BASF, Germany, Smashed $10 Billion In East Island Of Zhanjiang, Producing Engineering Plastics And TPU

In November 23rd, the Guangdong new integrated production base (Verbund) project with a total investment of 10 billion US dollars was officially launched in Zhanjiang, Guangdong, and the first batch of equipment was started in November 23rd. This is an important milestone since the project was announced in July 2018. The first batch of the project will produce engineering plastics and thermoplastic polyurethane (TPU) to meet the needs of customers in many growth industries in Southern China and the whole Asian market.


It is understood that the Zhanjiang BASF integration base is located on the east island of Zhanjiang, Guangdong province. The project area is about 9 square kilometers, and the total investment is expected to reach US $10 billion. The whole base will be completed by 2030. The first batch of the project will produce engineering plastics and thermoplastic polyurethanes (TPU) to provide materials for automotive, electronic products and new energy vehicles.


In July 2018, BASF signed the first memorandum of understanding on integration base with the Guangdong provincial government in Berlin, Germany, and signed a framework agreement in January 2019 to make planning details. Guangdong integration base will be BASF's largest overseas investment project so far. The total investment is expected to reach US $10 billion and will be built independently by BASF. The upstream and downstream production facilities from basic chemicals to consumer goods will form an integrated value chain, providing support for growth industries such as consumer goods and transportation. The Guangdong integration base will become the third largest integrated production base of BASF in the world, second only to the German Ludwigshafen and Belgian Antwerp bases. The core of the first phase is to build a steam cracking plant with annual capacity of 1 million tons of ethylene. The first set of equipment will be put into operation in 2022, and the whole integrated base is expected to be completed in 2030.


Dr.StephanKothrade, President and chief executive of BASF Asia Pacific (functional management), said: "Zhanjiang is an excellent choice for BASF to further strengthen its production capacity in China. Our new integrated production base will become the cornerstone of Zhanjiang's world-class industrial clusters and provide strong support for BASF's business development in Southern China and Asian markets. "


By 2022, the new engineering plastics modification unit will contribute 60 thousand tons of modified engineering plastics products to BASF in China each year, and the total output of BASF modified engineering plastics products in the Asia Pacific region will be increased to 290 thousand tons. BASF will better meet the growing demand of customers, especially in automotive, electronics and new energy vehicles.


BASF plans to adopt cutting-edge technology in the integrated base to fully implement the concept of intelligent production. The new base will also use automation packaging, high-tech control system and automatic guided vehicle technology.


BASF integrated base will also contribute to the development of local communities in Zhanjiang. The company is working with local technology schools and other units to form strategic partners to train professionals.


BASF wholly owned subsidiary BASF integrated base (Guangdong) Co., Ltd. has also been formally established. The company is mainly responsible for the operation of the new integrated base, reflecting BASF's commitment to the Chinese market.


According to the data, Donghai island is the fifth largest island in China and the largest island in Guangdong, with a total area of 286 square kilometers. The total length of the beach is 28 km. It is certified as "the first Long Beach of China" by the Ginis headquarters of Shanghai world. The beach is 100-300 meters wide.


Donghai island is located in the eastern part of Leizhou peninsula of China. Historically it belonged to the Suixi County jurisdiction of Leizhou Prefecture. In 1958, the construction of the Northeast embankment facilitated the entry and exit of the islanders. This is now the economic development zone of Zhanjiang. There are mainly 3 streets in Dongshan, Dongjian and min an on the island. The East is high, the west is low, the East is the basalt platform, and the west is the marine plain. The east end is 2 km from the beach, and the volcanic cone of the dragon water ridge is 111 m above sea level. The area is 500 * 500 m, which is composed of pyroclastic rocks and a small amount of basalts. It is a natural navigation landmark. Wei port and Beishan port are the largest fishing ports in the island. Wei Kwan near the 6.5 km coastline, water depth of 26~40 meters, of which 40 meters deep water channel 650 meters. There are more than 40 acres of land to be developed on the island, with a flat terrain and a height of 4~14 meters, which is a hard igneous rock base. Underground water can be pumped up to 500 thousand cubic meters per day. It is rich in fish and salt, with nunli and red flag salads, and mariculture is famous for abalone and prawn. The beach is long and white.


Dr. MartinBruderm MartinBruderm ller, executive director of BASF Europe, said: "I am very glad that BASF has made progress in this major investment project in China. We are committed to providing support for our customers in Southern China, bringing them innovative products and solutions. "


"By adopting cutting-edge technology and following the highest safety standards, the new integrated base will become a model for sustainable production and help China's development of circular economy," he added.


