BASF scoops second China chemicals deal in four months

German chemical giant BASF said it has signed a memorandum of understanding (MoU) with China’s Sinopec Corp to build a steam cracker in east China, the second major investment pledged by the German firm in four months.

China, the world’s top chemicals consumer, is allowing greater access by global majors and local independents to its massive chemicals market to feed plastics, coatings and adhesives to the fast-growing consumer electronics and automotive sectors, as well as polyesters for clothing.

BASF said the new steam cracker would have an annual capacity of one million tonnes of ethylene, a building block for plastics, rubber and synthetic fibre. It did provide financial details of the project.

In July, the firm landed a preliminary deal to build China’s first wholly foreign-owned chemicals complex in Guangdong, worth some US$10bil in investment to 2030, aided in part by trade tensions between Beijing and Washington.

In a press release, BASF said a joint pre-feasibility study on the cracker would be completed by the end of 2018.

Zhong Jian, chief analyst with consultancy JLC, said global chemicals firms had been encouraged by China’s top leaders, who have repeatedly expressed support this year for foreign investment in the petrochemicals sector.

“The companies are more ambitious than just building ethylene plants. They are aiming for a bigger market share in the whole supply chain and the ethylene complex might just be their first step,” said Zhong.

According to the MoU, BASF-YPC, its joint venture with Sinopec in Nanjing, will invest in a 50% stake in the new cracker. Sinopec Yangtzi Petrochemical (YPC) will take the other 50%.

Additionally, the companies would explore new business opportunities in China’s fast-growing battery materials market, it said. Founded in 2000, BASF-YPC has spent about US$5.2bil in China.

Following on from BASF’s July deal, US energy titan Exxon Mobil Corp signed a pact in September to build a petrochemical complex in Huizhou city of Guangdong, which will also be solely foreign-owned.

Just a week later Saudi Basic Industries Corp followed suit and signed a deal with Fujian government.