July 8, 2026

PU Raw Material ADD Analysis

Anti-Dumping on Polyurethane: How Trade Defense Is Repricing China’s PU Export Model

July 1, 2026 19 min read

MARKET INTELLIGENCE

Three separate forces are pressing on the same point of the global polyurethane chain this year, and they are easy to read as unrelated headlines rather than one story. A wave of anti-dumping duties across the United States, Europe, India, and Brazil is raising the cost of Chinese PU-chain exports at destination. China’s own decision to cancel export VAT rebates on polyether polyols is raising the cost of leaving China in the first place. And a five-month war in the Persian Gulf pushed feedstock costs into a spike that is only now unwinding. None of the three is new information individually. Read together, they describe the end of a specific economic model, export-led Chinese PU oversupply sold at a persistent discount, rather than a cluster of coincidental trade disputes.

One Cause, Two Reactions

It is worth being precise about what is actually driving this, because the anti-dumping wave and Beijing’s own rebate cancellation are frequently discussed as opposing developments, foreign protectionism versus Chinese liberalization,  when they are better understood as two reactions to the same underlying condition: sustained Chinese overcapacity in polyether polyols, MDI, TDI, and their shared upstream inputs. Chinese polyether polyol exports grew from roughly 1.7 million tonnes in 2023 to 2.8 million tonnes in 2025, a pace of growth that outstripped demand growth in every importing market and kept margins compressed across the value chain, including inside China itself. Producers in the US, EU, India, and Brazil responded to that oversupply the way trade law allows them to: by petitioning their own governments for relief. Beijing is responding to the same oversupply the way domestic industrial policy allows it to: by removing a subsidy that no longer serves its own producers’ interests either. The VAT rebate cancellation is frequently framed as a response to foreign pressure, but the stated rationale, curbing what Chinese policymakers call ‘involution,’ the deflationary price competition eating into every producer’s margin, points to a domestic motive that happens to align with what foreign trade-defense authorities want. That alignment is precisely what makes 2026 different from previous rounds of anti-dumping activity: the exporting country and the importing countries are, for once, pulling in the same direction, even if for different reasons.

A Decade in Context: Is This Actually Unusual?

TRADE REMEDY ACTIVITY AGAINST CHINA, 2015–2026

It is worth testing the claim above against the historical record, because trade remedies against China are not new, they have been a persistent feature of the trading system since China’s 2001 WTO accession, and it would be a mistake to read every new filing as evidence of an unprecedented crackdown. Chinese government data compiled through the Ministry of Commerce’s own Trade Remedy Information Center shows the total number of new investigations opened against Chinese products by all countries fluctuating between roughly 46 and 131 a year over the past decade, with most years landing in a 70–105 range. Looked at that way, the current wave is a continuation of a long-running pattern, not a departure from it.

What has changed is the shape of the curve, not just its existence. 2023 was a relatively quiet year at 69 new cases; 2024 more than doubled that to a record 160, with the number of countries filing cases rising from 18 to 28 in a single year as smaller and developing economies: Thailand, Peru, Pakistan among them, joined the traditional heavy users (India, the US, the EU). Steel offers a sharper illustrative comparison at the sector level: China faced roughly 29 major steel trade cases in the thirteen months from January 2024 to February 2025, against 15 across the entire four-year span from 2020 to 2023. That is not incremental growth; it is a step change in pace, concentrated in exactly the overcapacity-heavy sectors, steel, batteries, solar, and increasingly chemicals, where China’s own domestic price data shows the deepest and most sustained margin compression.

Year	Cases	Context
2020	131	Prior high point, Covid-era disruption
2022	46	Cyclical low
2023	69	18 trading partners filed cases
2024	160	Record high — more than double 2023; 28 trading partners, incl. Thailand, Peru, Pakistan

Two further data points frame where polyurethane sits within this broader picture. Over the longer run, 1995 to 2023, a cumulative 1,614 anti-dumping cases have been brought against China worldwide, with India (298 cases), the United States (189), and the European Union (155) as the three heaviest historical users; the current polyol, MDI, TDI, PTMEG, and adipic acid cases sit inside exactly that same top-three roster rather than representing new entrants to the practice. And within China’s own chemical sector specifically, industry commentary describes three consecutive years of profit decline and a roughly 36% fall in the sector’s product price index through late 2025, with local analysts explicitly warning that 2026 would bring more trade friction rather than less — a warning that the polyether polyols, PTMEG, and adipic acid filings of the past six months have already borne out. The honest reading, then, is not that anti-dumping activity against China is a new phenomenon in 2026, but that the specific chemicals underpinning polyurethane have moved, within the space of about eighteen months, from being a secondary target to one of the more active fronts inside a genuinely record year for the practice overall.

North America: A Case Study in Speed

UNITED STATES

The US MDI case is a useful marker for how quickly these proceedings can now move once a government decides to prioritize them. Petitioned in February 2025 by BASF and Dow under an ad hoc fair-trade coalition, the case produced preliminary margins as high as 511.75% within seven months and a finalized, enforceable antidumping duty order by June 25, 2026, roughly sixteen months from filing to order, which is fast by the standards of the statutory process. The final rate settled closer to 161.6% for cooperating respondents after correction of a ministerial error, still high enough to functionally exclude Chinese MDI from meaningful price competition in the US market for the foreseeable future.

The PTMEG case opened in April 2026 is worth reading differently. By naming South Korea and Vietnam alongside China, among other Asian producers, the petitioners are implicitly arguing that the problem is regional oversupply in the isocyanate and glycol chain, not a China-specific pricing practice. That framing matters for how Chinese producers should think about strategy: shifting nominal production or blending to a third Asian country will not obviously solve the underlying exposure if the US treats the whole region as a single competitive threat. The case is still in its early stage: the ITC’s May 2026 injury vote came back affirmative, which keeps the investigation alive, but that only clears the lower bar of ‘reasonable indication of injury.’ The number that will actually set duty levels, Commerce’s preliminary dumping margin, isn’t due until September 16, 2026, so there’s no PTMEG duty rate to point to yet, only a case that has survived its first procedural checkpoint.

Europe: The Producer Coalition Strategy

EUROPEAN UNION

The European cases show a related pattern, fewer but larger producers acting collectively rather than a single national champion filing alone, as in the Brazilian and US cases. The polyether polyols investigation opened in late June 2026 was brought jointly by BASF, Covestro, PCC Rokita, Shell, and Chimcomplex, effectively the entire surviving EU polyol producer base filing as one bloc. The adipic acid case that concluded in May 2026 with duties of 29.1% to 42.3% followed the same collective logic, built around a Chinese sector that now controls close to 70% of global adipic acid capacity. Two further filings on PBAT and aliphatic-aromatic copolyesters, adjacent biodegradable-plastics chains rather than core PU inputs, were both triggered by BASF, which is emerging as the most consistently active single petitioner across the entire European chemicals trade-defense docket this year, not just in polyurethane.

The complication is capacity. Ineos has publicly warned that the European Commission’s trade-defense caseload has grown faster than its staff can process it, citing injury findings as high as 67% met with duties proposed as low as 3.7% in unrelated cases. If that capacity constraint holds for polyurethane cases as it apparently has elsewhere, the polyether polyols investigation opened in June could take considerably longer to reach a preliminary determination than the statutory timeline suggests, leaving Chinese exporters operating under investigation-related uncertainty for an extended period without yet facing an actual duty.

India: What Sunset Reviews Reveal

INDIA

India offers the longest running dataset on how these measures actually perform over time, and the pattern is instructive. TDI duties against China, Japan, and Korea have been in force in some form since 2016 and were reaffirmed through a sunset review in 2022, suggesting a durable, structural competitive disadvantage that Chinese TDI has not been able to close even after several years of trying. Spandex tells a different story. An earlier elastomeric filament yarn duty regime lapsed in 2022, and Chinese and Vietnamese pricing pressure returned quickly enough that Indorama filed a fresh petition, resulting in a March 2026 recommendation for duties of roughly US$2 per kilogram. The lesson for how to read any of the current cases: a five-year duty is not necessarily a permanent solution, and the underlying Chinese cost advantage tends to reassert itself the moment protection lapses, which is exactly the dynamic worth watching as the US, EU, and Brazilian measures approach their own review dates later this decade.

India has also been the most active jurisdiction anywhere in actually completing new PU-chain cases rather than leaving them in process. A polyether polyol case opened in March 2023 by Manali Petrochemicals, India’s sole domestic producer, concluded within a year with duties of $534 per tonne on Wanhua and $608 per tonne on other Chinese producers — finalized a full year before Brazil’s comparable polyol case and more than two years ahead of the EU’s, which only opened in June 2026. A separate case brought by Covestro’s Indian unit against thermoplastic polyurethane (TPU) followed the same fast timeline, running from initiation in September 2023 to a finalized duty of $0.93–$1.58 per kilogram by October 2024. Taken together with TDI and the spandex cases, India has now run five distinct PU-chain proceedings against China since 2016, more than any other jurisdiction in this survey, and its average time from initiation to final duty, roughly twelve to fourteen months, is also the fastest of the major users covered here.

