Germany’s Chancellor Olaf Scholz made an official visit to China from April 14 to 16，2024. This was Scholz’s second visit to China since taking office as Chancellor. His first visit was in November 2022. 2024 marks the 52nd anniversary of the establishment of diplomatic relations between China and Germany, as well as the 10th anniversary of a comprehensive strategic partnership between the two countries. With a foreign trade volume of EUR 253.1 billion, China was Germany’s most important trading partner in 2023 for the eighth year. During Scholz’s visit, German top corporate brass accompanied him, highlighting the significance of bilateral economic and trade relations.
As Europe Faces a Cold Winter, German Companies Continue to Increase Investments in China
In 2023, Germany experienced a 0.3% decline in its Gross Domestic Product (GDP) due to the impact of poor economic situation, high inflation, high interest rates, and a sharp decrease in exports. Despite slower global economic growth, shrinking investment, and resistance from certain German political factions towards reducing risk and dependence on China, German companies steadily increased their investments in China. German direct investment in China rose by 4.3% to a record high of EUR 11.9 billion last year, official Bundesbank data analysed by the IW institute showed. Additionally, “Business Confidence Survey 2023/24” released by the German Chamber of Commerce in China showed that more than 90% of German companies in China plan to continue doing business in China, and more than half of German companies plan to increase investment.
The chemical industry is a vital pillar of the German economy. Soaring energy prices, supply chain disruptions and some other negative factors have significantly impacted production efficiency and operating profits in European plants over the past couple of years. This has become one of the major reasons driving German companies to enhance their investment efforts in China. As for the polyurethane industry, Covestro and BASF, as German-funded chemicals giants, have both chosen to emphasize and increase their investments in China in recent years.
Covestro
Covestro’s Asia-Pacific Innovation Center in Shanghai was part of Chancellor Scholz’s state trip to China. Here, Covestro develops future-oriented, sustainable products, technologies and solutions for dynamic markets such as electromobility, renewable energy, consumer electronics and construction. During the visit, Covestro demonstrated its leading innovations in the circular economy and provided a platform to discuss chances of the Sino-German partnership.
Markus Steilemann welcomed German Chancellor Olaf Scholz at the Covestro Asia-Pacific Innovation Center in Shanghai, China. (Source: Covestro)
In the polyurethane sector, Covestro is one the of global MDI suppliers, their PU business also extend to downstream applications such as TPU and PUD. Covestro has an MDI capacity of 1.77 mtpa globally, the facilities located in the U.S., Germany, Spain, China and Japan. In China, Covestro's MDI capacity is 600 ktpa, accounting for 34% of its global total capacity. China has become Covestro’s largest MDI production base worldwide. China is also one of the company’s largest markets, contributing over 20% of the company’s total sales in 2023.
Based on confidence in the future development of China market, as well as the stable energy supply, and a well-developed supply chain in China, Covestro continues its investment in China. As of now, Covestro has invested over EUR 4 billion in China. In 2023, Covestro made progress in several projects in China. In August, Covestro completed construction on a new production facility for PUDs in Shanghai. In September, Covestro broke ground on its new TPU production site in Zhuhai, Guangdong. With its potential maximum capacity of up to 120 ktpa it will then also be Covestro’s largest TPU site worldwide. In October, Covestro commenced operations at its first dedicated mechanical recycling (MCR) compounding line for polycarbonates at its integrated site in Shanghai. Covestro is committed to supplying over 60,000 tonnes of recycled-content polycarbonates annually in the Asia Pacific region by 2026.
BASF
BASF was selected as a member of the business delegation accompanying Chancellor Schultz’s first visit to China in November 2022. BASF has invested in numerous production bases in China. Despite the complex international environment, BASF has further expanded its investments here. BASF’s new Verbund site in Zhanjiang, Guangdong Province, is the company’s largest single investment to date. On January 18, 2024, BASF inaugurated its TPU plant at the Zhanjiang Verbund site. The site represents an investment of up to EUR 10 billion by 2030, equivalent to five Tesla gigafactories. Once all phases of the Zhanjiang Verbund site are operational, over 30 production lines will start simultaneously, producing more than 100 chemical products.
Greater China is BASF’s second-largest market after the U.S. BASF posted sales of approximately EUR 11.6 billion in 2022 to customers in Greater China, accounting for 13.3% of its global sales. BASF’s global MDI capacity currently totals 1.94mtpa with facilities located in Belgium, China, the U.S., and South Korea. The company has an MDI capacity of 640ktpa in China, representing 33% of its total capacity.
BASF signed a 25-year power purchase agreement with China Energy Engineering Group Guangdong Electric Power Design Institute Co., Ltd. to purchase renewable electricity for its Zhanjiang Verbund site. (Source: BASF)
