China’s Yangzi selling BASF-YPC's products to its customers

12 April 2005 12:04  [Source: ICIS news]

SHANGHAI (CNI)--China’s Yangzi Petrochemical will buy some products from BASF-YPC Co and sell it to its own customers, the company informed the Shenzhen Stock Exchange on Tuesday. It will also act as an exclusive domestic agent for some of the BASF-YPC products, the company added in the statement.

 

Yangzi, a Sinopec subsidiary, said it would buy monoethylene glycol (MEG) and BTX (benzene, toluene and mixed xylenes) from BASF-YPC, and sell them to its own customers. Yangzi is also a producer of MEG and BTX.

 

It is expected to buy 400,000 tonne of MEG and BTX worth an estimated Rmb2.81bn ($339.5m/Euro261.4m) from BASF-YPC this year. In return, BASF-YPC will make a one-time payment of $9.8m (Euro7.5m) to Yangzi as a “market transfer” fee.

 

BASF-YPC, which is starting up its 600,000 tonne/year cracker complex at Nanjing in Jiangsu province, will have the capacity to produce 300,000 tonne/year of MEG and 326,000 tonne/year of BTX. The company expects all of its units to start commercial production within the first half of this year.

 

Separately, Yangzi will act as the exclusive domestic marketing agent for BASF-YPC’s low-density polyethylene (ldPE) and pyrolysis products such as propylene and asphalt. It will buy a total of 448,000 tonne of these this year for a handling fee of about Rmb40m.

 

BASF-YPC will have an ldPE capacity of 400,000 tonne/year when the plant comes onstream, and its pyrolysis products will have a combined capacity of 224,000 tonne/year.

 

Yangzi said the agreement would reduce marketing competition between both companies since they are producing common products, and help it increase its market share.

 

As an agent, Yangzi will be responsible for helping BASF-YPC look for customers at a fee. Yangzi currently has no ldPE production.

 

It is required to explain these connected transactions to the Shenzhen Stock Exchange as it is one of the shareholders of BASF-YPC.

 

CNI understands that the BASF-YPC’s marketing staff who are handling the above products will remain to collect market intelligence and oversee the transactions with Yangzi.

By: Clara Tan
+65 6780 4359

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