BASF Is Boosting APAC Capacity as Consumer Demand Soars, Regional Executive Says
Zhang Yushuo
DATE:  Apr 15 2021
/ SOURCE:  Yicai

(Yicai Global) April 14 -- Global chemicals giant BASF is in the process of adding additional capacity in the Asia-Pacific region at a time of surging demand, particularly in China, following the impact of the coronavirus pandemic earlier last year, according to a senior executive.

BASF has acquired Solvay’s polyamide business and is building a Verbund project in China’s southern Guangdong province at Zhanjiang, Andy Postlethwaite, senior vice president at BASF for performance materials in the Asia Pacific, told Yicai Global in an interview on April 13.

Demand has recovered strongly since the second half of last year thanks particularly to “tremendous consumer demand” from the automotive, footwear and electronics industries in China, he said. “In that sense we are quite happy that we added additional capacity with Solvay and we are adding additional capacity with the Zhanjiang Verbund site next year.”

“We will have a broader product portfolio and stronger capabilities in the upper-stream supply from acquisition of the Solvay’s engineering plastic and the polyamide business,” Postlethwaite said by video-link at a press conference the company held in Shenzhen the same day. “BASF will be closer to markets with the Zhanjiang Verbund,” he added.

BASF paid EUR1.3 billion (USD1.56 billion) for Solvay’s polyamide (PA 6.6) business in January last year. The research and development capabilities and 300-person team in the Asia-Pacific region have been integrated into BASF’s Performance Materials business, said Postlethewaite, boosting the firm’s Asia presence. 

The first plants of the Zhanjiang Verbund project will begin producing engineering plastics and thermoplastic polyurethanes (TPU) next year to meet the increasing needs of growth industries in South China and the Asian market, said Zheng Daqing, senior vice president of BASF China. The plants will be powered by renewable energy and BASF will be the first company to buy such electricity following the local Renewable Electricity Marketization Policy.

BASF wants to be a key enforcer of the transition to net zero emissions for basic value goods and downstream value chains, said Zheng, citing the firm’s goal of reducing emissions by 25 percent globally in 2030 from 2018 and reducing global carbon dioxide emissions by 60 percent from the 1990s.

China Opportunities

BASF’s revenues in China rose 16 percent last year to EUR8.5 billion (USD10.2 billion) due to quick shifts in production and strong recovery, making China the company’s second-largest market behind the United States, said Zheng.

BASF, which supplies chemicals and advanced materials to all sectors, benefited from strong demand in personal care, household appliances, and autos in China last year. In addition, its agricultural business was not greatly affected as consumers care more about nutrition and health. 

Localization is another significant factor in boosting BASF’s China business. “We have local production bases to provide products of good and stable quality to win trust and favor from our Chinese customers, although logistics and supplies were affected,” said Zheng. 

China’s chemicals industry was very good overall in the first quarter of this year and BASF believes that it will be very positive. So far China has supplied 40 percent of the world’s chemicals and it is expected to reach at least 50 percent, or even 60 percent by 2030.

“This shows that the potential for the future development of China's chemicals markets is still huge,” Zheng added. 

BASF is displaying low-emission and energy-efficient solutions for automotive, sustainable materials for furniture and sports solutions, fifth-generation infrastructure solutions, recyclable exoskeleton suits, and additives that extend the service life of plastics at the ChinaPlas, Asia’s biggest plastics fair from April 13 to 16. It has also presented co-created products like a fridge, cold storage and trunk floor made of polyurethane waste. 

“Our showcase at ChinaPlas 2021 will strongly reflect our commitment to sustainability,” Postlethewaite said, adding that “we will continue to innovate and collaborate with our customers in China.”

Excerpts from the interview follow:

Yicai Global: How did BASF Performance Materials’ operations do in the Asia-Pacific last year, as many industries were struck hard by Covid-19?

Andy Postlethwaite: Like everybody else, we were impacted quite strongly in the earlier part of the year. In China, we saw that hitting us in January, February and then as the pandemic spread, we saw significant downturn in demand across Japan, Korea, ASEAN, and then into India. 

In the second half of last year and into Q1 this year demand has recovered very, very strongly, particularly in China, where the automotive industry, the consumer industry, footwear industry, electronics industry, where there seems to be tremendous consumer demand. 

In that sense we are quite happy that we added additional capacity with Solvay and we're adding additional capacity with the Zhanjiang Verbund site next year. 

YG: How has Solvay’s business been integrated into BASF in the Asia-Pacific region and what is its significance for BASF’s performance materials business?

