Investor Update 2021 - BASF's new Verbund site in Zhanjiang
Investor Update 2021
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BASF's new Verbund site in Zhanjiang - Transcript Q&A September 27, 2021
Chetan Udeshi (JP Morgan): It is interesting that BASF is expecting China's share of
global chemical production to rise to 68% in 2030.
Stefanie Wettberg: I think there might be a misunderstanding. This is the growth we
show in this slide.
Chetan Udeshi (JP Morgan): This at a time when there is a lot of talks and focus on
having a more spread-out supply chain. Does BASF not see this in discussions with
customers? Isn't there a risk that BASF's expectations of the long-term growth in
China, and hence the planned investments in China, are assuming a too optimistic
growth rate?
Martin Brudermüller: BASF for a long time has the strategy to invest where the
market is. We have not produced in one region to have big streams of products for
good going into another market. And so, the justification of the investment in Zhanjiang
is the Chinese market. As we said, as this couples back into domestic demand, a lot
of the supply chains, and where we are linked in with our materials, are local. They are
actually very local. We even talk about the province and not the whole of China. With
this, I think we can be even more sure that this will work well overall. I would be much
more concerned, if we had to export major shares into other countries and regions. We
have always had very good experience with this. In today's world where we have some
question marks about future globalization and trade frictions, I'm actually very happy
that this is following BASF's past experience. I think this is nothing to worry about going
forward.
Markus Kamieth: Allow me to add one additional thought: You also saw in the
presentation that already today, we have a share of the business in China based on
products that we actually produce in China, of almost three quarters, almost 75%. This
share will go up further. Adding to what Martin said, also making the comparison to our
Nanjing Verbund site: Nanjing is in the Jiangsu province and the majority of our
volumes that we actually make in Nanjing never leave Jiangsu province. All the
customers are there. So, it is a little bit oversimplifying to look at the overall situation in
China. You have to look specifically at where you are in China, with which products, in
which markets. I think Martin has laid out why we feel confident about our location also
in Guangdong and the economic development that will happen around us.
Georgina Iwamoto (Goldman Sachs): Perhaps a core rationale for the Verbund
concept is process efficiency. Do you believe it is possible for non-integrated
competitors to offer the same products as BASF at the same level of carbon emissions,
or does the Verbund offer potential to make carbon-based products with the lowest
impact on the environment?
Markus Kamieth: Of course, all the products that we make in Zhanjiang eventually
can be made via some chemical routes. But especially if you look at the carbon
efficiency, we clearly see today that throughout the Verbund planning, our setup will
have significant advantages.
A couple of examples were mentioned also in Martin's presentation. If you look, e.g.,
at the whole chain of C3 that will use also the large amounts of syngas, that will, of
course, significantly benefit from the strong integration that we have by reusing the
CO2 out of the ethylene oxide production. These are significant savings of carbon
dioxide emissions that you cannot realize outside of a Verbund setup where you do
not have the possibility to integrate raw material streams and also energy flows in a
production site like ours, at least with today's accessible technologies. Of course, you
can always speculate about technologies that are today not deployable yet, but within
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