Brazil: The Limits of Protection, Seen From Inside

BRAZIL

Brazil is the clearest illustration of the tension these measures create even where they succeed. GECEX Resolution No. 754, in force since July 2025, set Chinese polyether polyol duties at roughly double the rate applied to US exporters, US$1,409–1,469 per tonne against Chinese producers including Wanhua and Hebei Yadong, versus US$555–680 per tonne against BASF and Dow. Dow Brasil Sudeste, the sole domestic petitioner, got the protection it asked for, and the size of the gap between the China and US rates points to exactly the outcome the duty was designed to produce: Chinese-origin volume is understood to have been the more heavily displaced of the two since July 2025, with import volumes from China running below their pre-duty levels. Brazil’s customs data broken out by origin was not available for this report, so that direction is best read as the expected and, on the evidence assembled during the case, the intended result rather than a precisely quantified figure.

Brazil’s foam and mattress manufacturers, represented by ABICOL, pushed back hard enough that SECEX opened a formal public-interest review within two weeks of the duties taking effect, specifically to assess whether they should be suspended given supply-shortage risk. That review has since concluded: GECEX Resolution No. 858, published February 20, 2026, closed the assessment without suspending or modifying the duty, after Dow argued that supply from non-Chinese origins combined with domestic capacity was sufficient to cover Brazilian demand. The measure stands as originally set, in force to 2030. The episode is still a useful reminder that anti-dumping relief redistributes cost within the importing country as much as it restricts the exporting one;  the domestic producer won twice, first on the original case and again on the review; though this particular review resolved in the petitioner’s favor rather than staying open-ended.

Brazil’s parallel adipic acid sunset review, opened March 30, 2026, adds a second layer: Brazil is simultaneously defending one wall on polyols, now upheld in full, and deciding whether to extend a second one on an adjacent PU input.

Southeast Asia: Exposure Without a Mechanism

INDONESIA, VIETNAM, MALAYSIA, THAILAND

No Southeast Asian authority currently runs a direct anti-dumping case against Chinese MDI, TDI, or polyether polyols. Indonesia’s KADI has been active on adjacent petrochemicals — polypropylene homopolymer and block copolymer — but those cases target multiple Asian exporters collectively rather than China specifically, a materially different posture from the China-focused cases in the US, EU, and India. What Southeast Asia does have is exposure: Vietnam sourced roughly 70% of its polyether polyol imports from China in 2025, a concentration that makes it a natural landing zone for volume that Chinese producers can no longer place competitively in the US, EU, India, or Brazil. Indonesia’s move to draft anti-circumvention and transshipment rules for 2026 suggests regulators are alert to the risk of Chinese material being rerouted through the region to dodge duties elsewhere, which, if finalized, would close off the release valve that currently makes Southeast Asia the most open market left for Chinese PU exports.

China’s Own Lever

CHINA DOMESTIC POLICY

On January 8–9, 2026, China’s Ministry of Finance and State Taxation Administration cancelled the 13% VAT export rebate on 249 product categories effective April 1, 2026, with polyether polyols under HS code 39072990 explicitly included alongside PVC, agrochemicals, and photovoltaic and battery inputs. With export dependency near 33% of Chinese polyol production, the removal of the rebate strips out a cost advantage that has underpinned Chinese pricing dominance in Turkey, India, and Vietnam for years. Some larger, vertically integrated producers are exploring a bonded processing-trade workaround — importing propylene oxide under a duty-free handbook scheme, converting it domestically, and re-exporting the finished polyol without triggering VAT — but the model only pencils out while imported PO undercuts domestic PO, a narrowing window as global feedstock markets normalize.

A Price Reality Check: What the Hormuz Shock Actually Did

FEEDSTOCK VOLATILITY, MARCH–JULY 2026

Two of the developments above happened to land in the same six-week window as an unrelated geopolitical shock, and separating the two matters for reading current spot prices correctly. The 2026 Iran war began February 28, and Iran declared the Strait of Hormuz closed on March 4, disrupting roughly a fifth of global seaborne oil and LNG trade and pushing Brent crude above $120 per barrel by mid-March. Because propylene oxide, the direct feedstock for polyether polyols, is an oil derivative, the war shock landed on Chinese FOB polyol pricing at almost exactly the same moment Chinese exporters were also rushing shipments to beat the April 1 VAT rebate deadline, two separate cost-and-volume pressures compounding into a single, unusually sharp spike.

The scale of the move, and the shape of its unwind, is worth stating plainly rather than folding into the trade-policy narrative above. Chinese FOB polyol pricing rose from roughly $1,225 per tonne on March 1 to a peak of $2,265 on April 8, an 85% move in five weeks, before falling back to around $1,340 per tonne by July 1, a 41% retracement from the peak that leaves China only about 9% above its pre-crisis baseline. European and North American delivered prices moved on a longer lag and have not unwound nearly as far: West European polyol peaked in early May near €2,575 per tonne and North American polyol peaked in late May near $3,142 per tonne, and both remain roughly 13% below those peaks as of July 1,  still close to double their March 1 starting points. That divergence is itself informative: Chinese pricing, driven by FOB spot competition and no longer cushioned by an export subsidy, snapped back quickly once the war de-escalated and the pre-deadline rush ended, while Western delivered prices, which layer freight, war-risk insurance, and in several cases anti-dumping duties on top of the same feedstock cost, are proving considerably stickier on the way down.

Weekly average spot prices, China (FOB), West Europe and North America (DEL). Source: PUdaily market pricing data.

Market	Mar 1 baseline	2026 peak	Jul 1, 2026
China, FOB (USD/t)	$1,225	$2,265  (Apr 8)	$1,340  (–41%)
West Europe, DEL (EUR/t)	€1,122	€2,575  (May 8)	€2,250  (−13%)
North America, DEL (USD/t)	$1,582	$3,142  (May 27)	$2,745  (−13%)

The practical implication for anyone reading a Chinese FOB quote today: the current price reflects a market that has already round-tripped through both a war shock and a subsidy withdrawal and landed close to where it started. It is not yet clear whether $1,300–$1,400 per tonne represents a new, post-rebate equilibrium or a temporary trough before Chinese producers pass through the lost 13% rebate more fully once feedstock volatility settles further.

Global Snapshot

Region	Product	Status	Key figure
United States	MDI	AD order in force — Jun 2026	~161.6% final rate
United States	PTMEG	ITC injury vote affirmative — May 2026	China, Korea, Vietnam named; dumping margin due Sep 2026
European Union	Adipic acid	Definitive duties — May 2026	29.1% – 42.3%
European Union	Polyether polyols	Investigation opened — Jun 2026	BASF, Covestro, PCC Rokita, Shell, Chimcomplex
European Union	PBAT / copolyesters	Investigations opening	BASF-led complaints, adjacent chain
India	TDI	In force — renewed 2022	China, Japan, Korea
India	Polyether polyols	In force — Mar 2024	$534–$608/t
India	TPU	In force — Oct 2024	$0.93–$1.58/kg
India	Spandex / elastane	Recommended — Mar 2026	Up to ~$2/kg; China + Vietnam
Brazil	Polyether polyols	In force — Jul 2025	$1,409–$1,469/t (vs $555–$680/t US)
Brazil	Adipic acid	Sunset review — Mar 2026	Extension under review
Southeast Asia	PU raw materials	No direct AD action	Vietnam ~70% China-origin polyol
China (domestic)	Polyether polyols + 248 others	VAT rebate cut — Apr 2026	13% rebate removed, HS 39072990

What Comes Next for Chinese Product

None of this points toward a collapse in Chinese PU export volumes, and it is worth resisting the temptation to read the case log above as a story of China losing ground. China’s capacity base remains large and cost-competitive at the feedstock level, and the obvious response to a duty, redirecting volume toward markets that haven’t imposed one, is exactly what trade theory predicts and what Chinese exporters have done in every prior round of this cycle. The more interesting question is not whether that redirection happens, but what else is happening at the same time: Chinese polyol, MDI, and TDI quality has continued to improve over the past several years, with leading producers such as Wanhua and Covestro’s China operations investing in higher-specification grades and moving up the value chain rather than competing on price alone. That matters because it means the current wave of duties raises the cost of entry for Chinese material without necessarily closing the quality gap that used to be the main argument against it, a materially different situation from a decade ago, when Chinese product competed almost purely on price.

