planning and how we are planning it. Yesterday and today, we also had talks with our leaderships level talking to the affected employees. With the economic committee and with the works council, we discussed endlessly on what we are doing exactly. For every unit, we had all the measures explained, and these were very long meetings to have the understanding.
We do have the understanding. Works Council and employee representatives, of course, don't have the same interest as the Board of Executive Directors maybe, but we have agreed, and as I know that many of you will be in the press conference of IG BCE, which will follow today, and that's exactly the people sitting there. That is, for example, Sinischa Horvat, the head of the Works Council, Mr. Korvers, that is invited as a guest of this Economic Committee. He has been sitting in the Economic Committee all this time. Ludwigshafen, the 2,500, to confuse you once more with the figures, we have a high affectedness that we have already communicated to the affected people. Over 70% of everybody affected by these measures already know. We asked directly how they feel about it.
Of course, they are not positive about it. People are disappointed, and they say, "Why me?" There's also irritation and anger. TDI, for example, people who have worked with their heart and souls on this plant over the last years, of course, are disappointed and also mad with the situation. But it was reasonably communicated, everybody understood, and of course, we will see some discussions but we will deal with it constructively. We will see where things go wrong, where things go right, and this is the process that we are in today. Be care for the people. With our key issue paper, we have initiated a qualification program because we have this subject of the lack of skilled workers. Let's come back to the war for talent. That's a problem which here in Germany is major, is really huge.
Everything is to be digitalized, and we are lacking people that know about electrical and electronics. Mr. Brudermüller told you already, we will electrify this entire site with green electricity, but that requires a team that can handle with electricity. We don't have electrical skilled workers, so many of them here at BASF. What we have to do is we have to qualify people. We need high voltage, medium voltage, automation. Everything has to be conveyed to the team, and people have to learn about that. We can see that we cannot do that in Germany alone. We have an exchange system or program with Spain. We have trainees coming from Spain here. They enjoy being integrated. It's a European model, yes, of course, but we are now expanding it, and we also include South America.
We are trying to have a similar program with Colombia just now because we have learned that this works excellently. We cannot wait for politicians to initiate things. They do a lot, but that's not enough. We have to be much quicker. We have to do more. This is just a few measures to give you an impression on what we do and what we do to fill this gap for skilled worker. It's going to be a lot of work.
Thank you. Ms. Weiss, please, of Reuters. You should be able to speak now. Here we go.
Thank you. I have three questions. What about the separation from Wintershall Dea? You said that you still plan this. Is your preferred solution still an IPO? When could this IPO take place? Have you agreed with LetterOne now to a greater extent? What about the catalyst business? Have you taken a decision in the meantime? Last but not least, on China, aren't you concerned that this might backfire due to the political uncertainties? Speaking of Taiwan, apparently there were discussions at the level of the Board of Executive Directors, and things may turn out to be different in the end. Thank you.
Okay, let me start with the Wintershall Dea related question. The strategic statement is crystal clear. I'm aware of the fact that since the beginning of the joint venture... Well, we provided you with timelines, which for several reasons didn't come true. Please bear with me. There won't be any new timeline, but the goal is clear, although it's rather sad. The deconsolidation of the Russian assets, the clear statement to exit Russia, and the subsequent, let me say, separation of the assets gives us more leeway, more flexibility, but more work is required until we fully got rid of the Russian assets. Even in the consolidated way, an IPO, well, now will not be possible. After the completion of this step, it is possible.
Well, Ms. Weiss, China, we can talk a lot about this. I cannot give you a lot of news, of course.
We already discussed that we looked at it from all the different angles. We discussed it with many experts. We spent hours discussing it, also given a changed political environment and the changing situation in the relationship between China and the United States. We still think there are more advantages than risks. Are there risks? Of course. Is there a risk of, well, an attack on Taiwan? Of course there is this risk. What would the consequences look like? In the extreme situation, a total loss of our China business, it would go beyond the site. Let me tell you one more thing. If this happens, I don't think this is our only problem. I think in world economics, there will be upheaval, total havoc, and today's system would no longer work. You also addressed something else.
