Caojing Polycarbonate Production Facility, China

The new project is Bayer's biggest investment in China to date. It is a world-scale polycarbonate production facility located in Caojing, which is in north eastern China. The plant will be sited at the Shanghai Chemical Industry Park.

The new plant is to be owned by a joint venture between Bayer, which will provide 90% of the capital investment, and Shanghai Chloralkali Company (which provides the rest). The capital investment proportions also reflect the partners' equity. The Chinese partner will also provide the land for the production site.

MAKROLON THERMOPLASTIC PLANT

The project was initiated when the two partners signed a letter of intent at a ceremony in Beijing in November 1999. The cost of the plant is $450 million. The plant will eventually be able to make about 100,000t/yr of the thermoplastic, mainly for the local market. The brand name for the product is Makrolon. The facility will include a bisphenol A plant and basic infrastructure.

However, this goal will be reached in two phases of investment. In the first phase, the joint venture will build a 50,000t/yr polycarbonates facility. In the second phase, the 50,000t/yr facility will be expanded to the intended full capacity of 100,000t/yr. Bayer says that the first phase is likely to go into commercial operation in 2003. The second phase will begin construction immediately upon completion of the first. The full capacity of the plant is currently expected to be reached in 2005. In that year, the Chinese plant is expected to produce roughly 40% of the company's total Asian polycarbonate capacity. The rest of the potential plants that Bayer may put on the site could not be fully on-stream until 2008, although it is still too early to be able to suggest a schedule.

POLYMER TECHNICAL SERVICE PLANT

In 2000, Bayer announced another stage in Caojing's development. The German firm stated that it would be opening a technical service centre for polymers in Shanghai. This is intended to complement and support the company's other facilities in the region, especially at the Caojing site. In addition to its function as a technical centre, the development is expected to act as a customer interface. The cost of this new technical and customer centre (to Bayer) is about $9.5 million.

CAOJING: SEMINAL FOR FUTURE GROWTH

The new polycarbonates plant is the first step towards a fully integrated plastics and chemicals production centre in Caojing. According to the German partner in the project, Bayer is also pursuing plans to establish units for the production of isocyanate raw materials, chemicals, synthetic rubber and coating raw materials in Caojing. These are still, however, at an early stage not having gained Chinese government approval. A cluster of plants would enable improved efficiency as the complex exploited economies of scale. The Caojing site would then be Bayer's central hub for north eastern Asia. However, these future projects are dependent (as is the timing of their initiation) on a number of variables, including the consent of the Chinese government, and the future development of the Chinese markets for the respective products. Nevertheless, the German company has already begun negotiations for further land rights in Caojing. Another sign of the site's importance to Bayer is its relocation of its Chinese headquarters from Hong Kong to Caojing.

CHINESE MARKET

China is of enormous importance to the Bayer plastics group. The company 12 joint ventures in the country and has invested $4.5 billion in the region. Of this, $2.5 billion is earmarked to be spent on new plants. The programme is expected to increase Bayer Asian sales to about 25% of the total by 2010. The substances produced at Bayer's plants will have numerous applications in the domestic automotive, appliances, electronics, construction, shoe and furniture industries.