With that caveat in mind, a few specific developments look likely over the next twelve to twenty-four months:

• Continued trade-flow redirection toward markets without duties. Chinese volume that previously went to the US, EU core markets, India, and Brazil will keep concentrating in Southeast Asia, the Middle East, and Africa, reinforcing the import-dependence numbers already visible in Vietnam, Turkey, and India. This is the default response to any duty and shouldn’t be read as a special insight so much as the baseline case.
• Gradual uptake of bonded processing-trade structures. The import-PO, export-polyol workaround may spread beyond the largest integrated producers as the VAT rebate loss bites, though its economics remain fragile and sensitive to the domestic-versus-imported PO price spread, so this is likely to stay a partial, producer-specific response rather than a wholesale shift.
• More anti-circumvention scrutiny over time. Indonesia’s 2026 rulemaking may be followed by similar moves elsewhere as regulators in duty-free markets watch import volumes rise and ask whether material is genuinely originating where it claims to.
• Some consolidation pressure inside China, concentrated among smaller producers. Non-integrated Chinese polyol producers without secure feedstock access face the most margin pressure from the combined effect of the rebate loss and continued anti-involution policy; some capacity rationalization there is plausible, though the pace will depend on how much support local governments continue to extend to marginal producers.
• More overseas capacity investment by the largest Chinese producers, continuing an existing trend. Wanhua’s Hungary MDI capacity is the clearest precedent: producing inside a market that would otherwise impose a duty sidesteps the issue rather than contesting it, and further announcements of this kind would be consistent with treating the current measures as durable rather than temporary, though this is an extension of a strategy already underway, not a new one.
• A gradually widening product list, following an established pattern. TDI, PTMEG, and adipic acid cases are already open in multiple jurisdictions; adjacent chains such as PBAT are following the same petition pattern, and further filings covering additional PU-adjacent HS codes are a reasonable base-rate expectation rather than a dramatic escalation.

The honest summary: Chinese producers are not losing their structural cost advantage in feedstock and scale, and the quality gap that once made Western and Indian material an easy default choice has narrowed. What has changed is that the advantage now has to clear a materially higher bar,  duties in force or pending across four continents, a lost export subsidy at home — before it shows up as a landed price advantage for the buyer. That is a slower, costlier, and more contested version of the same trade, not the end of it, and not a story with an obvious winner.

Appendix: Full Case Log (2003–2026) — Anti-Dumping Actions Against Chinese PU-Chain Products

The list below covers documented anti-dumping investigations specifically targeting Chinese polyurethane-chain products — MDI, TDI, PTMEG, adipic acid, polyether polyols, TPU, spandex/elastane, and PU-coated leather — across the jurisdictions most active in this space. It reaches back to the earliest confirmed case, India’s original 2003 polyether polyol investigation, to show that PU-specific trade defense against China is not purely a product of the last decade, even though the current wave is far denser than anything in the prior twenty years. The log excludes adjacent chemicals (PBAT, copolyesters, general petrochemicals) and countries where no PU-specific case could be confirmed in available public sources, including Southeast Asia, where, as discussed above, no direct case against Chinese PU raw materials currently exists. Dates reflect investigation initiation, final determination, and duty notification where applicable; “Ongoing” indicates no final determination as of this writing.

Jurisdiction	Product	Started	Outcome
India	Polyether polyol (China, South Korea) — original case	2003	Final Nov 2004; sunset renewal 2009 (min. price $2,601/t); 2nd sunset review withdrew measure — lapsed 2015
India	TDI (China, Japan, Korea)	Oct 2016	Final Dec 2017; sunset renewed Jun 2022 — in force
India	Spandex (China, Vietnam, Korea) — original case	c. 2016	Duty imposed 2016 (~$3.34/kg); lapsed 2022, not renewed
India	PU leather (China)	Feb 2021	Final Feb 2022; duty $0–$0.46/m from May 2022 — in force to 2027
India	Polyether polyol (China, Thailand)	Mar 2023	Final Mar 2024; duty $534–$608/t — in force to 2029
India	TPU (China)	Sep 2023	Final Aug 2024; duty $0.93–$1.58/kg from Oct 2024 — in force to 2029
India	Spandex (China, Vietnam) — revived case	Mar 2025	Recommended Mar 2026, up to ~$2/kg — pending notification
United States	MDI (China)	Feb–Mar 2025	Final Apr 2026; AD order Jun 2026 — duty ~161.6%, in force
United States	PTMEG (China, Korea, Vietnam)	Apr 2026	ITC injury determination affirmative, May 2026, investigation continues; Commerce dumping-margin preliminary due Sep 16, 2026
European Union	Adipic acid (China)	Mar 2025	Provisional Nov 2025; definitive May 2026 — duty 29.1–42.3%, in force
European Union	Polyether polyol (China)	Jun 2026	Just opened — no determination yet
Brazil	Polyether polyol (China, US)	Jan 2024	Definitive Jul 2025 — duty $1,409–$1,469/t (China); public-interest review closed Feb 2026, duty upheld unchanged, in force to 2030
Brazil	Adipic acid (China) — sunset review	Mar 2026	Ongoing — review of existing duty

Read chronologically, the list itself makes the point of the section above concrete: a single early case in 2003 that ultimately lapsed in 2015 right as the current cycle was about to begin, then two more cases opened in the 2016–2021 window (India TDI, India PU leather), against nine opened from 2023 onward (India polyol, India TPU, India spandex revival, US MDI, US PTMEG, EU adipic acid, EU polyether polyols, Brazil polyol, Brazil adipic acid sunset review). The pace roughly quadrupled in the second half of the decade, and every case still open or still in force as of mid-2026 was filed in 2023 or later, with the sole exception of India’s TDI order, which has now survived one full sunset review and remains the longest-running currently active PU-specific measure against China in this list.

https://www.pudaily.com/news/65481/anti-dumping-on-polyurethane-how-trade-defense-is-repricing-chinas-pu-export-mod

June 25, 2026

China Bans HCFC-141b Use in Rigid Foams

HCFC-141b Ban Enters the Countdown: Is the PU Rigid Foam System About to Change?

June 15, 2026 6 min read

Viewing the Green Upgrade of Rigid Foam Through Blowing-Agent Substitution: Costs, Compliance and Order Thresholds

Core view: After July 1, the transition window for HCFC-141b in spray polyurethane foam products will close. The policy may not directly lift total demand for PU rigid foam, but it will reshape formulation systems, cost structures and order-entry thresholds for premixed polyols, spray rigid foam and downstream insulation projects.

As the July 1 deadline approaches, the PU rigid foam industry is reaching an important environmental-compliance watershed. According to Ministry of Ecology and Environment Announcement No. 28 of 2025, from January 1, 2026, the production of premixed polyols and polyurethane products using HCFC-141b as the blowing agent is prohibited, except for spray polyurethane foam products; from July 1, 2026, the production of spray polyurethane foam products using HCFC-141b as the blowing agent will also be prohibited.

This means premixed polyols and most polyurethane products have already entered the ban stage, while spray rigid foam is about to exit its final transition window. For the industry, this is not simply a matter of switching to another blowing agent; it is a system-wide adjustment affecting formulations, production, construction practices and customer compliance requirements.

1. Policy Deadline Nears: Spray Rigid Foam Enters Its Final Transition Window

In terms of policy timing, January 1, 2026 was the first threshold, mainly targeting premixed polyols and polyurethane products that use HCFC-141b as the blowing agent. In principle, premixed-polyol producers, rigid-foam product manufacturers and related polyurethane product companies other than spray foam can no longer continue using HCFC-141b as a blowing agent in production.

The July 1 deadline mainly targets spray polyurethane foam products. Unlike factory-made rigid-foam boards, pipe shells and other products, spray rigid foam is often formed on site. Its applications include building insulation, cold-storage insulation, fishing-vessel insulation, roof waterproofing and insulation, warehouse insulation and some pipeline insulation. Because construction participants are more dispersed, project scenarios are more complex and regulatory chains are longer, the policy previously granted a longer transition period.

Starting July 1, however, this transition window will also close. Spray polyurethane foam products using HCFC-141b as the blowing agent will then be banned from production. For spray-construction companies, premixed-polyol suppliers and downstream project customers, compliance requirements will shift from “gradual switching” to “mandatory switching.”

Figure 1: Key Timeline for the HCFC-141b Ban

2. The Impact Goes Beyond Blowing Agents: Rigid Foam Systems Will Re-segment

HCFC-141b has historically been widely used in PU rigid foam, mainly because of its foaming effect, thermal-insulation performance, process adaptability and cost advantages. However, a rigid-foam system usually consists of premixed polyols, isocyanates, blowing agents, catalysts, flame retardants and surfactants. Once the blowing agent changes, cell structure, thermal conductivity, dimensional stability, flame-retardant performance, construction window, spray adhesion and curing speed may all change accordingly.

Therefore, companies can hardly complete the upgrade by simply replacing HCFC-141b with another blowing agent. They need to readjust formulation systems and construction parameters. Current substitution routes available to the industry include water-blown systems, hydrocarbon blowing agents, HFCs and HFOs. These routes differ in environmental attributes, cost, equipment requirements, safety management and performance stability.