Let me tell you, thank God, given all the discussions at the Board of Executive Directors, we always have diverse discussions. We always need diversity and different perspectives. Sometimes we have great discussions, at the end of the day, we reach a point where we say, "That's it. This is how we will go forward." This is our contribution. You know, this is the responsibility a Board of Executive Directors has to discuss all the different facets and then take a decision. The same goes for democracy. Everybody has a different opinion. Well, thank God we can discuss it. Next, the catalyst business. Well, Melanie, please.
The catalyst business, I think you're referring to the automotive catalytic converters for the cars. We have other catalysts, for example, cathode active materials are also part of catalysts.
Well, the business is in the carve-out process. We will have a separate SAP system there, and it separated from BASF in areas where we said governance is not required here any longer, but at the highest level it will remain within the structures. The business is performing very well, and it's the first step regarding a carve-out to a separate company, and I think that's all we can comment on this.
Mr. Reitz, please. SWR.
Thank you. One question remains regarding the figures, Ms. Maas-Brunner. I'm a little confused, and I did my math here. Okay. In case of 2,600 positions worldwide, if 50% are supposed to be rendered by Ludwigshafen, I don't know whether you calculated correctly. It's 1,300, given the 700 from the other process.
You now said 2,500 positions in Ludwigshafen are affected. Maybe you can explain the figures in a little more detail so that we all understand.
Let me start from the top to make it easy. Gross, 4,200 positions. Of the 4,200 positions, 700 are regarding production facilities in Ludwigshafen. The cost savings program totaling 3,500 positions, net here 2,600 because 900 positions will be new positions in hubs. If you take the 3,500 gross and take 50%, this brings you to around 1,800. That's Ludwigshafen. 1,800 plus the 700 also in Ludwigshafen gives you the 2,500. I hope the calculation is correct.
Now I almost understand. Can you give us an outlook?
I understood that 700 positions don't have to be made redundant if in other situations, those who don't have a job any longer because plants are shut down are needed somewhere else. At the moment, you have a little more than 39,000 employees at Ludwigshafen. What will this mean 2 to 3 years from now regarding the headcount?
Okay. The positions become redundant. The people working here can go to other vacancies, to fill vacancies. I think in Ludwigshafen, we have a very selective hiring strategy. If you look on the Internet, there are a lot of vacancies because at the moment it's hard to get the skilled labor we need. We have a lot of projects that we are planning, and this goes toward transformation.
We start to work on technologies that are unknown to us now, where we develop teams, also strategic teams in terms of R&D. We work a lot on recycling, ChemCycling, to tap innovative solutions. In some cases, we do it on our own, in some cases with partners. We always need new people that we don't have in our existing workforce regarding the expertise. De facto Ludwigshafen, if we say we transform, we turn towards green infrastructure, we produce fewer base chemicals because we only produce them for the European market rather than for the global market. We will shrink rather than grow because looking at the infrastructure projects, we have to make this very clear. If I need switchboards, in case of green power, I need fewer people compared to a major plant that I shut down. Will we go rock bottom?
No, because we have so many projects that we are planning. R&D
At the bottom line, if you look at the research platform and R&D at level of ODs, we have 5,000 people in R&D on site. If you look at our figures, EUR 2 billion-EUR 3 billion are spent on research still, 2023 a little more than 2022, so we are continuing along these lines. Of course, we will have to become more efficient, for example, in admin, where we digitalize and automate processes. Of course, we have to do something against inflation. We will have automation in production. Maybe then in production, we have jobs which have to be done in different ways. Digitalizing and automating R&D, we started this as well. Data management will change, for example. Well, not going rock bottom, no. We will have a reasonable adjustment that will be good for this site and for the future.
[Wohnberg], please.
Thank you very much. Good morning. I also have two questions. The first one is just a figure. I can understand that you are pleased about the future sustainability at your site and other sites, but I would like to have a little more details, a real percentage. For example, comparison, if I don't go to maintenance and service work for my cars, and it breaks down, then I don't consume any fuel any longer. It would be more sustainable to get a bicycle. What about the savings of carbon emissions from plants and the real sustainability in terms of retrofitting? The second question, again, China, please. The China business, you mentioned that there was criticism from your own Board of Executive Directors. Mr. Vassiliadis criticized. We heard before of a very distinctive and disciplined risk policy.
