BASF will officially open its new Verbund site in Zhanjiang, China, in the first quarter of the year – as an industrial site with interconnected production facilities, logistics and material flows.
At around 8.7 billion euros, the plant is the company’s largest single investment project to date. Critics warn that BASF is once again making itself dependent on autocratic leadership after expensive write-downs in Russia due to the war in Ukraine. BASF argues that there is no way around the future market of China. Some questions and answers about this.
Why is BASF investing in this location?
Because China is growing. “We expect that around 80 percent of the growth in the chemical industry will be concentrated in the Asia-Pacific region by 2035,” said BASF. China, which has a share of around 50 percent of the global chemical market, is already making a significant contribution to this growth.
“In view of this development, BASF is still underrepresented in the largest market of the future: in 2024, BASF achieved around 13 percent of the BASF Group’s total sales in China. The market share is significantly smaller than in the USA or even in Europe,” it says. The commitment in China does not mean a focus on a single market or a relocation of production. Most of what BASF produces in China is sold there.
German chemical companies generally remain optimistic about the growth prospects in China. A business climate survey published in December by the German Foreign Chamber of Commerce in Beijing showed that 84 percent of chemical industry members in the People’s Republic expect an increase in average annual growth in the next five years. 61 percent said they would increase their investments in China in the next two years.
How does BASF ensure human rights and labor standards?
In 2024, the company sold shares in two joint ventures in China. Reason: Reports pointed to activities at the joint venture partner “that are not compatible with BASF’s values.” The company wants to continue systematically checking its own companies and suppliers. “We take any allegations of human rights violations very seriously and examine them carefully.” Compliance with legal requirements is checked in audits.
What risks does the company see in its involvement in China?
Beijing makes no secret of its desire to unite democratically governed Taiwan with China – militarily if necessary. A conflict would also have economically devastating effects because the Taiwan Strait and the Western Pacific are important maritime trade routes, Taiwan supplies the entire world with urgently needed computer chips and China in turn faces international sanctions in the event of a conflict. BASF says: It is monitoring geopolitical developments very carefully and assessing the risk scenarios. This applies to all countries in which you are active.
What do critics of the investment say?
Critical shareholders of the chemical giant fear that BASF is making itself too dependent on the leadership in the Far East with its investments in China. Recent expensive depreciation in Russia is being held up to management as a warning example. When CEO Markus Kamieth – the group’s former head of Asia – took office at the general meeting almost two years ago, critical shareholders had already railed against China and renewed this criticism at the most recent general meeting.
Arne Rautenberg, fund manager at Union Investment, the Volks- und Raiffeisenbanken fund company, is skeptical as to whether the investment will pay off for shareholders. Linus Vogel from the savings bank fund company Deka spoke of a “risky bet” – “especially since the China of today is completely different to the China at the time of the investment decision.”
What about sustainability?
According to BASF, the Zhanjiang plant is powered “100 percent” by electricity from renewable sources. Through various measures, the site will reduce its CO2 emissions “by up to 50 percent” compared to a conventional petrochemical site. “A significantly lower CO2 footprint than most competitors – and at competitive costs: This makes us an attractive partner for our customers in China,” the company advertises.
How is BASF doing at the moment?
The company has been suffering from weak demand and lower prices for some time. In addition to the poor economy, US customs policy is weighing on the economy. Company boss Markus Kamieth recently told the “Handelsblatt”: “The chemical industry is probably experiencing its most difficult time in 25 years.” BASF has shut down facilities at its loss-making main plant in Ludwigshafen and has included several savings programs across the group Job cuts hung up.
In Ludwigshafen, the group wants to forego redundancies for operational reasons until the end of 2028 and invest billions. With more than 30,000 people, a third of BASF’s global workforce works there.
Kamieth wants to get the group on track with a restructuring. Some business areas will be sold and the agricultural division will go public in 2027. Overall, BASF is intended to develop from a broad-based, integrated chemical group with many networked business areas into a company with a core business consisting of four divisions and several independent business units.
China is no longer growing as quickly. What does this mean for BASF?
“There is currently overcapacity for many chemical products in China,” admits the company. At the same time, the Chinese market continues to record very robust growth in demand. “It is expected that older plants with lower energy efficiency and poorer environmental standards will have to be shut down in the coming years.” In the medium term, this will lead to a reduction in excess capacity.
How big is the plant – and who works there?
“The site will be BASF’s third largest Verbund site after Ludwigshafen and Antwerp,” the company said. 2,000 employees will work on an area of around four square kilometers – almost the area of the island of Mainau in Lake Constance. “The management team consists largely of Chinese employees.”
What is produced there?
The new plant includes a so-called steam cracker with a capacity of one million tons of ethylene per year and several plants for the production of petrochemicals, intermediates and other products. According to the group, customers include the packaging industry for plastics and specialty chemicals as well as the construction sector for high-performance plastics and the automotive industry for paints and plastics.
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LUDWIGSHAFEN (dpa-AFX)
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