Market Updates

BASF Puts Its Biggest Growth Bet on China!

August, 2018

It is not long ago, when BASF was seen following the feedstock and investing significantly in the US market to improve the propylene supply. The methanol to propylene (MTP) plant has been aimed to capitalize over enough propane gas supplied by shale gas. This is one of the most significant investment planned by BASF in the US which is to fulfil the C3 olefin demand of the company. But, now the company has shifted its focus towards the eastern world and cliched an important memorandum of understanding (MoU) with Chinese authorities.

Background: China currently holds around 40% of the global chemical production which benefitted from low labor rates and feedstock margins. Further, Guandong is an important province, which has promising growth prospective. Guandong’s GDP, which is currently growing at around 7%, is expected to grow with 6% at least until 2035. The big local industries have made it their growth hub with automotive and electronics industries moving fast each growing with double digit growth rate. The proximity is expected to help BASF in cementing the close relationship with these big industries.

Exposure: The investment in this project is expected to reach up to $10 billion with first plants coming online by around 2026 and complete complex to be operational by 2030. The current plans for the suggested complex is expected to cover markets right from steam cracker producing olefins and producing intermediates & other chemicals of the likes of superabsorbent polymer (SAP), acrylates, surfactants, Amines, glycols, and performance polymers.

Aligning with Manufacturing Shift: The new complex is expected to come with the latest automation technologies such as Industry 4.0 which would enable high integration level starting from lab bench to logistics to customer support. The investment also indicates, the movement of companies’ export strategy to ‘proximity to growth markets’. In today’s scenario when just-in-time and logistics carry high importance and feedstock advantage is almost diminished, this change is expected to garner better results for large manufacturing industries.

Impact: The investment is not only expected to impact the global chemicals’ market, but also the overall economies of China and the US. This investment was announced when the trade rifts is wide open between china and the US. The investment of an European company in China can be seen as European companies’ allegiance to economic benefits offered by high growth China market, slightly diminishing the impact of the US policies against China on global scale. These changes at the backdrop of Chinese emergence on global political leadership scale is expected to has impact on the global power balance impacting each and every one living in the modern world.

– Ankur Kalra,
Manager – Chemicals & Materials,
Infoholic Research