Do you take risk with the China business? I think a little bit of reasoning and reasons why you take this is missing. For economic reasons, we understand it, but for social reasons, not so much.
Melanie, would you start with the first?
Yes, of course. Sustainability, carbon reduction cannot only be done by shutting down plants. I mean, that would be, well, not the right thing to do. No. We have other plans, of course. We have two CO2 producers. That's the energy source of natural gas, but also natural gas as a product, as a raw material. Here we have these two tracks, and we try to reduce the intake of CO2 here for both. I tried to say a moment ago that we electrify. It has to be green power for this electrification.
This green power, and Martin Brudermüller is trying very hard to have long-term contracts or have our own wind farms to invest in. A lot has to happen in politics that this really works. For the next years, it fits very well. Secondly, we try to get away from fossil fuels, and that can be done in several ways. It's biogenic raw materials that can come in. You can talk about bio-naphtha, biomethanol, for example. By way of these, we can reduce the intake of carbon too. We have different other concepts that can optimize energy, heat pumps, for example, on site that lead less natural gas. We have the possibility to use hydrogen as an important energy source for the future.
Hydrogen for the chemical industry is rather the molecule that we're interested in, but on medium term, it has to be one of our energy vectors apart from green electricity. Here we are working around technologies to make this hydrogen green or turquoise. It's not easy, this color code, to understand that. Green hydrogen will help us to also lower the carbon footprint. Here again, a lot of infrastructure is necessary. Hydrogen can only be produced locally. It can also arrive via pipelines. We want to get rid of CO2. There's this principle of carbon capture and storage, which we operate in Antwerp, for example, which is close to the ocean. Here we want to approach this very accurately. We want to have partners, so carbon which is generated can be pressed into small amounts.
This is not a solution that you want to have for infinity, it is one, taking one step forward in our development. As a chemist, I can say that my heart and soul goes into carbon capture and usage. How to use the CO2, which is a dead molecule, actually, with a lot of energy and with hydrogen in it, how can it be introduced into the cycle? That would be the best solution. It only makes sense if you have green hydrogen and green electricity. We're working around technologies, but that's looking into the future. With our footprint, slowly but surely, globally, we get down. In 2045, in Ludwigshafen, we can be carbon neutral, and in 2050, everything is achieved. Well, hydrogen is also electricity indirectly. Of course, it needs electricity itself.
You always see the demand and supply situation. If you want to see what the different levers contribute over time, there are a few good charts on our homepage where you see the projection looking forward, and you can see that until 2025, the biggest lever for CO2 reduction is actually going from grey-to-green. Then we have our pilot plants that are tested whether it works. The second half of the decade, we have the scale up where we, well, improve or increase everything. This is why all, every step is important. We have a problem if we don't get the renewable energy, because if we want to replace the gray one, we need green renewable energy. We need some, well, funds to aid us with our efforts. If you do something new with the technology, we of course want some support.
Asking for funds and aid always takes infinitely. We are very much depending on staying close together between the society and politics. It's not us that will prevent all this, and I think we can do it eventually, because everything that we cannot do in Europe, we have to do somewhere else in the world where things are a bit faster. China and the United States are a part of that.
Let's switch to China once more. Let me say once more, the big project over the next years is the Verbund site, and you can't have a machine which we have commissioned already in 2018. It's hundreds of engineers that we employed. We planned everything. On this side, we have already started massively to lay pipelines, to build jetties.
All this has already started, and that's the time where you invest a lot of money, but you don't earn so much. You want it to be as short as possible. You don't want to invest for 6 years and that eats EUR 1 billion, and then you start slowly but surely to get the plants running. There's a lot of effort to be done, and a lot has already been done. If you stop this, all this money would be gone, and we all would irritate everybody because we went in it too so strongly because we really want it. We have our team there, and they would say, "What? You employed me and now you don't want to continue?" We want to continue it because we are convinced that it's the right thing to do for the market. Mr.
[Wohnberg], you can't be so-so. We have to go through with this project. If we look at what comes after the project, we will have to see how this developed, how much we will allocate into China after this site has been up and running. We still don't know how this will operate. I have to be honest here, it's not as if we don't have a home country or anything. We want to invest in Europe. Just now, with everything that I told you, over-regulation, slow operations, no market demand. I get so many mails and they tell me, "Why don't you have an investment project in Europe?" I say, "Well, tell me one which we can earn money with." It's the transformation. We are a business company.
