BASF, one of the world’s leading chemical companies, has announced its decision to initiate the divestment process for its joint ventures in China. The move comes amidst market challenges and allegations surrounding the company’s operations in the Xinjiang region.
In the fourth quarter of 2023, BASF began the process of divesting its shares in two joint venture companies, namely BASF Markor Chemical Manufacturing (Xinjiang) Co., Ltd. and Markor Meiou Chemical (Xinjiang) Co., Ltd., both located in Korla, China. This decision is part of BASF’s global strategy for 1,4-butanediol (BDO), a key chemical compound used in various industries.
The market environment for BDO and its downstream products has become increasingly competitive, with global overcapacities posing challenges for value chains. Additionally, the production process of carbide-based BDO and polytetrahydrofuran in Korla involves the use of coal as a base raw material, resulting in a significantly higher product carbon footprint (PCF) and high energy intensity. In light of these factors, BASF aims to customize its global portfolio of BDO and related products to offer more competitive low-PCF alternatives.
The situation in the Xinjiang region has always been a crucial aspect of BASF’s assessment of its joint ventures in Korla. The company has conducted regular due diligence measures, including internal and external audits, to ensure compliance with its values and standards. These assessments have not found any evidence of human rights violations within the two joint ventures.
However, recently published reports regarding BASF’s joint venture partner have raised serious allegations that are inconsistent with BASF’s values. While there is no indication that employees of the joint ventures in Korla were involved in human rights violations, BASF has decided to expedite the divestment process in response to these allegations. The finalization of the divestment will be subject to negotiations and approvals from relevant authorities.
It is important to note that BASF’s decision to divest its shares in the joint ventures does not impact the company’s overall presence in China. BASF remains fully committed to its business activities and planned investments in the country. In fact, Greater China currently accounts for approximately half of global chemical production. Looking ahead, the chemical industry’s global growth until 2030 will be primarily driven by Greater China, which is expected to contribute around 80% of the total growth between 2022 and 2030.
BASF’s decision to divest its shares in the joint ventures reflects its commitment to sustainability and aligning its portfolio with low-PCF offerings. By customizing its BDO and downstream product offerings, BASF aims to meet the evolving market demands while reducing its environmental impact. The company’s dedication to responsible business practices and adherence to its values remain at the forefront of its operations.
As BASF continues its journey in China, it will navigate the challenges of the market and strive to contribute to the country’s growth in the chemical industry. With its global expertise and commitment to sustainability, BASF remains a key player in shaping the future of the chemical sector in China and beyond.