He also said that launching the BASF (Guangdong) integration base project in Zhanjiang, Southern China is the largest single investment BASF has made in 154 years. It has a long-term significance and is also the beginning of a long journey. The investment is staged in stages, with a current investment of US $10 billion. After the completion of the BASF (Guangdong) integrated base project in 2030, BASF will further expand its investment according to market demand.


In the case of Mr Mao, the reasons for choosing Guangdong and Zhanjiang are optimistic about China's future investment and market prospects. First of all, Guangdong is the hinterland of China's industrial production. It needs to import 20 million tons of chemicals from abroad every year. We learned from many customers in Southern China that many chemicals needed for the development of Guangdong need to be shipped from abroad. After the BASF (Guangdong) integrated base project is launched, it will meet the needs of customers for innovation and raw materials, and will play a complementary role in Guangdong and make more contributions to the local market. Secondly, Zhanjiang has an advantageous location. It is close to the coastline and has a deep-water port, which is conducive to importing raw materials from overseas and exporting ASEAN countries. At the same time, it also accords with the government's location requirements for chemical enterprises, and the local government also provides superior conditions. Therefore, settling in Zhanjiang is mainly based on these two considerations.


Reporters learned that BASF had already had six integrated bases: two in Europe (Germany, Ludwigshafen, Belgium, Antwerp), two in North America (free port in the US, Luis Anna Gass Ma in the US), and two in Asia (China Nanjing, Malay West Ya Guandan). BASF's integrated base in Nanjing, China, was founded in 2000 and is jointly operated with Sinopec (50:50). Its integrated base in Kuantan, Malaysia, was built in 1997 and operated jointly with Malaysia Petroleum Corporation (Petronas) (60:40).


Yu Xiaobo, an analyst with CAITONG securities, had previously believed that Zhanjiang's new integrated base and expanded Nanjing integration base would bring objective growth to BASF's China performance. In the 2000-2018 year, the production base of BASF in China was 7 square kilometers and capital expenditure was 11 billion dollars; the area of Zhanjiang's new integrated base was 9 square kilometers and capital expenditure was 10 billion dollars; in contrast, the two base base area of Ludwigshafen, Germany, was 10 square kilometers, and the area of Antwerp in Belgium was 6 square kilometers. It can be seen that the scale of Zhanjiang's new base is large, and the performance of BASF has increased considerably after its completion.


Public information shows that BASF was founded in 1865 and is the world's leading chemical company, headquartered in Ludwigshafen on the Rhine river. It is the largest chemical product base in the world. BASF provides customers with a range of high-performance products, including chemicals, plastics, specialty products, crop protection products, and crude oil and natural gas. Integrated (Verbund) base is the advantage of the company, and the intelligent interconnection of production devices and technology platform enables them to efficiently use resources and develop expertise. With around 10000 employees in R & D departments around the world, it is a solid backing for BASF's innovation and competitiveness.


In November 20, 2018, BASF launched a new business strategy in Ludwigshafen, Germany. Its primary goal is to achieve sales and sales growth, which began in 2019.


Aiming at the new situation of global strategic transformation, the new strategy has formulated the strategic objective of enhancing the core competitiveness of enterprises. The company's six major strategic objectives are: 1) to achieve sales and sales growth higher than the level of global chemical production; 2) to increase EBITDA 3%-5% every year without special items; 3) to achieve annual capital return rate which is much higher than capital cost ratio; 4) to increase earnings per share per year; 5) to achieve strategic product sales income of 22 billion euro; 6) to zero growth in carbon emissions by 2030.


Yu Xiaobo said that in the past 2017-2030 years, the growth of global chemical industry mainly came from the Asia Pacific region: China accounted for 64%, Asia Pacific accounted for 13%, North America accounted for 10%, and other regions accounted for 14%. In addition, the rapid development of electric vehicles has led to the demand for battery cathode materials. In the 2017-2025 years, the demand for cathode materials has increased by more than 300%. Revenue growth, innovative solutions and digital demand are BASF's main driving force for growth.


In Yu Xiaobo's view, the core points of BASF's new strategy are mainly reflected in two aspects:


First, BASF adjusts its business structure and starts excellent projects to pursue more efficient operation and become more transparent, flexible and close to customers. The structural adjustment of business has changed from 5 to 6, with clearer market positioning, focusing on innovative growth businesses and direct customer oriented industries, rather than traditional chemicals themselves. The six new business areas are chemicals, materials, industrial solutions, surface treatment technology, nutrition and nursing, and agricultural solutions. In addition, BASF is launching a new excellence project 2019-2021, which aims to contribute 2 billion euros BITDA annually from the end of 2021. The project will include measures such as production, logistics, R & D, digitalization, automation and organizational development.


