BASF to exit Chinese BDO jvs; cites oversupply and human rights allegations
German chemical firm BASF has started the process to divest its shares in the two joint venture companies BASF Markor Chemical Manufacturing (Xinjiang) Co and Markor Meiou Chemical (Xinjiang) Co in Korla, China, that produce 1,4-butanediol (BDO).
BASF says says it has assessed the market environment and product carbon footprints (PCF) of BDO and its downstream products from different production sites worldwide. BASF also adds that allegations of human rights abuses by jv partner Markor Chemical against the Uyghur population in Xinjiang are another reason for the exit.
It adds that BDO value chains are under increased competitive pressure and characterised by global overcapacities. Furthermore, carbide-based BDO and polytetrahydrofuran produced in Korla have a significantly higher PCF due to the use of coal as a base raw material and the high energy intensity of the production process.
In the future, BASF says it will customise its global portfolio of BDO and affiliated downstream products to provide competitive low-PCF offerings.
The situation in the Xinjiang region has always been part of BASF’s overall assessment of its joint ventures in Korla, it claims. “Regular due diligence measures including internal and external audits have not found any evidence of human rights violations in the two joint ventures,” it furthers.
Nonetheless, recently published reports related to the joint venture partner contain serious allegations that indicate activities inconsistent with BASF’s values.
Reports published by Germany’s Der Spiegel and ZDF have said that staff from BASF’s local partner Markor Chemical had visited the homes of Uyghurs in the province as part of a government campaign that human rights campaigners warn is used to spy on people and indoctrinate them.
Consequently, BASF has said it will accelerate the ongoing process to divest its shares in the two joint ventures in Korla, subject to negotiations and required approvals of the relevant authorities.
It is important to note that, also in the context of the public reports, BASF adds it has no indication that employees of the two joint ventures in Korla were involved in human rights violations. The most recent reports relate to BASF’s joint venture partner, in which BASF does not have a stake.
BASF’s presence in China remains otherwise unchanged, and the company is fully committed to its business activities and planned investments in the country.
Already, it adds, China accounts for around half of global chemical production, which include a EUR10 billion chemicals complex under construction in Zhanjiang.
Global growth in chemical production until 2030 will be driven by China, which will account for around 80% of the total growth during the period from 2022 to 2030.
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