Water-blown systems and some hydrocarbon routes have relative cost advantages, but they place higher demands on formulations, equipment and on-site safety management. Low-GWP routes such as HFOs have stronger environmental attributes but higher costs, making them more suitable in the near term for customers with higher requirements for performance, certification and export compliance. Although HFCs are not ODS, they have already entered a longer-term greenhouse-gas control framework, so companies cannot evaluate substitution routes based only on immediate cost.

This also means the impact of the ban may not necessarily appear as a sudden increase in rigid-foam demand. It is more likely to show up as a re-segmentation of the market structure. Companies with formulation R&D capabilities, experience applying substitute blowing agents, testing capabilities and compliance-document management will be better positioned to take high-standard orders. Smaller companies that compete mainly on low prices and low compliance costs may face greater operating pressure.

Figure 2: Transmission Path of the HCFC-141b Ban Through the PU Rigid Foam Value Chain

From a cost perspective, substitute blowing agents, formulation validation, equipment adaptation, construction training and testing certification will all raise overall costs. However, this cost pressure may not be fully passed downstream. Demand for building insulation, cold-storage construction, insulated pipelines and some industrial insulation is still affected by real estate, infrastructure schedules, investment appetite and project-payment cycles, and end customers remain price-sensitive.

A more realistic judgment is therefore that the ban itself may not significantly expand total rigid-foam demand, but it will change order structure and profit distribution. Products that are highly compliant, high-performing and traceable may gain stronger bargaining power, while low-priced, opaque products that cannot prove the source of their blowing agents may gradually be excluded from key projects, branded customers and standardized construction scenarios. Environmental regulation will not create demand out of thin air, but it will raise the threshold for entering order systems.

3. Corporate Response Priorities: From Inventory Switching to a Closed Compliance Loop

Premixed-polyol companies are a critical link in this adjustment. Downstream foam companies and construction firms do not necessarily purchase single-component blowing agents directly; instead, they buy premixed-polyol systems that already contain the blowing agent. As a result, premixed-polyol companies are not only formulation providers but also key nodes in the chain of compliance responsibility.

After July 1, the room for HCFC-141b-containing systems to continue flowing into the spray-foam sector will basically close. Premixed-polyol companies need to focus on three issues: first, how to compliantly dispose of existing HCFC-141b-containing inventory; second, whether substitute blowing-agent systems can meet downstream construction and performance requirements; and third, whether contracts, labels, quality-inspection reports, blowing-agent declarations and customer filing materials can form a complete closed loop.

The spray-construction side also needs to upgrade in parallel. The special feature of spray PU rigid foam is on-site formation: construction environment, temperature and humidity, spray thickness, equipment pressure and operator practices all affect final quality. After blowing-agent substitution, construction companies need to become familiar with the operating window of the new system to avoid foam shrinkage, hollow spots, fluctuations in thermal performance, insufficient interlayer adhesion or higher on-site losses.

Figure 3: Response Checklist for Premixed-Polyol and Rigid-Foam Companies Before July 1

In the short term, companies should focus on three tasks: first, complete inventory checks as soon as possible, distinguishing standalone HCFC-141b, HCFC-141b-containing premixed polyols, orders in transit and project inventory; second, complete substitute-system validation and verify performance across scenarios such as cold storage, building insulation, fishing-vessel insulation and pipeline insulation; and third, improve compliance-document management by retaining procurement, sales, filing, test reports, blowing-agent declarations and contract clauses to reduce subsequent traceability risk.

Overall, the HCFC-141b ban entering the July 1 countdown marks a more thorough stage of blowing-agent substitution in the PU rigid foam industry. In the short term, it may bring higher costs, formulation adjustments and construction-adaptation pressure. In the long term, however, it will push the industry away from low-price competition and toward competition based on technology, compliance and service capabilities.

The PU rigid foam market may not expand rapidly because of one ban, but the rules of competition are changing. After July 1, rigid-foam companies will compete not only on price, but also on whether they can prove their products are more environmentally friendly, more stable and more compliant. This may be the deepest impact of the HCFC-141b ban on the polyurethane industry.

Sources: Ministry of Ecology and Environment Announcement No. 28 of 2025 and related policy Q&A; China Polyurethane Industry Association, Regulations on Ozone-Depleting Substances and Compliance Operations for Polyurethane Enterprises.

https://www.pudaily.com/news/65186/hcfc-141b-ban-enters-the-countdown-is-the-pu-rigid-foam-system-about-to-change

June 16, 2026

Chinese PO and Polyol Review

Explaining the Anomaly: Why Are Polyether Polyols Cheaper Than PO?

June 11, 2026 4 min read

Recently, the price inversion between propylene oxide (PO) and flexible slabstock polyols has drawn market attention.

Based on mainstream prices in Shandong, this round of inversion was not a one-day fluctuation. Since mid-May, the spread between flexible slabstock polyols and PO has gradually turned negative. On May 14, flexible slabstock polyols were CNY 250/tonne lower than PO. By May 29, the inversion widened to CNY 650/tonne, marking one of the deepest levels so far this year. Entering June, the inversion narrowed somewhat but had not fully repaired. On June 3, mainstream flexible slabstock polyols prices in Shandong stood at CNY 8,550/tonne, while PO was at CNY 8,900/tonne, leaving a negative spread of CNY 350/tonne.

Period	Flexible Slabstock Polyols	PO	Spread
Jan. avg.	8,296	8,108	188
Mar. avg.	11,311	10,510	801
Apr. avg.	12,443	11,841	601
May avg.	9,484	9,628	-143
Early Jun.	8,583	8,850	-267

Unit: CNY/tonne; spread = flexible slabstock polyols minus PO.

The charts show that flexible slabstock polyols maintained a positive spread over PO from January to April, with the spread once widening in March and April. However, after entering May, the spread quickly moved into negative territory. This suggests that the current inversion is not simply a pricing mismatch, but a reflection of diverging pricing power between upstream and downstream markets.

PO: More Concentrated Supply, Stronger Price Resilience

Compared with polyether polyols, the PO market has fewer producers and a higher degree of supply concentration. Producers also differ in process routes and cost structures. When margins are squeezed or losses deepen, some higher-cost producers tend to reduce operating rates, shut down units, or delay restarts to curb supply. Once supply tightens, PO prices can find support more easily.

Although PO prices fell sharply earlier, they later rebounded continuously. This indicates that PO pricing is not driven solely by weak demand, but is also affected by operating rates and producers’ willingness to defend prices.

Polyols: More Fragmented Capacity, Prices More Demand-Led

On the polyols side, new capacity has continued to come online in recent years, while market participants remain relatively fragmented. Different producers face different inventory, order, and sales pressures. When demand weakens, producers are more likely to offer concessions to move cargoes.

During June 1-5, domestic flexible slabstock polyols prices continued to bottom out. Bulk ex-works offers in North China were roughly CNY 8,300-8,700/tonne, down CNY 400-600/tonne from the previous week. Downstream sponge and home furnishing sectors were entering the off-season, purchases were mainly small-volume just-in-time orders, large orders were limited, and the sustainability of export demand still required attention. Against this backdrop, polyols prices lacked upward momentum.

Cost Structure: Pressure Is More Obvious for PO-Buying Producers

PO accounts for a high share of polyols production costs, usually around 80%. In theory, when PO prices remain high, polyols prices should move up accordingly; otherwise, margins will be compressed quickly.

However, polyols are not priced purely on a cost-plus basis. Final transaction prices are also determined by downstream acceptance, peer competition, and inventory pressure. Producers with integrated PO supply have a cost advantage and can tolerate lower polyols quotations, while non-integrated producers that buy PO externally face more rigid feedstock costs and greater pressure in a low-price competition environment.

Weaker Feedstocks Have Not Resolved the Inversion

It is worth noting that weaker propylene and liquid chlorine prices have not effectively repaired the inversion. In early June, Shandong propylene moved weakly, while liquid chlorine prices also softened. The cost side did not provide strong upward support for PO.

Even so, PO prices rebounded after earlier declines. This suggests that the current pricing driver is more about supply adjustment than pure cost movement. In other words, the inversion is not caused by PO costs being passively pushed higher; rather, PO is more sensitive to losses, while polyols simply lack the ability to rise.

Outlook: Repair Depends on Which Side Gives Way First

Looking ahead, there are three possible paths for the spread to repair. First, PO supply remains ample and prices continue to concede. Second, downstream replenishment supports a rebound in polyols prices. Third, polyols producers continue to absorb the inversion through margin compression.

In the short term, if demand does not show a clear improvement, the third scenario may remain the main path.

Therefore, this round of PO-polyols inversion is not merely a “cost inversion.” It is a redistribution of margins along the value chain during a weak demand cycle. The upstream side is defending prices through higher concentration and supply adjustment, while the downstream side is giving up margins amid loose capacity and insufficient orders. For polyols producers, the real pressure is not only that PO prices remain high, but that when PO still has support, polyols have already lost their ability to pass through costs.

https://www.pudaily.com/news/65127/explaining-the-anomaly-why-are-polyether-polyols-cheaper-than-po

June 9, 2026

Chinese Market Update

China PU Market Reset: War Premium Fades, Demand Pressure Builds

June 5, 2026 7 min read

The Middle East crisis reshaped global polyurethane feedstock trade flows in a short period of time. Low-cost Middle Eastern supply became less available, European producers faced higher cost pressure and reduced competitiveness in import markets, North American markets experienced feedstock tightness and price increases, while South Korea and Japan also faced upstream and logistics constraints before gradually moving back toward some stability. During this disruption, China’s PU feedstock supply became even more important for import-dependent markets globally.