We want to invest money where we have a proper return afterwards.
Maybe I can connect with what Melanie said, and we showed you the chart of the regional earning situation. Without the profitable activities outside of Europe, the transformation in Ludwigshafen and Europe is not possible financially. The challenge looking forward, all that what we want to do, wind farms and all that, my big concern is that we all have to earn this with the volume that we have today. It's not additional volumes that come, so no new capacities are evolving because the market doesn't give them to us. Those that buy the products, they need to finance these additional capital investments, making possible that we can earn money. Let me be quite clear about that. It's not like we are stealing out of the room.
If we, as consumers and as a society that want it, don't get real and understand that this costs money and that we have to change our lifestyle, and if you buy shampoo that doesn't have CO2 because it's products that don't generate CO2 in the production, cost more, and then you don't buy it, then we will not succeed. It's a few more people involved to make things successful. We do the first steps here. We invest massively because we believe that the consumers will follow suit. I think this has to be said quite clearly for once.
Susanne.
Okay. you know, to put it into perspective, do not forget, looking at the past and looking into the future, the team in Ludwigshafen invest more than EUR 2 billion per year. More than EUR 2 billion a year are invested for this site, and we will continue to do this in future for transformation purposes, but also for maintaining our production assets, for investing into new projects. As a EUR 10 billion China, this sounds as if it was so much over average. This is how the press tells us.
Rhein-Neckar-Zeitung, please.
What does it mean exactly when you say you will shut down plants? You know, will you tear them down or will they stay just in case? The figures, I think I've now understood how about the redundancies, but I have not really understood the timeline because you mentioned two steps, admin and production, and the major part, if I understood you correctly, is supposed to be done a little faster. Can this be done without compulsory redundancies? There is this site agreement, theoretically you could terminate this. I think you exclude this for the time being, if I understood you correctly. My last question, regarding the redundancies you mentioned, will you then no longer be able to use the government energy price breaks?
There are lots of questions. Maybe Melanie can start.
What about plants we shut down? First of all, we have to clean them in a safe way, and there are clear procedures how to do this. The question is, what type of equipment can we use of plants that were shut down? Tanks, for example, you can use them for other products, and maybe they can be used somewhere else, or it could be scrap. We could sell it as scrap, and we will have a certain sequence. We will do this, for example, when block fields in Ludwigshafen are required, that they will be emptied according to schedule. Of course, we don't want to have ruins here and leave everything in a dilapidated state. No, not at all. Especially when it comes to electrification on site, we need a lot of land, so this is a good thing.
Now, redundancies via the cost savings program, globally speaking, of the 3,500 people that are affected, this will be done by 2024. Redundancy in production plants that will be shut down alongside the closure of the production plants, a lot of work remains to be done. This will go on up until 2026 because plants are still running, have to be cleaned, and so on. The site agreement is valid. We committed ourselves to this morning until 2025, and of course it will be renegotiated with the works council in due time.
Okay. The gas price break, this is a very complex vehicle, but first of all, it's important to understand that the maximum amount in Germany for a company is capped at EUR 150 million. That's the cap of a possible subsidy.
Everything beyond this goes to Brussels, has to go to Brussels. We took a very close look at this, and from the very beginning, we stated that we want to pay this from our own funds. Of course, in 2020, this left some traces, which are obvious now, but I think you can clearly tell that BASF was able to meet the challenge in 2022, and this is what we want to do in future as well. In other words, when it comes to state subsidies coupled to the gas price break, as a company, we do not want to take part in this.
Okay, Andrew Noel next. It's already on.
Is it on?
Yeah.
Okay. I've got three questions, please. Martin, I saw that you made a rare visit to the GPCA in Riyadh. I wanted to ask you about the Middle East, because the companies there seem to be consolidating their chemical assets and creating sort of mega empires. I'm wondering, is that, is that a growing threat to BASF, especially if, you know, you talk about renewables, they could have a competitive advantage in hydrogen? Once again. That's the first question. The second one is, just I think in the earlier call, you sort of hinted at investments outside of China, I think maybe in other Asian countries. I wanted to ask which countries are attractive, and are we talking battery material plants or what exactly?
