BASF investments in Asia to outstrip Europe in next five years – CEO

Ludwigshafen, GERMANY (ICIS)–BASF’s investment programme for the next half-decade in Asia will outpace expenditure on its European home market as the Germany-headquartered chemicals major seeks to increase its focus on higher-growth markets, its CEO said on Friday.

An estimated 41% of investment spending will flow into the Asia-Pacific region over the next five years, compared with 34% into Europe, according to Martin Brudermuller.

BASF expects to spend €23.6bn on growth priorities through to 2024, with €8.2bn of that sum to go into its new verbund site in Guangdong, China, set to rival its headquarter complex in Ludwigshafen.

The company will also allocated capital expenditure (capex) to a chemical complex under consideration in Mundra, India, and on growing its battery materials business.

Despite current economic issues in China set to drive GDP growth in the country down to 4.5% this year, according to BASF’s estimates, its trajectory to become the overwhelmingly dominant chemicals market is set to continue, according to Brudermuller.

“China represents 45% of global chemicals production, which is set to rise to 50% in the coming decade – [current] coronavirus challenges will not change this,” he said, describing the increased capital expenditure as “a shift in our regional” focus.

“Players who want to grow in the global market must participate in China’s growth,” he added.

The Guangdong verbund project officially launched in November last year; it is to be developed in phases through to 2030, with the peak investment period for the $10bn-complex expected between 2022 and 2024.

The first plants, producing engineering plastics and polyurethane (PU), are expected on stream in 2022.

Product from the complex will be largely targeted at southern China, Brudermuller added.

BASF signed a memorandum of understanding (MoU) with Borealis, Adani and the Abu Dhabi National Oil Company (ADNOC) in October 2019 to evaluate the potential for a chemicals production complex in Mundra.

Worth up to $4bn, the project would involve the development of a propane dehydrogenation (PDH) plant to produce propylene from propane feedstocks supplied by ADNOC, with a view to developing acrylics value chain capacity.

The India complex is intended to be fully powered by renewable energies.

BASF is also making a substantial bet on the electromobility market, with plans to develop battery materials production capacity in Schwarzheide, Germany, and Harjavalta, Finland.

The theme of 2019 for the company was transition, around the restructure of the business towards a stronger focus on customer responsiveness, the sale of non-core assets including pigments and construction chemicals, and the ongoing move away from oil and gas with the upcoming initial public offering (IPO) of its oil and gas assets and its increased focus on agricultural chemicals.

Brudermuller said the company’ theme would be resilience, with economic conditions set to be even weaker than last year and company estimates that global chemicals demand growth will sink to 1.2%, the weakest level since the 2008 financial crisis.

“I would tell our team stay tough because we will continue with this strategy, it is the right one,” Brudermueller said.

“We cannot change the environment, but we can do our best.”

Front page picture: View of a storage tank at BASF’s Ludwigshafen site; archive image
Source: Ronald Wittek/EPA-EFE/Shutterstock