By early June, however, the market has entered a new phase. The war premium that pushed TDI, PMDI and Polyether Polyols prices higher in March and April has largely faded. China domestic prices have corrected sharply, with TDI already back near February levels, PMDI moving quickly toward its pre-crisis range, and flexible slabstock polyol already at February levels. Some war-related factors have not fully disappeared, logistics costs remain elevated, recent 20ft container indications are still around USD 3,000–4,000, and shipment delays or uncertainty may persist in June as there has been no clear ceasefire or peace agreement signed. Even so, pricing is now being driven more by weak domestic demand in China, soft overseas downstream demand, healthy inventories in export markets, production costs, operating rates and margin discipline than by supply panic.

This makes China’s current price reset especially important. As the world’s largest and most influential PU feedstock supplier, China’s domestic price movement is now a key signal for regional and global import markets. The central question is no longer whether the crisis pushed prices higher, it already did. The more important question is whether demand recovery and inventory digestion can stabilize prices before producer margins come under deeper pressure.

Price Reset Toward Pre-Crisis Levels

The price correction in May and early June has been significant across all three major PU feedstocks. TDI has already returned to around February levels. PMDI remains slightly above its February average, but the pace of decline suggests that it may also approach the pre-crisis range soon. Flexible slabstock polyol has already reached February levels, with margins becoming extremely tight for some suppliers.

China PU Feedstock Price Trend and Reset | 5 Feb – 5 June (CNY/Tonne)

Note: Prices mentioned are East China DEL domestic prices, including 13% VAT; TDI/PMDI on drum basis, flexible slabstock polyol on bulk basis. USD equivalents use the June 5 exchange rate: 1 USD = 6.77 CNY.

TDI: Back to February, Still Under Pressure

TDI has already returned to around February price levels. Current China domestic TDI prices are around CNY 14,300–14,900/MT (USD 2,110–2,200/MT). Production cost is estimated at CNY 12,000–12,200/MT (USD 1,770–1,800/MT), leaving current margins around CNY 2,500–2,700/MT (USD 370–400/MT).

Normally, a return to February levels would suggest that the crisis impact has largely disappeared from pricing. However, TDI prices are still under pressure because demand has not recovered strongly. China exported large TDI volumes during the crisis period, especially when overseas buyers were trying to secure supply amid uncertainty. Those shipments helped import markets, but they also created healthier inventory positions downstream. As a result, many buyers are now less aggressive in May and early June.

The key issue is that prices are no longer falling because of the crisis; they are falling because demand remains weak. If downstream consumption does not improve, TDI margins may continue to compress in the near term. Stabilization may only become more likely in the second half of June, when inventory levels begin to decline and July shipment demand becomes clearer.

PMDI: Fast Correction, Higher Cost Base

PMDI is also correcting sharply, although it has not fully returned to February levels yet. The current average price is around CNY 15,650/MT (USD 2,310/MT), compared with a February average of about CNY 14,200/MT (USD 2,095/MT). Based on the recent decline of around CNY 1,000/MT per week, PMDI could move closer to the pre-crisis range if the current trend continues.

The important difference is cost. Current PMDI production cost is around CNY 12,150/MT (USD 1,795/MT), compared with about CNY 10,430/MT (USD 1,540/MT) in February. This means the market price is moving back toward pre-crisis levels, but the cost base remains higher than before. Current margins are still around CNY 3,500–4,000/MT (USD 520–590/MT), but continued price correction could reduce this buffer quickly.

This makes PMDI a transition market. The war-driven price premium is fading, but production economics are not fully back to February conditions. If demand remains weak and buyers continue to delay procurement, prices may keep moving lower. However, the higher cost base may eventually slow the decline, especially if producers become more disciplined on offers and operating rates.

Polyether Polyols: Tight Margins Limit Further Downside

Flexible slabstock polyol in domestic market has already returned to around February levels, with the current bulk price averaging about CNY 8,350/MT (USD 1,235/MT). Unlike TDI and PMDI, the polyol market has very limited room for further downside because margins are already extremely tight. Some suppliers are close to breakeven, while others may already be facing losses depending on feedstock costs and plant efficiency.

The weakness is mainly demand-driven, but export economics are also adding pressure. The cancellation of Polyether Polyols export tax rebate has tightened export profit margins, keeping export offers relatively firmer than February levels even as domestic offers have already returned to pre-war levels. This gap is making overseas buyers more cautious, especially when many downstream users are still digesting March–April cargoes.

Large export volumes in March and April helped overseas markets build inventory, especially when buyers were reacting to the risk of prolonged supply disruption and policy-related cost changes. Demand is unlikely to recover strongly before late June unless inventories fall faster than expected. Suppliers are already operating at reduced rates, with current operating rates around 50% in some cases. If demand remains weak, further production cuts may become more important than additional price reductions. For Polyether Polyols, the market adjustment is likely to shift from price competition to supply discipline.

Export Inventory and Weak Demand Pressure

The March–April export wave is now one of the main reasons why the market remains weak even after prices have returned close to pre-crisis levels. China exported large volumes of PU feedstocks during the two-month crisis period, including 132,770 MT of TDI, 170,964 MT of PMDI and 611,818 MT of Polyether Polyols. These volumes mainly flowed into major consuming regions such as Southeast Asia, South Asia, South America, Turkey, Europe and Africa, where buyers had moved earlier to secure supply amid uncertainty over Middle East availability, logistics delays and rising prices.

This export data only reflects China’s shipments. In reality, many of these same consuming markets also imported from other available regions, including South Korea, Thailand, Singapore, Europe and other suppliers where material was available. Taken together, China’s strong export flow and additional regional sourcing helped downstream buyers build healthier inventories during March and April. That inventory position is now one of the key reasons why May–June demand has weakened: buyers are not absent, but many are covered, cautious and waiting for clearer price signals before restocking.

Freight remains higher than normal and shipment uncertainty still matters for importers, but these factors are no longer strong enough to offset weak demand pressure. Domestic demand in China is also not strong enough to absorb supply quickly, while overseas downstream buyers are still digesting inventory. As a result, both domestic and export offers remain under pressure, and the market is increasingly being driven by inventory digestion rather than supply panic.

China PU Feedstock Exports | March–April (Unit: Tonnes)

Product	Total Exports (March–April)	Top destination markets
TDI	132,770	Southeast Asia, Europe, South America, South Asia, Africa
PMDI	170,964	Europe, Southeast Asia, South Asia, South America, Africa
Polyols	611,818	Europe, Southeast Asia, South Asia, South America, Africa

Source: China Customs

What Comes Next: Demand Recovery or Further Market Pressure?

The near-term direction depends on whether demand recovery can catch up with the pace of price correction. For TDI, prices are already back near February levels, but weak demand could still squeeze margins further in early to mid-June. For PMDI, prices may continue moving toward the pre-war range, but higher production costs could eventually limit the depth of the correction. For Polyether Polyols, further price downside appears limited because margins are already very tight.

The second half of June will be an important turning point. If downstream inventories decline and July shipment demand improves, prices may begin to stabilize. If demand remains weak, producers may need to manage the market through lower operating rates rather than deeper price cuts, especially in Polyether Polyols and eventually in Isocyanates if margins continue to compress.

Overall, China’s PU feedstock market has moved from crisis-driven price inflation to demand-driven price correction. The war premium has largely faded, although elevated freight, shipment delays and geopolitical uncertainty still remain secondary risk factors. The next stage will be defined mainly by domestic demand weakness, export-market inventory digestion, downstream restocking, production cost pressure and producer discipline. China remains the key supply signal, and its price reset will continue to shape regional PU feedstock pricing in near to medium term.

https://www.pudaily.com/news/65022/china-pu-market-reset-war-premium-fades-demand-pressure-builds

June 8, 2026

BASF Discusses the Zhanjiang Verbund Site Launch

Zhanjiang Verbund Site Launch and Strategic Investment in China Transcript

Jun 08, 2026, 1:28 PM ETBASF SE (BASFY) Stock, BFFAF Stock

BASF SE (BASFY) Discusses Zhanjiang Verbund Site Launch and Strategic Investment in China June 8, 2026 6:00 AM EDT

Company Participants

Stefanie Wettberg – Senior Vice President of Investor Relations
Markus Kamieth – CEO & Chairman of the Board of Executive Directors
Haryono Lim
Stephan Kothrade – CTO & Member of the Board of Executive Directors

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

Yes. Thank you very much, Stefie, and welcome, everybody, to our deep dive on Zhanjiang, a topic that we all have talked about a lot over the last year. So I’m really happy to have a bit of time with you to answer your questions and also introduce the site to you.