Just finally, do you think the Verbund that you're building now is gonna be the last one? By that, I mean, do you think your successor will maybe take a different approach, like mini Verbunds? I think they cost about EUR 10 billion or something each, don't they? Maybe EUR 5 billion or a mini mini Verbund or...
Andrew, cool questions. Yeah. I want to talk Deutsch or not?
English.
English.
Yeah.
I can answer English. Okay. Indeed, I mean, it was interesting when I was in this chemical conference in Riyadh, what you actually could see is that certainly the countries in Middle East, they have growing huge ambitions in this new world of producing green chemicals, to participate. They have actually both. They have the cheap raw materials, and they have enough surface, where they have enough sun, when they have very cheap renewable energy. If you combine the two, rightfully, I have to say they have a claim that when it comes to energy vectors, and Melanie was talking about this, if you think about methanol, green methanol, if you think about green ammonia, they have very good cards actually to build capacity and to make this, a future business.
That's exactly what the Saudi government has in mind. Very huge, ambitious plans on one hand on the renewable side, but also oil to chemicals, where they really take the oil fractions by expecting that less combustion engines means less gasoline. What do you do with the capacities you have for gasoline? You actually go directly into chemicals, which is very much on the primary, let's say commodities, the polyethylene and the polypropylene, which is not BASF's business. I think in all fairness, with all these moves that are doing, they have rightfully so, I think good chances to participate and to get their stake from that growth market. When it comes to Asian investment outside, I mean, I think one country that was always on our mind, but has proven to be extremely difficult is India.
We always try to get also a Verbund structure into India. If you look on the size of the market, it's always has been slower than anticipated, but the fundamentals also in India don't go away, as they by the way, don't go away in China, that Indian people in average will go up in consumption and they need stuff and they need chemicals. We had also there one project, as you know, acrylic acid, which did not materialize because one of the partners had deprioritized actually its, his participation in this whole thing. But that remains interesting for us.
I think also if we talk about the battery value chain. That is not only a European ambition, that is certainly also now with the IRA has become a very much a U.S. focus, but certainly also with China and other players in Asia, they also will drive electric over time. There is quite a bit of raw material if you talk particularly about [nickel]. We have also very clearly addressed that we want to tap into these value chains, and this most probably will then also be investments which are not in China, but in countries like Indonesia. We wanna participate over there. That is exactly what we want. What I said earlier, we need diversification.
We need a very solid, good regional footprint, because if one region is not doing well, you have the others who are comparably doing better. With this we can stabilize and get more resilience in the group. That is why after this big peak in China, I would expect we will have a much more balanced investment program going forward. Now I cannot talk for my predecessor or pre-predecessor how the Verbund looks like, but I think what you could see today is Verbund is not Verbund. Verbund always changed in these 158 years here in Ludwigshafen also. I think we learn always something from it, but actually with all the exercises, we also come to the conclusion that it's a cool concept.
In a lot of respects with efficiency, with much more flexibility to adapt it, let's say, having structures and bringing them into a CO2-free environment is much more easier on a site like this than you have a separate or you have many separate ones. Also from a capital point of view, much more efficient here. In that respect, I am deeply convinced that the Verbund will play its role in decades going forward. By the way, if you also look a little bit more generously on that, I think you see also intercompany Verbund at a lot of sites. If you go into the big clusters, you have maybe five, six companies connected to each other, but it's also a kind of Verbund.
The principle to integrate, to cluster, and to have economies of scale, I think is a very well proven concept in the chemical industry. By the way, also Middle East does exactly the same. I think the particular thing is that we have it in our hands, and there's no other company that is so much willing to keep it in its hand like we do.
Okay.
I hope that gives you an answer there.
I've got just a brief one, if I may.
Okay. I have to switch back.
Okay, good.
Sure.
Just when you went out, I think it was in the 1990s. I read.
Yeah. The book.
Was the Middle East ever on the table when you went and, you know, planted the flag in China?
