BASF to build giant Shanghai plant

BASF has been shutting plants elsewhere in the world

German chemicals firm BASF has been given the go ahead by China's central government to build a giant chemical plant in Shanghai to benefit from China's consumer boom.

BASF heads a consortium of foreign firms which will have formed a joint venture with Shanghai Chlor Alkali to build the $1.2bn (£710m) factory.

It will produce raw materials for the production of polyurethane, which is used by manufacturers of cars, soft furnishings and fridges and well as in China's booming construction industry.

Demand for polyurethane in China is growing rapidly and outstrips growth in global demand.

Bright spot

China's market for polyurethane is growing at 12-18% a year, while global demand is increasing at about 8% a year.

BASF said it had received official approval from the State Council, which is the Chinese government's cabinet.

Last year BASF announced it was closing 10 plants worldwide because of world economic slowdown.

The firm's profits sagged raw material prices rose and the US recession shrank its markets - operating profits were 70% lower in 2001 than the previous year.

The Shanghai plant is BASF's second biggest investment in China, dwarfed only by its project to build the country's largest ethylene cracker in Nanjing.

Shanghai Chlor Alkali will provide 30% of the total investment, while BASF and other consortium members, including US firm Huntsman Polyurethane, will provide the rest.

A spokeswoman for Shanghai Chlor Alkali said construction work should take about two years.