We have recently opened Zhanjiang as our seventh Verbund site in BASF globally. And this is the first Verbund site opening since 2005, where we opened the last one in Nanjing, and we’ll talk about this in a second. It is — the Zhanjiang investment marks BASF’s largest single investment globally in our history and the largest investment by a German company in China. At the peak of construction, more than 35,000 people from over 150 companies worked at the site. And as Stefie said, we completed the project on schedule below the original budget and started up the project in line with our expectations.

Now let me take you back a little bit to the history of BASF in China. And BASF has a long history of over 140 years of doing business in China. And we started actually our production in China in 1969 with our first manufacturing site, and that was roughly the time when we started up our — when we opened our Antwerp site in Europe. So we are certainly one of the longest invested chemical companies in China.

Since then, we have consistently increased our presence in Greater China, in line with our local-for-local approach, which we follow already for quite some decades. In 2025, the proportion of sales from local production in Greater China accounted to almost — to around 80%. And we sourced around 90% of the required input factors locally. Today, BASF operates 29 production sites and has 28 major wholly owned companies, and we are partnering in 12 major joint ventures in the country.

Overall, 12,500 employees helped to generate sales of EUR 8.2 billion with customers in Greater China. And please keep in mind that this number EUR 8.2 billion does not include the roughly EUR 2 billion of sales generated by our main joint venture in China, BASF-YPC Company, which is a 50-50 joint venture with Sinopec operating our Nanjing Verbund site, and we consolidate or we account for this participation at equity. So the EUR 8.2 billion sales number does not account for this.

On the slide, you can also see that we have consistently delivered volume and earnings growth in Greater China between 2015 and 2025, so roughly over the last 10 years, sales volumes in Greater China have grown at 6% on a compounded average annual basis and profitability as measured by EBITDA before special items has grown on average 11% per year, and the performance has been stronger than in any other region for BASF.

Now let me turn for a moment to the macroeconomic environment in China’s role in the chemical industry. We overall assume that the chemical production globally will grow at a rate of around 2.8% on per year in the time frame of 2025 to 2030. This growth will be predominantly driven by Greater China, which is expected to grow by 3.7% per year. And if you look at the middle of this chart, I think these are some remarkable numbers. If you look at the share of Greater China’s — of Greater China in the GDP, industrial and chemicals growth. You can see that 1/3 of the global GDP growth, roughly half of global industrial growth and 3/4 of global chemicals demand growth will come from Greater China in this time period.

This growth will be supported by robust domestic demand based on an expanding middle class with rising income and through export-oriented industries. Greater China will — is and will remain the largest chemical market in the world. And already today, accounts for 55% of global chemical production. So I think it’s important for the chemical industry cannot be over exaggerated.

On the next slide, you can see that the absolute growth, if you take this from a relative to an absolute growth perspective, the absolute growth in the chemical market in Greater China is expected to be nearly 3x higher than the rest of the world combined. All other regions will grow as well, at least to our estimates in the time frame, 2025 to 2030. And I think it’s fair to say when you look at these numbers that the growth in China, certainly, will be unmatched by anything else that we see in the rest of the world. And this is why we have decided to invest into a second Verbund site in China.

Now the overall environment also politically is certainly providing us with some confidence that also the next years will be quite successful years for BASF. If you look at the political environment that comes through China’s 15th 5-year plan, you can see that this creates a very favorable framework for companies like BASF. Our local scale, cost competitiveness and especially our innovation strength, foster long-term value creation. In addition, our broad portfolio means that we can grow by creating tailored solutions for our customers.

And we today talk about the big manufacturing site, but let me also remind you that in Shanghai, with our innovation campus, we have over the last 10 years, established a significant. And our second largest innovation center globally for our chemicals activities in China and this in line with our — or in combination with our strong EHS reputation certainly gives us a strong credibility to develop future solutions for our customers in China.

Our strong commitment to sustainability supports the targeted transition of the Chinese economy to a low-carbon and circular economy. And in this regard, the Zhanjiang Verbund site shows what the future of chemistry will look like is a smart integrated Verbund structure on an industrial scale, efficient digital and sustainable by design, and you will see this in more details going forward.

Lastly, let me focus on the location and why we chose to invest this Verbund site in the south of China, namely in the province of Guangdong. Historically, BASF has grown significantly in the east of China. So we had more than 90% of our assets in the area around Shanghai and Jiangsu province. More and more China’s economic growth has moved south and Guangdong is actually as a province today, the powerhouse of the Chinese economy. With nearly 128 million residents, Guangdong is the most populous province in China. And although in terms of GDP, it is the country’s largest province with Jiangsu province, which is home to our Nanjing operations ranking second.

And to put things into perspective, the GDP of Guangdong is roughly equivalent to that of South Korea or Spain. The projected GDP growth of around 4% per year in Guangdong will be driven by industrial investments of important BASF customer industries, such as transportation, consumer goods, home and personal care as well as electronics. And it includes, of course, the strongly growing, let’s say, area or economic zone around the Pearl River Delta, including Macao and Hong Kong.

In a nutshell, Guangdong Province is one of the most — is one of the economic growth engines of China and detects as a powerhouse for BASF’s key customer industries and provides fast-growing demand innovative chemical products and solutions. And until today, Guangdong as a province is a significant net importer of chemical products, and we assume that the strong economic growth in the Guangxi, Guangdong, Fujian and Hainan provinces will at the end of the day, stipulate a strong and successful future of our Verbund site in Zhanjiang.

And with this, I hand over to Hary, and please take us into the journey of the Zhanjiang site.

Haryono Lim

Yes. Thank you very much, Markus. Let me virtually bring you to Zhanjiang and explain to you a little bit about what is so special about the location, Zhanjiang. So the location is exactly on this Donghai Island. This is over excellent geographical advantages. I think thanks to proximity fast-growing industrial centers in Guangdong and the surrounding provinces in South China.

For those of you who have never been to Zhanjiang, so we are located on the western part of Province Guangdong. And today, you can reach us via high-speed rail train from Guangzhou just in 1.5 hours. So our site has direct access to the deep-water seaport. I think this is very important to us to run the Verbund because with the access to the deep seaport and operate our own JP, we are able to bring in large-scale raw material and as well as using the waterway to ship our finished goods to our customers. And the location itself also offers the shortest sea routes between Mainland China and the Southeast Asia market. And in addition, Zhanjiang has a rapidly evolving industrial ecosystem, enabling future synergies with co-location partners and core producers.

Next, I would like to give you some statistic about our site in Zhanjiang. So impressive statistic here. We have a size of full square kilometers, so 400 hectares since we are approaching the World Cup. So it is roughly 550 soccer fields just for you to compare to the soccer field. And as Stefie mentioned at the beginning, in early 2026, we have successfully started up our entire Verbund, including the worldscale flex-feed steam cracker. And as of May, we have started producing and also run successfully 19 of our plants and 33 production lines. And one more plant is coming, and this will be commissioned in 2028. This is the 3-decanol plant. So this is also on schedule. The total investment, as you know, it is an amount of EUR 8.7 million. This is the CapEx that we spend on the period of 2019 to 2028.

And as for the value chain. So we have this Verbund location with the upstream and downstream. So that gives us an advantage to also to manufacture a broad product portfolio. It is not just the cracker or cracker plus 1. We call it, The Cracker Downstream, but we have more products to offer through the integrated approach. We create a value chain for ethylene, propylene, C4.

And after Ludwigshafen and Antwerp Zhanjiang is the third largest Verbund for BASF. And today, we are employing around 2,000 people working at a site as a key platform for the long-term profitable and sustainable growth of BASF in China and Asia, the majority of the products that we produce in Zhanjiang will directly serve customers in China, particularly. And this is fully aligned with BASF local-for-local production approach.

And allow me also to share some key success factors for our Zhanjiang Verbund site. So running such a mega project require high commitment to safety, quality and also compliance. At the peak of our construction site, we have more than 35,000 people working for BASF and more than 150 companies working at our site. So it is UTmost important that we are committed to the safety and the quality of our site, making sure that not only the BASF employees, but also all our partners, they are giving us the same commitment as well.

And also, this is important to make sure that we have a very, very strict discipline in our executions, making sure that the timeline and as well as the CapEx are well under control. And what is also important for us for being a greenfield in China that we are also managing the interfaces with authority [indiscernible] partners extremely well, making sure that any issues that we have identified are also being addressed speedily. And of course, at the end, it is also about the people. So we are very proud that our team has executed this complex tasks with outstanding dedications and speed and exceptional level of commitment.