AP: It’s multi-faceted. One of the key reasons that we made this acquisition was to ensure the upstream supply of the PA 6.6 precursors, and also add polymerization of 6.6. In Asia, that means we have the polymerization of 6.6 in Korea. Securing raw materials supply of this polymer and upstream material was critical. 

When it comes to serving our customers in Asia, we have a very nice compounding plant in Minhang. We have additional plants in India and Korea. In China, we also have additional R&D capabilities which we have integrated into our R&D facilities in the Waigaoqiao site [in Shanghai] and combined the people and the equipment. 

Solvay also brought a lot of synergies because they were working on certain technologies. For example, they are very, very strong in fluid dynamics. BASF is very strong historically in air dynamics. So we have additional and synergistic capability from the R&D perspective, which means actually quite synergistic product portfolio. When we combine this it gives us a much more broader and full portfolio into new applications and additional capability. 

Together with all that, of course, we got an additional nearly 300 colleagues from the acquisition in Asia who have different experiences, but particularly in R&D. On the technical side, Solvay was very strong and colleagues have now joined BASF to support our technical development. The team is doing a great job and they're adding to our capabilities, to support these new industry trends, to support sustainability and to be able to produce close to our customers, particularly in China.

YG: BASF showcase many innovations at ChinaPlas. There are some new trends like automotive electrification and carbon-neutrality. How will BASF adapt to these changes?

AP: We are moving out R&D focus and our budgets towards these developments. If it comes to e-mobility, we are moving R&D spending and creating projects to support our customers when it comes to, for example, battery housing, electric motors’ sensors, high voltage connectors, etc. BASF made some very strong commitments to carbon-neutral footprint by 2050, and also to support our customers with innovative, sustainable products. 

There are multiple ways we do that from the simple way of maybe supporting light-weighting of electric vehicles to more sophisticated approaches through mass balance, to bio-content or bio-based materials, with the long-term vision to look at new value chains such as chemcycling.

We are tackling this from multiple angles. The main two topics really is producing our own carbon footprint and enabling customers to reduce their carbon footprint with de-carbonized materials. 

YG: The price of most chemical materials has risen sharply this year. What impact will this have on BASF Performance Materials’ business?

AP: The prices for most performance materials portfolio actually have risen during the last month, mainly due to two factors. One is unprecedented demand. We are seeing a demand above any level we have ever seen for these materials. 

At the same time, due to multiple factors around the world, there has been a bunch of problems with the upstream, be it force majeure due to raw material supply or due to weather conditions. The upstream has had many, many issues over the course of the last month. So we have a combination of very high demand and raw material shortages.

So far, this has not dented demand because the demand is very strong, but as in previous cycles, there is a tipping point where the industry will start to slow down if this situation continues. But so far, we don’t see an impact on demand from this pricing and cost increases.

YG: What opportunities do you see in China for BASF Performance Materials? 

AP: Many of the important industries that we serve as Performance Materials are automotive, including new energy vehicles, electronics, consumer products, footwear, infrastructure, 5G communications, etc. 

As I mentioned, all of these industries are going through quite a technological and demand transformation. This transformation requires different materials or different properties from materials. That’s what we do at BASF. We develop materials with new properties for our customers, and we try to produce them locally for our customers. 

So both the Solvay acquisition when it comes to R&D and local carbon footprint, and the BASF Verbund site in Zhanjiang, will support these initiatives. There are extensive R&D network in China, Korea, linking to a global R&D footprint. We are transforming and creating materials where our customers in China that are serving these segments.

So for me, it’s very exciting. Growth is strong. China remains a key market for all these segments. So we will continue to innovate and collaborate with our customers in China. It’s a sweet spot of high demand and innovation requirements. So we are very excited and happy to participate in these challenging industries. 

YG: Can you tell us about the role of digitization in BASF Performance Materials’ business in the Asia Pacific?

AP: Together with the rest of BASF, particularly in China, there is a lot of digitization going on in our manufacturing plants to support more efficient, safer, greener production. 

But when it comes to dealing with customers, you would have heard from Dr. Zheng regarding our extensive use of the e-commerce platform. Another area where we collaborate with customers via digital platform is to support trials, lets say remotely, with modern technology.

At the same time, we have certain platforms for collaboration with CAE, computer-aided engineering technologies, to support joint design, or to support the ongoing engineering design of our customers. We are also trying to enable our sales organization to work smarter and provide better service to our customers through a number of different digital tools.

Editor: Peter Thomas

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Keywords:   BASF,Verbund,chemical products