By Nathan Allen

BASF SE (BAS.XE) said Monday that it has signed a memorandum of understanding with SINOPEC Shanghai Petrochemical Co. (600688.SH) to build a second steam cracker in the Chinese city of Nanjing.

A joint pre-feasibility study for the cracker, which would have the capacity to produce 1 million tons of ethylene a year, will be concluded by the end of 2018, BASF said.

BASF and SINOPEC's existing joint venture, BASF-YPC, will cover 50% of the investment, while SINOPEC Yangtzi Petrochemical will contribute the remaining 50%.

The cracker will allow the companies to expand capacity of upstream and downstream chemicals at the Nanjing site, which currently produces around 3 million tons a year of chemicals and polymers for the Chinese market.

BASF has been taking advantage of China's policy to relax restrictions on foreign investment in the chemicals sector to expand its foothold in the country.

In July, it said it was considering a $10 billion investment in a chemical production site in Guangdong Province.

Write to Nathan Allen at nathan.allen@dowjones.com

(END) Dow Jones Newswires

October 29, 2018 03:39 ET (07:39 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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