The new strategic core point two: expand with the Chinese chemical market, expand the layout of the integrated base, and give full play to the cost and technological advantages. China has become the world's largest chemical market, accounting for 40% of the world's total market, and will continue to promote global chemical production growth. By 2030, the share will expand to nearly 50%. BASF will grow together with it, so in Zhanjiang, Guangdong, it will build second integrated bases in China and expand the original Nanjing integration base. In the integrated system, due to the high concentration of production, BASF can save more than 1 billion euros per year. In addition, the Zhanjiang base will fundamentally apply the concept of circular economy, implement the concept of Intelligent Manufacturing in a sustainable manner and adopt cutting-edge technologies to provide support for customers in Southern China.


Yu Xiaobo said that before the new strategy was released in 2019, BASF group had five major business areas, under 13 business units, with subsidiaries in over 80 countries, and 6 integrated (Verbund) bases and 347 other production bases worldwide. The five major areas of business are chemicals, characteristic products, functional materials and solutions, agricultural solutions, and oil and natural gas. As an important foreign investment enterprise in China's chemical industry, BASF's main investment projects are located in Nanjing, Shanghai and Chongqing, with production bases all over the country. BASF Asia Pacific Innovation Park (Shanghai) is the R & D Hub in the global and Asia Pacific region. By the end of 2017, BASF had 25 production bases in Greater China (excluding Yangzi Petrochemical BASF Limited).


Among the five major businesses, the highest proportion of functional materials and solutions accounted for (32%), followed by chemicals (25%) and characteristic products (25%). Business components are: chemical business consists of petrochemical, monomer and intermediates, accounting for 25% of the revenue in the business area; its product range includes solvents, plasticizers and a large number of monomers, glue and electronic chemicals, as well as detergents, plastics, textile fibers, oil paints and coatings, crop protection and pharmaceutical raw materials. Specialty products include dispersions and pigments, nursing chemicals, nutrition and health and specialty chemicals, accounting for 25% of the business revenue. The business of functional materials and solutions includes catalysts, chemical building materials, coatings and characteristic materials, accounting for 32% of the revenue in the business sector. The agricultural solutions business provides solutions for crop protection, seed treatment and water management, as well as nutrient supply and plant pressure. Oil and natural gas businesses are engaged in exploration, production and transportation.


According to the financial report, in 2018, BASF realized operating income of 62 billion 675 million euros, an increase of 2.4% over the previous year, EBIT63.53 billion euros, a year-on-year decline of 16.9%, net profit of 4 billion 707 million euros, a decrease of 22.6% over the same period last year, and Q4 operating income of 15 billion 586 million euro in 2018, an increase of 2.3% over the same period last year; EBIT6.30 billion euros, a decrease of 58.7% over the same period last year; net profit of 348 million euro, a decrease of 77.4% over the same period last year.


In the first three quarters of 2018, BASF realized revenue of 47 billion 89 million euros, up 2% over the same period last year, but net profit fell 4% to 4 billion 359 million euros compared with the same period last year, due to the decline in the performance of chemical business and the decrease in gross margin. According to the year, it achieved 64 billion 475 million euros in 2017, an increase of 12.03% over the same period last year, and realized net profit of 6 billion 78 million euros, an increase of 49.85% compared with the same period last year, and the gross profit rose steadily. Quarterly, the third quarter of 2018 achieved 15 billion 606 million euros in revenue, up 7.51% from the same period last year, mainly due to the increase in sales prices. Net profit of 1 billion 200 million euros, down 10.18% from the same period last year, was mainly due to the decrease in the performance of the chemicals business.


BASF has released 2019-2023 years' 21 billion 300 million euros capital expenditure plan, and the main projects currently planned or are being implemented include: (1) Antwerp, Belgium: ethylene oxide integrated device; (2) Luis Anna S Geismar: MDI capacity expansion; (3) Germany Ludwig Industrial Park: acetylene plant replacement, new vitamin A and ibuprofen production capacity; (4) Kuantan Malaysia: acrylic acid and butyl acrylate capacity expansion; (5) India mondella: invest in acrylic acid industrial chain with ardni; (6) China Guangdong Zhanjiang: invest in new integrated industrial park.