So this is just a couple of points that I want to highlight to you that summarize what we see as a key pillar for success. And also important is that we have started the recruitment processes very early at the beginning of our project, knowing that to get the right people and to train them and to qualify them to run such an important Verbund for BASF that requires time and also sufficient training for our stuff. But we are fortunate enough that in China, we are operating many sites, especially with our experience in Nanjing, our Verbund site in Nanjing, we are able also to train our colleagues in various production sites in China as well.

So — and I think also what is impressive for us to make a comment here is also about the commissioning and start-up as well. I think running a Verbund is always a complex part. It has a chance if it works. But at the same time, we know that if anything doesn’t fall into phases, may also create a lot of complexity and stress. So I think we are very happy to see that with our comprehensive commissioning plan, so we are able to start up our plants in sequences and achieve steady state operation already today.

So the next slide that I want to introduce to you is also about our Smart Verbund. So this is also a very unique opportunity for BASF for being a greenfield that we are able to bring our vision to life that with the digitalization and innovations, we are able to even get additional synergies, what already the Verbund could deliver. So we apply state-of-the-art digital solutions that are seamlessly integrated and enhanced with big data and artificial intelligence.

To achieve this, we implemented a best-in-class digital infrastructure and are leveraging 5G and cloud services, for example. And also to make this more tangible also, let me have some showcase for some features. So we are trying for our Verbund site to be paperless. We have implemented fully automated real-time integrations, and we have more than 8,000 utility measurements. We have AI-driven automations. If you see today in our site logistics, AI agents already automate 95% of our outbound delivery processes across multiple systems. And also with the help of digitalization. So we are moving from reactive to proactive, digital assistant leverages DSF data, analytics and AI to spot supply disruptions at early stage.

With all that, our Smart Verbund vision has become reality, something that is fascinating for me also as a chemical engineers. But based on this excellent foundation, we will continue to innovate. We are at the right place in China where today, AI, automation, robotics are very much on the front page of our activities. And here, we hope that we will continue making use of this opportunity to drive our Verbund even to more sustainable operation.

The next slide is about our unique cracker setup. Here, I would like to highlight that with the access of the deep seaport that we have, we are able also to bring the key cracker feedstock to our site. But also what is important to highlight here is that in Zhanjiang with our 1 million metric ton of ethylene flex-feed cracker we are able to process quite broad varieties of feedstock like naphtha and butane. And this will allow us to produce key raw material for our value chain, ethylene, propylene, Crude C4 reliably and efficiently.

Furthermore, this setup also allow us to optimize feedstock and to strive to achieve low cost. It is remarkable also that we are driving or utilizing 100% renewable energy today for our entire site. And one big contributor to this success is also the innovation that we apply here for our cracker that we drive the main compressor of our cracker also known as a e-drive, using 100% renewable energy. In conventional cracker, typically, those big compressor turbines are driven by steam generated and using the natural gas and cracker fuel gas.

And also, we make use of the surplus cracker fuel gas and CO2 off-gas produced by downstream plant like ethylene oxide. We are using those fuel gas and CO2 off-gas to produce our syngas, which is again important raw material for our downstream like for the Oxo alcohol. And not only just the — utilizing the e-drives, but we also make sure that the so-called heat integration of our entire site is really at the top notch because with the heat integration, we are able to optimize further our site and reduce the CO2 and therefore, less fossil feedstock to be used compared to other sites.

The next one, I want to give you a little bit of our sustainability journey here in Zhanjiang, especially also to explain to you how we’re able to bring our carbon footprint or reduce our carbon footprint more than half than conventional petrochemical side. So with the Verbund concept, obviously, we have already efficiencies. And what I mentioned before about the heat integrations. So that obviously also contributed to the lower use of the fossil fuel.

And with the e-drive using the 100% of renewable energy for the entire site, obviously, this is all contribute to bring down the CO2 emissions for our site. And how are we able to do that? I think to secure the renewable energies today, we have 3 main sources. One is we have a joint venture with Mingyang for offshore wind farm located 80 kilometers south of Zhanjiang. This is currently under construction and has a planned capacity of 500-megawatt.

And then we have also — the second source is from the Power Purchase Agreement that we have signed with partners like State Power Investment Corporation, SPIC, and GEDI. This is a long-term supply contract for 25 years. And the third one is we also install wherever we can on our site, the solar panels that contribute also to the green energy source for our site.

With this, I would like to hand it over to Stephan.

Stephan Kothrade
CTO & Member of the Board of Executive Directors

Yes. Thank you very much, Hary. I would like to continue with an overview of the value chains and products of the Zhanjiang Verbund site to illustrate a little bit what the differences are between our site and the typical big sites you see in China from our competitors.

First of all, you know we have this Verbund setup, our Verbund production system that makes us more resilient because it’s also less dependent on externally sourced precursors as we produce the vast majority ourselves. It provides us with cost advantages. But it’s also important to highlight here that whilst most of our competitors focus just on 2, 3, 4 major commodity type products such as polyolefins, ethylene glycol or PTA, we have a very diversified product slate here.

Of course, we also produce polyethylene and ethylene glycol. We need these products as scale enablers to achieve economies of scale and cost benefits and also to have more flexibility. But let’s say, the strategically relevant products are more diverse. And let me go through the 3 main value chains, starting with C2, ethylene. So ethylene oxide is a very important raw material for us because we produce surfactants and even precursors for brake fluids on our site.

Last year, during the investor update in Antwerp, we showcased the BASF EO Value Chain just to repeat a little bit. So we are a technology leader and also offer the lowest CO2 footprint with our downstream products because of lower energy consumption and high raw material yield. We also have the best safety technology in the industry. So this is a very strong foundation of this value chain.

When we come to the propylene C3 value chain, this is the basis for our acrylics business, acrylic acid and Oxo alcohols. And these are used to make further products, mainly for the adhesives and coatings industry. And Oxo products are also the feedstock for Specialty Intermediates. One byproduct is isobutyraldehyde that is a basis for neopentyl glycol, an intermediate that I will talk about in a couple of minutes.

And when it comes to the Crude C4 that we get out of our cracker, here, we extract isobutene, which is the starting point of the citral value chain to produce aroma ingredients and vitamins. Now in addition, we also have at the site engineering plastics compounding facilities and plant for thermoplastic polyurethanes, which both serve the automotive and electrical industries in South China, but are also used for sports shoes and sports equipment.

Now building on this product slate, I would like to show you on the next few slides some examples of customer success stories that show how our local-for-local production approach and the breadth of our customer industries works and plays into our hands. And here, it’s also very important to notice what Markus has highlighted that we have a strong R&D footprint in China at our Shanghai campus that allows us to co-create with customers.

And let me start with one example, the partnership with Youyi. You are all familiar, of course, with adhesive tapes from your daily life, but I would bet it most of you haven’t heard a name Youyi. It’s definitely not a household name, but Youyi is a globally leading adhesive tape manufacturer that operates around 20 production sites in China and has a very strong market presence. It’s a vertically integrated player from polypropylene film to the finished tape products. And they are a — have been a partner for us for many, many years. Actually, we started our business with them from our Nanjing Verbund site and now with the Zhanjiang Verbund site in Guangdong. We also follow the production footprint of Youyi because they also build a new large-scale production plant in South China, not far from our Zhanjiang Verbund site.

So from a customer perspective, we offer here a long-term reliable acrylates supply. We talk about butyl acrylate and 2-ethylhexyl acrylate and we reduced the import dependency in South China for these products. And with our leading cost position in acrylics, thanks to our proprietary BASF technology and the favorable cost position offered by the site set up, we are here the partner of choice. So this customer alone purchases the production volumes equivalent to one world-scale butyl acrylate plant every year. And our Zhanjiang Verbund supplies more than 50% of its BA and 2-EHA production to China’s fast-growing adhesives and the tape market, which has a compounded annual growth rate of around 11%. So this was an example from our Petrochemicals division.

Let’s move on to the Intermediates division. And here, we have a success story around neopentyl gycol or NPG that I mentioned already. It’s a key ingredient for powder coatings that are low VOC, low volatile organic compound coatings for a wide variety of applications. ranging from garden furniture to infrastructure elements, for instance, all the big construction parts you see at airports are typically coated with powder coatings.

To capture profitable growth, we have also built a world-scale NPG plant at the Zhanjiang Verbund site. NPG is expected to grow at around 5% per year on a global scale and Asia Pacific is by far the largest market, and it’s also the fastest-growing region with an annual growth rate of around 6%. And now we are again close to our customer. Here, the company KHUA, it’s one of the top ranking producers of the saturated polyester resins that are made with NPG and then used for powder coatings. And we signed an agreement with them to supply them from our new plant.

And again, here, we have the same pattern. We have been, for many years, a strong partner based on our production in Zhanjiang, at the Zhanjiang Verbund site, and now we replicate the success and tap into the market potential in South China. To give you just a number, KHUA recently expanded its production capacity by 150,000 tonnes to almost 400,000 tonnes. So quite a relevant customer for us.

