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Petrochemicals

BASF is considering a $10 billion investment in China

The German giant may build a new Verbund site in Guangdong, China

by Alex Scott , Alex Tullo
July 13, 2018 | APPEARED IN VOLUME 96, ISSUE 29

09629-buscon1-nanjing.jpg
Credit: BASF
BASF's joint venture with Sinopec in Nanjing, China, was completed in 2005.

BASF CEO Martin Brudermüller has signed a nonbinding agreement with Chinese authorities to build a wholly owned chemical complex in Guangdong, China. The German chemical giant says spending on the new site could reach $10 billion by 2030, making it the largest investment in the company’s history and the biggest in China by a foreign company.

BASF’s project is part of a wave of foreign investments in China totaling $23 billion pledged by various companies in the past week. The catalyst for the proposed investments is China’s removal of a policy requiring foreign manufacturers to form a partnership or joint venture with local Chinese firms.

Petrochemical consulting firm PCI Wood Mackenzie says the policy change could shift investment dollars from other leading petrochemical-producing regions, including North America and the Middle East.

Some 15 rules relating to foreign companies investing in China have been lifted. The European Chamber of Commerce in China, which represents European business, says that the policy shift widens access for foreign investors in several industries but that Chinese law continues to discriminate against foreign firms when it comes to market entry and approval requirements. The chamber estimates that 48 measures limiting foreign investment in China remain in place.

The Chinese policy shift coincides with the country’s escalating trade war with the U.S. (see page 13). Some media outlets claim to have information that trade tensions between Beijing and Washington aided the BASF deal.

Guangdong would be BASF’s seventh site incorporating its Verbund principle of meticulous integration. The installation would have a 1 million-metric-ton-per-year ethylene cracker. The preliminary scope of the project includes basic chemicals such as ethylene oxide, acrylic acid, oxo chemicals, propylene oxide, and butadiene. Downstream from these would be ethylene glycol, surfactants, amines, superabsorbent polymers, acrylates, polyols, and performance polymers.

BASF expects to open the first plants in 2026. The firm says Guangdong is home to many of its most important customers in the auto and electronics industries. The company already operates a Verbund complex in Nanjing, China, in partnership with the Chinese firm Sinopec.

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