News Release, February 9, 2024
BASF to divest shares in its two joint ventures in Korla, China

In the fourth quarter of 2023, BASF started the process to divest its shares in the two joint venture companies BASF Markor Chemical Manufacturing (Xinjiang) Co., Ltd. and Markor Meiou Chemical (Xinjiang) Co., Ltd. in Korla, China. As part of BASF’s global strategy for 1,4-butanediol (BDO), BASF has assessed the market environment and product carbon footprints (PCF) of BDO and its downstream products from different production sites worldwide. BDO value chains are under increased competitive pressure and characterized by global overcapacities. Furthermore, carbide-based BDO and polytetrahydrofuran produced in Korla have a significantly higher PCF due to the use of coal as a base raw material and the high energy intensity of the production process. In the future, BASF will customize its global portfolio of BDO and affiliated downstream products to provide competitive low-PCF offerings.

The situation in the Xinjiang region has always been part of BASF’s overall assessment of its joint ventures in Korla. Regular due diligence measures including internal and external audits have not found any evidence of human rights violations in the two joint ventures. Nonetheless, recently published reports related to the joint venture partner contain serious allegations that indicate activities inconsistent with BASF’s values. Consequently, BASF will accelerate the ongoing process to divest its shares in the two joint ventures in Korla, subject to negotiations and required approvals of the relevant authorities.

It is important to note that, also in the context of the public reports, BASF has no indication that employees of the two joint ventures in Korla were involved in human rights violations. The most recent reports relate to BASF’s joint venture partner, in which BASF does not have a stake.

BASF’s presence in China remains otherwise unchanged, and the company is fully committed to its business activities and planned investments in the country. Already today, Greater China accounts for around half of global chemical production. Global growth in chemical production until 2030 will be driven by Greater China, which will account for around 80% of the total growth during the period from 2022 to 2030.

Statement on reports by German media outlets Der SPIEGEL (Print edition No. 6, February 3, 2024) and ZDF (heute journal, February 2, 2024)

BASF does not have a stake in Xinjiang Markor Chemical Industry Co., Ltd. (Markor Chemical) but has shares in two joint ventures: BASF Markor Chemical Manufacturing (Xinjiang) Co., Ltd. und Markor Meiou Chemical (Xinjiang) Co., Ltd.

The reports found by the quoted German anthropologist are from the website of Markor Chemical and not from a website of one of these two joint ventures. We currently have no reason to believe that employees from our joint ventures were involved in the measures described. Irrespective of this, we take the current reports very seriously, will continue to investigate them and will take them into account in our assessment of business relationships.

Statement on audits of joint ventures in Xinjiang, China

BASF is aware of the situation in the Xinjiang region. We closely monitor media reports and studies on the situation of minorities in Xinjiang, as well as the political discussions surrounding it.

Since 2016, BASF has been operating two production joint ventures in this region at which we produce two chemicals – butanediol and poly-THF – in technically advanced facilities. In total, the two joint ventures in Korla have around 120 employees, of whom around 40 are employed by the BASF majority-owned joint venture BASF Markor Chemical Manufacturing (Xinjiang) Company Limited.

BASF respects human rights as the basis of its social responsibility in its business activities and relationships. Our Code of Conduct applies to all our locations worldwide, including China. It sets behavioral requirements for all BASF employees in their collaboration with business partners, authorities, colleagues, and society, including human rights, labor, and social standards. We also take responsibility for respecting human rights in our relationships with our business partners along the value chain. BASF complies with the applicable laws on human rights, labor, and social standards of the United Nations, Germany, the European Union, the United States of America, the United Kingdom, and other countries worldwide in its global business operations. This includes the US Uyghur Forced Labor Prevention Act (UFLPA).

In the two joint ventures in Korla, BASF has taken preventive measures to ensure compliance with its global Code of Conduct. A commitment to the BASF Code of Conduct, including a non-discrimination policy in the hiring of joint venture personnel, has been included in the joint venture agreements.

The joint ventures have also obtained written confirmation from all major suppliers, including our joint venture partner, accepting our new Supplier Code of Conduct that specifically addresses the requirements for human rights compliance in the supply chain. In addition, background checks are regularly conducted on the suppliers of our joint ventures in Korla to the extent legally possible. In parallel, measures are being prepared to further increase transparency in the supply chain.

We regularly review the working relationships at our joint venture locations in Korla. After previous audits in 2019 (internal) and 2020 (external), an internal audit of our joint venture operations was conducted at the beginning of 2023.  None of these audits found any evidence of forced labour or other human rights violations in our joint ventures.

In March 2024, a renewal of our external audit of our joint ventures was completed by a reputable auditing firm. As in 2020, the external audit was scheduled to take place approximately one year after the internal audit. We use the subsequent external audit to provide an additional control point and also to check how the recommendations from the internal audit have been implemented. The external audit of the joint venture companies did not identify any findings or indications of human rights violations by BASF's joint ventures in Korla.

In addition, BASF carried out external background checks on the main suppliers to the BASF joint ventures and on our joint venture partner. This review was also conducted by the reputable external auditing firm that has just completed the audit of the joint ventures. The background checks did not reveal any findings with respect to our joint venture partner or any of the key suppliers to BASF's joint venture in Korla.