Huntsman and BASF with Chinese Partners Go for $1 Billion Polys Plant to Keep Up with Market Growth

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). The Chinese market for polyurethanes is expected to grow at a rate of about 10 percent over the next 12 years and will be the largest market for the product in the world by 2015. This projection was given by Jean-Pierre Dhanis, president of BASF's polyurethane division as Chinese approval for the optimization to world scale capacity of the planned integrated isocyanates complex at the Shanghai Chemical Industry Park (PEC 88000035).

The $1 billion project consists of three separate joint ventures between BASF China (PEC: 88000074/109/176/177/440/643/644) (NYSE:BASF) (Ludwigshafen, Germany), Huntsman (Salt Lake City, Utah) (PEC 44000262) and their Chinese partners - Shanghai Hua Yi Co, Sinopec Shanghai Gao Qiao Petrochemical Corporation and Shanghai Chloro-Alkali Chemical Company.

The project, which is being partially financed by Chinese banks and is targeted for commercial production in 2006, will see Shanghai Leaching Isocyanine build a 240,000 tons (previously 160,000 tons) a year crude MDI (diphenylmethane diisocyanate) manufacturing plant, including manufacturing facilities for the precursors aniline and nitrobenzene. This company is made up of the full consortium of BASF, Huntsman, and their four local partners.

Shanghai BASF Polyurethane will be responsible for an MDI finishing plant and a 160,000 tons (previously 130,000 tons) a year TDI (toluene diisocyanate) plant with precursors nitric acid and dinitrotoluene. This company consists of BASF, Shanghai Hua Yi and Sinopec Shanghai.

An MDI finishing plant, Huntsman Polyurethanes Shanghai, will be built by Huntsman and Shanghai Chloro-Alkali Chemical.

The operating companies intend to supply Bayer AG in China (PEC: 88000217/218/234/235/236/237/238) (NYSE:BAY) (Leverkusen, Germany) with crude MDI and TDI from the complex. Details of the supply contracts are still under negotiation. The partners have awarded the EPC (engineering, procurement and construction) contract to a consortium of Fluor Corporation (NYSE:Fluor) (Aliso Viejo, California), Daelim, South Korea and CTCI, Taiwan. Fluor is expanding its activities in China. In 2001, it won the design, procurement and construction contract for the $2.6 billion integrated petrochemical facility in Nanjing. Fluor will manage the project on behalf of BASF-YPC, which is a joint venture between BASG AG and China Petroleum and Chemical Corporation (SINOPEC).

"With our isocyanante plants in Shanghai, we can now reach an economy of scale, which will give us an excellent competitive position to participate in this growth and to better serve our customers through local production," said Jean-Pierre Dhanis.

MDI and TDI are important precursors in the manufacture of polyurethanes, the versatile polymers used in the automotive and construction industries and in appliances, upholstery and footwear. The consumer market in China for all these products is expanding rapidly.