Now we talk about Ultramid and Ultradur, our engineering plastics based on polyamide and PBT. And here, It’s, again, relevant to emphasize the co-creation aspect, co-creation in innovation with customers from our Innovation Campus in Shanghai. We are the — we hold the #1 position in engineering plastics globally, Asia Pacific continues to be our largest and fastest-growing market. And for us, it’s important to penetrate new application segments through innovation. And here, the company Orient Motion, a very dynamic, fast-growing mobility tech start-up from Suzhou in China is a nice example because they are specializing in the next generation by wire systems that replace traditional mechanical components in the automotive industry with electronic control. And we have co-developed here a break by wire pedal system.

You see the pedal on the upper left corner on the slide, on the right side, you see the control units where the mechanical signal is translated, transmitted into an electric signal. So our materials are nonconductive, lightweight, antistatic. It’s about stiffness, mechanical properties, and you have to meet all the sophisticated GB codes. And we developed this system now together with Orient Motion within less than 2 years and brought it now as the first mass-produced electromechanical braking system to the market, benefiting from the innovation appetite of Chinese OEMs that are fast moving here into the electrification of all these systems.

Now let’s talk a little bit also about the expected financial outcome of our investment. We have built a fantastic growth platform that benefits from the Verbund advantages. We have leading cost positions. And we also, as I hope I could show you, we enjoy customer proximity. We benefit from our local R&D capabilities. And as Hary has explained, we are also leading when it comes to sustainability and are well prepared for the green transformation in China.

So what we expect is that by 2030, we will achieve sales of between EUR 4 million and EUR 5 billion from the Zhanjiang Verbund site, this is roughly equivalent to around 10% of the current sales in our core businesses. The EBITDA is expected to reach between EUR 1 billion and EUR 1.2 billion by 2030. For ’26, however, we have said this before, we anticipate still a slightly negative EBITDA. This has to do with the start-up cost with the fact that we are still further optimizing the infrastructure utilities to the sweet spot. So all this will come during the course of the year. And then the key inflection point is expected in 2027 when the site reaches full capacity utilization, the start-up costs phase out and the optimization measures begin to take effect. So against this backdrop, we clearly expect the site to contribute positively to EBITDA from 2027 onwards.

Christian Faitz
Kepler Cheuvreux, Research Division

Two questions, please. First of all, how certain can you be of the expected still overproportionate growth of the Chinese market into 2030 as you elucidated on Slide 5 of your presentation. I mean for one, China is already more than 40% of global chemical markets. And according to our data, you just cited apparently even more than 50%. And some geopolitical factors have necessarily changed over the past 18 months or so, Liberation Day, Iran conflict, et cetera, just to name the most important ones. So would this mean a shift away from China, at least in terms of growth? Or what is your perspective there?

My second question, as we have the opportunity to talk to you, Markus, as CEO in the last month of Q2, would you mind providing us with the trading update of the key trends you have observed so far in Q2. Are chemical customers, for example, still panic buying as they are afraid that logistics globally might be more challenging going forward? And how do you assess underlying demand in your key customer industries?

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

Yes. Thanks, Christian. Markus here. I will try to take both questions, starting with the first one. Of course, these are projections, but please also look at the time frame that we have also taken here, we are not speculating now for the next 15 or 20 years. This is really an outlook for 2025 until 2030. So it’s fairly certain. And I would say, also is very much in line with what we are observing already in 2026.

As you know, chemical market growth has in China been significantly above 5% last year in 2025 and also continues this year with a very strong demand. Now short term, this is certainly overproportionately driven by export growth of customer industries, but we still believe that there is a robust domestic demand developing also in China. And this is also, I think, from our perspective, at least underlined by a solid fundamental, let’s say, policy directions in China. So short term, until 2030, I think we’re fairly certain that this picture is valid. And it, of course, is also particularly impressive in comparison to the rest of the world where we do not see any chemical demand growth, and this is particularly due to the weakness that we are seeing in customer industries in Europe and in North America.

So yes, China looks a little bit better relative to other regions. But in general, the short-term outlook from our perspective is at least fairly robust, plus/minus the usual ups and downs, but China has, again, in the Iran conflict from my perspective, at least proven its resiliency when it comes to industrial value chains. China has, let’s say, reacted or has been affected much less than people have predicted in early March.

Second question on Q2, let’s say, current trading, I have not seen the May results, I have to say. But based on what I’ve seen in terms of volume development, I can say that the short term spike that we have seen when it comes to volume, especially in March, slightly lower than in April is somewhat normalizing. So May looks more like April than it looks like March. So this is what you call panic buying, I would say, this was certainly a certain insecurity in value chains in particular, in Europe, that is somewhat tailing off. But what we continue to see is a rather robust price development when it goes — when you compare April, May, we still see some areas where pricing has even strengthened.

So overall, I would say, May looks like a continuation of a fairly strong April. So we expect that in Q2, we should be able to come in around analyst expectations given the current dynamics. But of course, we have to wait until June is in. We see somewhat of a, let’s say, overall normalization, so no big hectic effects, but the inflation overall is, of course, not going away within security in Iran not tailing off.

Stephan Kothrade
CTO & Member of the Board of Executive Directors

We have always brought the latest technology to China. We did this at the Nanjing Verbund site, we did it at our sites in the Greater Shanghai area with the MDI asset we built in Chongqing, and this is paying off. It’s a combination of the technologies we bring, but it’s also the way how we operate the sites. And here, you can always make a difference. And this now brings me to this aspect of your question where you’re asking, what do all the data and the digitalization and AI tools really help you in terms of achieving a cost advantage.

The point is at the end of the day, when you invest, it’s important that your plants really run 24/7, 365 days a year. You don’t want to have any hiccups. Any unwanted unplanned shutdowns. You want to be always back on track as soon as possible. And here, we can see when we compare to peers, but also when we compare BASF internally that our asset park in China shows the best performance globally. And I’m pretty sure that now with the newest technologies and what we built in Zhanjiang, this will even set new benchmarks over time when we advance on the learning curve.

Now comparing this between different regions is difficult because you have a different raw material base, you have different partners across the fence. But what I can say is, if you look now into the cost position of some of our key products like acrylic acid or butyl acrylate that I mentioned or NPG, products where already today, we are extremely cost competitive in China. Now if we compare the new plants in Zhanjiang with the assets in Nanjing, I can say this is, again, a further reduction in cash cost position. So we are very much to the left side. And in the example that I’m just mentioning, the cost leader in the Chinese producer landscape. So this will pay off over time and really further improves our position in key value chains of BASF.

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

And last point maybe, Chetan, what’s always important is, for us, is the cost position in the region that our assets are in. So comparing now the absolute, let’s say, cost of goods sold of Zhanjiang to Ludwigshafen to Geismar is not so relevant because most of our products actually do not travel so much. So we’re not a polyethylene producer where you are moving your assets to the lowest feedstock region and then distribute from there to the world.

But our products that you’ve seen in Stephan’s presentation are typically in the region for the region, and this is why you have to be competitive where you are. So for us, for example, despite the fact that we might have lower cost because we have newer assets in Zhanjiang for certain of our products, we would not — it would not make sense for us to ship them from Zhanjiang to Europe because we have also very competitive assets here in Ludwigshafen even if they are older. So for us, the competitiveness in the respective markets is much more relevant. And that’s why you heard us often talk so much about the relative cash cost position in China.

Stephan Kothrade
CTO & Member of the Board of Executive Directors

Yes. India is definitely an interesting market. We have defined India as 1 of the 7 advanced countries in our winning ways strategy because we see that there is now more and more investment into industrial production, into manufacturing, which translates into demand in our customer industries. So the size of the Indian chemical market is becoming more relevant. But you also have to take into account that if you compare the Indian chemical market to the Chinese chemical market, there is a difference of a factor of 15, 1-5. So I would also say the Indian chemical market fits into one larger Chinese province. But nevertheless, it’s fast growing. It’s interesting.

But coming to one aspect of your question. India is definitely not a platform to produce chemicals or plastics for export. So if we look into opportunities in India, it’s for the domestic market. We would need a very competitive setup in one of our key value chains. It’s something we are considering, but we are not in a rush.

We are not in a need to do anything at this and you also know our guidance when it comes to CapEx. We want to stay below depreciation levels. So yes, there’s opportunities. We will always look into opportunities in India, but it’s too early now to come to a decision point or to make any announcements at this stage.

Markus Kamieth
CEO & Chairman of the Board of Executive Directors

Yes, Sebastian, I think your question was also whether we are supplying maybe India from Zhanjiang. That is certainly not the intent. But as Stephan said, we believe in India, we believe India is a very promising market for chemicals in the next decade. So we are thinking about investment oppurtunities also in India because I don’t believe that at the end, you can be long term successful by importing products into India. But we’re doing this, of course, right now, successfully, for example, also from our Southeast Asian Verbund in Kuantan. But also from Europe, we are importing into India now with the new free trade agreement with India that even is more competitive. So overall, we are preparing India for the next growth phase, but we have nothing imminent yet, but we believe in strong local chemical production in India for the next decade.

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