GERMAN chemical giant BASF said yesterday it has signed a memorandum of understanding with China’s Sinopec Corp. to build a steam cracker in eastern China, the second major investment pledged by the German firm in four months.

China is allowing greater access by global majors and local independents to its massive chemicals market to feed plastics, coatings and adhesives to the fast-growing consumer electronics and automotive sectors, as well as polyesters for clothing.

BASF said the new steam cracker will have an annual capacity of one million tons of ethylene, a building block for plastics, rubber and synthetic fiber. It did provide financial details of the project.

In July, the firm landed a preliminary deal to build China’s first wholly foreign-owned chemicals complex in Guangdong, worth some US$10 billion in investment to 2030, aided in part by trade tensions between China and the United States.

In a press release yesterday, BASF said a joint pre-feasibility study on the cracker will be completed by the end of 2018.

Zhong Jian, chief analyst with consultancy JLC, said global chemicals firms have been encouraged by China’s top leaders, who have repeatedly expressed support this year for foreign investment in the petrochemicals sector.

“The companies are more ambitious than just building ethylene plants. They are aiming for a bigger market share in the whole supply chain and the ethylene complex might just be their first step,” said Zhong.

According to the memorandum of understanding, BASF-YPC, its joint venture with Sinopec in Nanjing, will invest in a 50 percent stake in the new cracker. Sinopec Yangtzi Petrochemical (YPC) will take the other 50 percent.

Additionally, the firms will explore new business opportunities in China’s fast-growing battery materials market, it said. Founded in 2000, BASF-YPC has spent approximately US$5.2 billion in China. (SD-Agencies)