BASF, the world's largest chemicals producer, aims to double China's share in its global chemicals sales and profit to 10 percent by 2010.
That means China by then will make up the lion's share of BASF's chemicals business in Asia, as the company set a 20 percent goal for the entire region.
Today, China generates a weak third of BASF's sales in Asia, which collectively account for 16 percent of the global total, according to Wolfgang Hapke, president of BASF Asia Pacific.
BASF certainly believes the Chinese chemicals market will keep gaining momentum and absorb increasing capacity in the foreseeable future.
Andreas Kreimeyer, BASF's executive director for the Asia-Pacific region, said he expects the toy, textile, auto and packaging industries to drive the Chinese chemical market to grow 6 percent annually in coming years.
With all the good market prospects, BASF plans to invest about 1 billion euros ($1.21 billion) in Asia during the next few years - 20 percent of what the company expects to spend on capital projects. The goal is to build a local manufacturing base to supply 70 percent of its sales in Asia.
In 2004, only 18 percent of BASF's sales in China were produced locally. But local production has been enhanced this year with BASF-YPC Co. Ltd. launching in Nanjing, China.
BASF-YPC, a 50-50 investment between BASF and state-owned Sinopec, started production in June. It expects to break even or make a slight profit this year, BASF Chairman Jurgen Hambrecht said.
The Nanjing site is modeled on the Verbund concept originating from BASF's headquarters in Ludwigshafen, Germany, the world's largest chemical production complex. Under the system, the complex is integrated to save on production costs and use resources efficiently. Construction took four years.
The 544-acre site, consisting of 10 chemical plants, has annual capacity of 375 billion pounds, including 1.3 billion pounds of ethylene and 882 billion pounds of polyethylene.
A total of $2.9 billion has been invested in the Nanjing site, the largest single investment in the chemical giant's history. It is also one of the largest investments made by Sinopec, China's official newspaper reported.
BASF has 14 wholly owned subsidiaries and nine joint ventures in China. Most of their production is supplying the domestic market.
Other major players in the global chemical market also are believers in China's potential market growth.
BP's Chinese joint venture with Shanghai Petrochemical, Sinopec's subsidiary, also started in June. The venture, Secco, has an annual capacity of 1.98 billion pounds of ethylene and 1.3 billion pounds of linear low density PE and high density PE.
CSPC between Shell Oil Co. and CNOOC, to start in December, has an annual capacity of 1.76 billion pounds of ethylene, 551 million pounds of LDPE and 441 million pounds of HDPE.
The risk of oversupply, with all the capacity being built, does not seem to intimidate multinational investors.
``According to our forecasts until 2015, China will remain dependent on imports of chemicals despite a strong growth of local chemical production,'' Hapke said.
Commenting on the reported slowdown of the Chinese polyolefins market, he said, ``BASF uses conservative estimates to account for ups and downs in the market, as well as unpredictable disruptions in growth.''
