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The world's largest chemical company is likely to open its new plant in China at the end of March. The hope for growth is high. However, there is also skepticism.

The BASF Group will officially open its new integrated site in Zhanjiang, China, in the first quarter of the year—as an industrial site with interconnected production facilities, logistics, and material flows. With around $10.2 billion USD, the plant is the company's largest single investment project to date. Critics warn that BASF is once again becoming dependent on an autocratic leadership after expensive write-downs in Russia due to the Ukraine war. BASF argues that there is no way around the future market of China. Some questions and answers on this.

Why is BASF Investing in this Location?

Because China is growing. "We expect that around 80% of the growth in the chemical industry will be concentrated in the Asia-Pacific region by 2035," BASF states. Even today, China, which accounts for around 50% of the global chemical market, significantly contributes to this growth.

"With regard to this development, BASF is still underrepresented in the largest future market: In 2024, BASF generated around 13% of the BASF Group's total sales in China. The market share is significantly smaller than in the USA or even in Europe," it says. The involvement in China neither means a focus on a single market nor a relocation of production. What BASF manufactures in China is mainly sold there.

German chemical companies remain generally optimistic about growth prospects in China. A business climate survey published in December by the German Chamber of Commerce Abroad in Beijing revealed that 84% of members in the chemical industry in the People's Republic expect an increase in annual average growth over the next five years. 61% stated that they plan to increase their investments in China within the next two years.

How Does BASF Ensure Human Rights And Labor Standards?

In 2024, the company sold shares in two joint ventures in China. The reason: reports indicated activities by the joint venture partner "that are not consistent with BASF's values." The systematic review of its own companies and suppliers is set to continue. "We take every indication of human rights violations very seriously and examine it carefully." Compliance with legal requirements is reviewed in audits.

What Risks Does the Company See in Its Engagement in China?

Beijing makes no secret of its intention to unite democratically governed Taiwan with China—if necessary, militarily. A conflict would also have devastating economic impacts, as the Taiwan Strait and the Western Pacific are key maritime trade routes, Taiwan supplies the entire world with urgently needed computer chips, and China, in turn, would face international sanctions in the event of a conflict. BASF states: The geopolitical developments are being observed very closely, and the risk scenarios are being evaluated. This applies to all countries in which the company operates.

What Do Critics Say About the Investment?

Critical shareholders of the chemical giant fear that BASF is making itself too dependent on the leadership in the Far East with its investments in China.

Recently costly write-downs in Russia are being held up to management as a cautionary example. When CEO Markus Kamieth—the former Asia head of the company—took office at the general meeting nearly two years ago, critical shareholders had already criticized China and renewed this criticism at the most recent general meeting.

Arne Rautenberg, fund manager at Union Investment, the investment company of the Volksbanken and Raiffeisenbanken, is skeptical whether the investment will pay off for shareholders. Linus Vogel from the savings bank investment company Deka referred to it as a "risky bet"—"especially since today's China is very different from the China at the time of the investment decision."

What About Sustainability?

According to BASF, the plant in Zhanjiang is powered "100%" by renewable energy. Through various measures, the site will reduce its CO2 emissions "by up to 50%" compared to a conventional petrochemical site. "A significantly lower carbon footprint than most competitors—and at competitive costs: This makes us an attractive partner for our customers in China," the company promotes.

How is BASF Doing at the Moment?

The company has been suffering for some time from weak demand and falling prices. In addition to the sluggish economy, US tariff policies are a burden. Company CEO Markus Kamieth recently told the "Handelsblatt": "The chemical industry is probably experiencing its most difficult time in 25 years." BASF has shut down facilities at its loss-making headquarters in Ludwigshafen and initiated several cost-cutting programs across the group, including job cuts.

In Ludwigshafen (Germany), the company plans to avoid layoffs for operational reasons until the end of 2028 and invest billions. With more than 30,000 employees, about one-third of BASF's global workforce works there.

Kamieth wants to steer the company on course with a restructuring. Some business areas are to be partially sold, and the agricultural division is planned to go public in 2027. Overall, BASF aims to transform from a broadly diversified, integrated chemical group with many interconnected business sectors into a company with a core business consisting of four segments and several independent business units.

China is No Longer Growing As Quickly. What Does this Mean for BASF?

"Currently, there are overcapacities for many chemical products in China," the company acknowledges. At the same time, the Chinese market continues to experience very robust demand growth. "It is expected that older plants with lower energy efficiency and poorer environmental standards will have to be shut down in the coming years." In the medium term, this will lead to a reduction in overcapacities.

How Large is the Plant—And Who Works there?

"The site will be BASF's third-largest integrated site after Ludwigshafen (Germany) and Antwerp (Berlgium)," the company states. On an area of around 1.5 square miles—almost the size of Mainau Island in Lake Constance—2,000 employees will work. "The management team largely consists of Chinese staff."

What is Produced there?

The new plant includes a so-called steam cracker with a capacity of 1.10 million short tons of ethylene per year and several facilities for the production of petrochemicals, intermediates, and other products. According to the company, customers include, among others, the packaging industry for plastics and specialty chemicals, the construction sector for high-performance plastics, and the automotive industry for paints and plastics.

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