BASF Diversifies In Nanjing

At a 2005 press conference to mark the start of production at a joint venture between BASF and Sinopec in Nanjing, China, a reporter asked the venture’s president, Bernd Blumenberg, whether the 600,000-metric-ton-per-year cracker at the heart of the complex might be expanded in the future.

“Well, BASF has never come across an ethylene cracker that could not be expanded,” Blumenberg answered, tongue-in-cheek.

Fast-forward to 2010, when Blumenberg, who still occupies the same position, was briefing a group of journalists about the progress of expansion work at the site. The $1.4 billion investment that BASF and Sinopec are making in their BASF-YPC venture will boost the capacity of the cracker to 740,000 metric tons per year and also add numerous plants that will significantly broaden the venture’s product offerings. The work is about halfway done now and will be completed next year.

Back in the mid-1990s, BASF was one of several Western companies that set up petrochemical complexes in China in collaboration with a Chinese partner. The ventures by Shell and CNOOC in Guangdong province; ExxonMobil, Sinopec, and Saudi Aramco in Fujian province; BP and Sinopec in Shanghai; and BASF and Sinopec in Nanjing all featured a large ethylene cracker and downstream plants producing mostly commodity petrochemicals.

BASF and Sinopec initially invested $2.9 billion in facilities that, like the others, turn out a fairly narrow range of products. But when the current expansion work is completed next year, BASF will be firmly established in China as a producer of a far more diversified range of chemicals.

“There you see the difference between a petrochemical company and a chemical producer,” Blumenberg commented, making a distinction between firms such as Shell and ExxonMobil and those such as BASF. The 10 new plants that BASF and Sinopec are building in Nanjing will produce amines, highly reactive polyisobutene, nonionic surfactants, 2-propylheptanol, and other chemicals.

In addition to expanding the ethylene cracker, the partners will expand three existing plants. At the same time, BASF is building two wholly owned facilities that will produce quaternized cationic monomers and cationic polyacrylamides, materials that are used in municipal wastewater treatment and paper manufacturing.

BASF will face limited competition within China for the new products it will be making there, predicts David S. Jiang, president of the Beijing-based chemicals consultancy Sinodata. Chinese competitors already manufacture most of the products that BASF is adding, but their costs are higher because they operate small-scale facilities that aren’t integrated with other plants.

As for foreign producers of specialties, the only serious one on the horizon is Dow Chemical. With its partner Shenhua, Dow is planning an integrated complex in northeastern China that will use coal as a feedstock, but construction work has yet to start, Jiang notes.

BASF has always sought to establish itself as a diversified chemical producer in China, Jiang adds. The company agreed in the first phase of the Nanjing project to limit its product range to basic commodities in order to satisfy the demands of its partner Sinopec, he believes.

The up side for BASF, Jiang notes, is that to be competitive as a commodity chemical producer in China, BASF fitted the Nanjing venture with a large, efficient ethylene cracker. The low-cost cracker now supplies cheap olefins to downstream specialty chemical units in the complex, he adds.

Blumenberg declined to discuss how much convincing was required to get Sinopec, an oil refiner and petrochemical producer, interested in the specialties that BASF wanted to add. “We are two partners, and we have regular discussions, and those discussions lead to an outcome,” he told C&EN. Blumenberg has been stationed in Nanjing since 1997, a time when it was highly uncertain whether negotiations with Sinopec would result in anything major taking place.

Selling specialties is more complex work than selling commodities. As a result, BASF is enlarging its footprint in China in other ways than by just building plants. At last month’s press conference, Martin Brudermüller, a Hong Kong-based BASF board member, said the firm will double its R&D workforce in the Asia-Pacific region—mostly in China—to 800 by 2020. Although BASF conducts most of its R&D in Germany, significant customization is needed locally. “Our products from Germany are often overengineered for Chinese needs and as a result too expensive,” he said.

In response to a reporter’s question, Brudermüller said he “feels good” about investing on such a large scale in China. He noted that the Chinese economy slowed down only briefly in the aftermath of the global financial crisis that began in late 2007. “China has kept its economy growing,” he said.