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BASF, partners put $4 billion India chemical complex on hold due to COVID-19

BERLIN (Reuters) - German chemicals maker BASF said on Thursday that its plans to build a petrochemicals complex in India worth up to $4 billion with partners had been put on hold due to the economic uncertainty caused by the pandemic.

BASF signed a memorandum of understanding with Abu Dhabi National Oil Company (ADNOC), Adani Group and Borealis AG in October 2019 to evaluate a collaboration to build the chemical site in Mundra, in India’s Gujarat state.

“The global economic uncertainties caused by the pandemic have led the partners to review the timing for undertaking this investment,” BASF said in a statement.

“Despite all attempts to optimize the scope and the configuration, the project has been put on hold.”

BASF in April scaled back its investment budget as the coronavirus crisis hit automakers, the chemicals giant’s biggest customers.

Profits in the chemicals industry react strongly to a downturn because of the industry’s exposure to cyclical sectors such as carmakers, while massive overheads prevent swift cost cutting.

Under the India plan, the partners wanted to build a plant to produce propylene from propane gas to be supplied by ADNOC.

It would have been the first plant in the world to be fully powered by renewable energy and BASF’s biggest investment so far in India.

BASF said the partners remained convinced that India was a good place to invest and had agreed to periodically explore market conditions and discuss any opportunity that might arise over time.

Reporting by Caroline Copley and Ludwig Burger; Editing by Michelle Adair and Susan Fenton