I mean, I made this short. We have looked several times into Verbund structures in Middle East very intensively. We always came to the conclusion that for the product portfolio of BASF, it makes less sense because the further you go in the value chains, the more you dilute the raw material advantage. If you have these prime things like polyethylene, polypropylene, they're almost a no-brainer. If you have cheap raw material, you produce ethylene, then also the polyethylene, polypropylene is incredibly cheap. If you make acrylic acid and then you make superabsorber, then this already dilutes. For that reason, we always ultimately took the decision not to go where the raw material is, but to go where the customer is. I think for BASF portfolio, that has proven right.
I would say in today's world where you have trade restrictions, multipolar world, geopolitical tensions, the best you can always have is that you are close to your customers because then you reduce risks of supply chain. Just think about the dysfunctional supply chains last year and the year before. For that reason, we came always to that conclusion. If you now think about energy vectors, where you need somehow the green hydrogen in derivatives, that looks different. For the customer products, I think that is the view we always kept, and I think in this current situation, it again proves right.
Okay.
now we have Morgan.
Morgan.
Hi. Thank you very much. I've just got three questions. I was wondering if you could share what your expectations are for China's industrial growth and GDP for 2023 and 2024. Will obviously you've been very critical of the EU sort of legislation and everything. Is there any benefit to BASF from the Green Deal? Finally, what needs to happen with legislators looking at supporting chemical recycling to make it a viable option?
You take the third one?
Mm-hmm.
Why don't you start?
Okay. chemical recycling. That's interesting topic. I think we need to be very open towards all possible technologies. We shouldn't limit ourselves in making it connecting the one C atom to the other C atom. We need to test out what's really possible. Mechanical, mechanical recycling, lots of waste sorting, very, very expensive. Also, setting up such an ecosystem, it's crazy. Having a kind of simple chemical recycling, pyrolysis could make life much easier. It's also not that easy because when you look at all the startup companies that are now popping up telling you pyrolysis is working, just use some plastics, bring it to a certain temperature, and then you can recycle the content.
No, there's lots of side products. Also here you need kind of creative and good innovation to make this happen. We need it all. I think it's clear understanding the carbon that we are, that we have in usage has to be recycled at a certain point in time. It has to be done so that I think first of all, it needs to be accepted through all value chains, it needs to be managed through all value chains, and it also needs to be clear that for the end consumer, this means at a certain point in time, obviously also higher prices. That's also what Martin already hinted at. If this is all coming together, I think we have lots of opportunities.
We have ChemCycling for pure polymers, we have ChemCycling for waste, we have maybe then also mechanical cycling. If this all goes along, I think this ecosystem will then be established and help really in doing this what's requested. We as a chemical industry, we as BASF, we are trying out very many different technologies, and we will be also part of the solution here. Regulators need to support us. They are a little bit too strict and too limited. Then the box that we have where we can play the sandbox is just too small, so we have to open up. Then if then more technology to come, we can also make it a little bit closer then.
More about China. I just looked it up because I did not really know it by heart. I mean, one thing is very clear, the bigger the basis, the smaller the volume, the, the rate of growth goes. I think if you think about 6% and 7% and 8%, what we had in GDP growth in China in the past, I think this is tough with the size it has. If you think about the chemical market, if that is 50% of the world and you let that grow by 6%, 7%, 8%, my God, you need huge capacities to be built every year. We are a little bit more conservative and, I think I mentioned that also for the planning for the new China side, we are rather on the conservative side.
What we have, roughly as an indication, I would say 4%-5% GDP growth this year and slightly above 5 for next year. I think, with the industry, with the stimulus measures which you have to expect now after the zero-COVID activities, I think this is not a bad indication. It could be 4, it could be 5, something like that, which in absolute terms is huge. I mean if you compare that with the low growth number we have here, it's massive. I think we said, we mentioned that at least three-thirds of the absolute chemical demand in volume until 2030 is China alone. That will determine more or less everything in the chemical markets. I think you asked about the Green Deal, whether there is advantage for us.
Ooh, that is tough to answer because I'm really criticizing that we have too much on the, in the air, many balls in the air. I mean, let me maybe answer that that way. If you look on our approach in Europe, then it is that we want to enforce the transformation by writing regulative regulation papers which tell you in very much detail each step you have to do to come to where politicians want you to be. The Americans have now for the first time shown with the IRA that there is a second way. If I would summarize the two approaches, I would say the Europeans generate regulation to enforce transformation. The Americans generate a business case to facilitate transformation.
