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Chemical plant to be expanded

Germany-based BASF, the world's top chemical maker, and Sinopec Corp have won approval from the Chinese government for a US$1.4 billion expansion of their joint petrochemical plant in Nanjing, Jiangsu Province.

The cost is 56 percent higher than previously announced because of higher costs and currency effects, BASF said yesterday.

The joint venture, BASF-YPC Co (BYC), will build 10 new chemical plants and expand three plants and a steam cracker to meet demand from China's construction, electronics, drug and automotive industries.

The capacity of the steam cracker, which produces ethylene, a key petrochemical building block, will be increased from 600,000 tons to 740,000 tons a year, BASF said.

The expanded steam cracker will start operating in 2011. China plans to increase annual ethylene capacity to 18.13 million tons by 2010.

In March 2008, the two parties announced a US$900 million investment for the expansion plan.

"Engineering contractor work is more expensive compared with our original estimates. This is mostly due to the complexity of integrating the new plants into a running complex, as we want to lose as little production output as possible during the expansion," a BASF spokesman said, adding higher infrastructure spending and the appreciation of the yuan also had an impact. He attributed the biggest portion of the cost change to the expansion of the steam cracker.

Meanwhile, another Nanjing joint venture between the two partners, Yangzi-BASF Styrenics Co, is being merged into BYC to further increase synergies in Nanjing operations, BASF said.

Sinopec President Wang Tianpu said the expansion will make the Nanjing facility one of Sinopec's most competitive operations.

Martin Brudermuller, a board member of BASF SE for Asia Pacific, said: "The expansion of BYC underscores our strong belief in the growth opportunities of the Chinese market and is another milestone in cooperative development."


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