BASF and Sinopec have signed a Memorandum of Understanding (MoU) to expand their existing joint venture and build a second steam cracker in Nanjing, China.

The companies said the basic chemicals provided by the additional cracker, which will have an ethylene capacity of 1 million t/y, will enable them to expand capacity at BASF-YPC, their existing joint integrated “Verbund” site in Nanjing.

Under the terms of the MoU, BASF-YPC will take a 50% stake in the new cracker, with Yangtzi Petrochemical (YPC) taking the other 50%. A joint pre-feasibility study will be concluded by the end of 2018.

“This additional investment into a new steam cracker and the expansion of our BASF-YPC joint venture in Nanjing underline the strong partnership between Sinopec and BASF and the commitment to our customers in China,” said BASF chairman Martin Brudermüller.

BASF-YPC’s existing cracker at Nanjing has a capacity of 740,000 t/y ethylene with the site producing around 3 million t/y of chemicals and polymers for the Chinese market. The jv posted sales of around 21 billion yuan ($3 billion) in 2017.

The partners are also jointly exploring new business opportunities in battery materials. They said the rising importance of alternative energy in China, especially in the automotive industry, has led to a surge in demand for innovative battery materials for a range of applications.

BASF is also investing in battery materials production in Europe to serve the automotive market. Earlier this month, the German chemicals giant announced it would build its first European battery materials plant in Harjavalta, Finland, next to Norilsk Nickel’s nickel and cobalt refinery. Start-up is planned for late 2020.

The company is currently evaluating other locations in Europe to build additional plants for battery materials.