This is the big difference, and I think this is what we see now, that you can also achieve transformation, decarbonization, very simple if you give good terms and conditions on the OPEC side, which means you have to invest in the U.S. your own money, but then they ensure about tax credits, you can earn money with it. The nice thing is they give you the tax money back, which they never would earn if you don't invest. The Europeans pour EUR billions into taxpayers' money at the beginning to fund your plan, but no one cares whether you can earn money with it or not. A dilemma with the green hydrogen is indeed everyone gets now the funding for the electrolyzers, but with the German price for electricity, you have no business case to earn money with green hydrogen.
That is a bit where the difficulties is. Still, I would say BASF with the site here in Ludwigshafen, and you know it being in the middle of the city, EHS topics, the way how we run plants, responsibility, Responsible Care issues, the company has it in the DNA. I would say we are having the burden too. Our people know, I think, very well how to handle that. I can only tell you when I talk as Cefic president to SMEs, they are really concerned because they have neither the resources nor the experience to take all these changes up which are coming over there. In that respect, it is additional cost. It's slowing down. I would say from a differentiation point of view, BASF could handle it better than other companies.
I hope that answers a bit the question.
Good. [Foreign language] .
Okay. The last question by Mr. Hofmann, Handelsblatt.
Yes, a follow-up question regarding China. Can you tell us how much have you invested so far regarding the Verbund site there, also in terms of the battery activities? If we look at the slides on competitiveness, this goes to show that earnings are declining, clearly declining in China, not to the same extent as in Germany. We hear people mentioning overcapacities that will enter the market. Isn't there the risk that you will be trapped in the same way as you were trapped here with TDI? Wouldn't it be a good idea to invest there over a longer period of time for sake of consolidation?
Okay, if we look at the size of the business, looking at the figures of 2022, I think it's 13% China and a little more than 10% in Germany.
The China business is a little bigger, but you saw the figures. We are still making money in China, whereas regarding the German activities, they were negative in the year, difference regarding profitability. Of course, the COVID-19 issue, lockdowns, resulted in a loss of momentum. You see this when you look at the growth figures, but they will return. This is slightly different here. If we look at European growth figures, it's a kind of European disease because over a decade we've seen very low growth figures. In China, it goes down, but then all of a sudden it goes up again. If you look at what measures do they take, well, they take different measures from Germany. I mean, here, you know, we also have state aid rules that are defined in Brussels.
In other words, I'm confident that also in future, Chinese will be able to stimulate their markets very quickly and recover. Mr. Hofmann, it's not that, you know, we put all our eggs in the Chinese basket. This is not true. We also gave you figures on what we do here on site. You know, I don't like this very much. We read a lot about this in the media and especially the Bild newspaper in Germany. We are not relocating to China. Not at all, you know? This is not reasonable at all. We have a market there where customers want to buy, and we have to react here because we are losing ground here. You know, we will not relocate to China. Not at all. Mr.
Hofmann, I think it's about striking a balance, it's also about risk management. What difference do we need when we look at the different regions? I would say in 50% of the chemical market, if that's China, then the share of 13% of the BASF portfolio is not enough.
Right. We are done regarding the questions. Are there any closing remarks?
Okay. Having come to the end, I'd like to make one comment because there is one individual here I would like to wish all the best because he's going to retire, and this is Siegfried Hofmann. If my information is correct because, you know, you seem to be surprised. No, I would like to say this again.
For 30 years, you have accompanied us as a journalist with a critical distance, but I want to make very clear, with a very fair reporting, also, with a positive attitude, and that's great. Mr. Hofmann, you also had a lot of expertise. On behalf of the BASF team, thank you very much for your excellent support, and we wish you all the best.
Well, thank you very much.
Okay, this brings us to the end of today's press conference. Thank you very much for your questions. On 27th of April, we will have BASF's AGM, face-to-face meeting at Rosengarten, and we will also report on the Q1 figures there. We prepared a snack lunch for you, if you like, in the lobby. Please take your documents with you because we will have more meetings here in this room.
Leave the cards in the microphone console or take them with you, whatever you prefer, and see you at lunch.