The chemical plants will boost supply to a wide range of mainland industries as the country shifts to local production German chemical giant BASF and its partners have received approval from the central government to invest Euro1 billion (HK$9.58 billion) to build chemical production facilities in the Shanghai Chemical Industry Park. The facilities are among several new and existing plant construction and expansion projects on the mainland, which is seeking to replace imports with local production to cut transport costs. China's industrial output increased 17.9 per cent year on year in October - the fastest monthly growth this year. Chemicals have been playing a key role as they have wide applications in the agricultural, textile, construction, packaging, food, medical, cosmetics and car sectors. The companies received the green light last month to build an integrated plant that could churn out 240,000 tonnes of diphenylmethane diisocyanate (MDI) and 160,000 tonnes of toluene diisocyanate (TDI) a year in Caojing, a Shanghai suburb. The previous proposed capacities were 160,000 tonnes of MDI and 130,000 tonnes of TDI. MDI and TDI are raw materials for the production of polyurethane, which is used in the car and construction industries and can be found in products such as refrigerators, upholstery, mattresses and footwear. MDI is a raw material for TDI production. Construction work on the plants is scheduled to start later this month and completion is expected in 2006. China's emergence as the 'workshop of the world' has led to surging demand for chemicals. Output of ethylene, a base compound used to produce many downstream chemicals, rose 15 per cent in the first 10 months, according to the National Bureau of Statistics. The corresponding growth rate of plastics was 17.3 per cent, and for chemical fibre it was 16.9 per cent. Three separate joint ventures have been formed for the BASF-led projects. BASF, United States-based Huntsman Polyurethanes, Shanghai Chloro-Alkali Chemical, Shanghai Hua Yi and Sinopec Shanghai Gao Qiao Petrochemical have formed Shanghai Lianheng Isocyanate to make raw MDI. BASF, Shanghai Hua Yi and Sinopec Shanghai Gao Qiao have set up Shanghai BASF Polyurethane to process MDI and make TDI. BASF holds a 70 per cent stake in Shanghai BASF Polyurethane. Separately, Huntsman and Shanghai Chloro-Alkali have formed Huntsman Polyurethanes Shanghai to process MDI. Meanwhile, BASF has received a business licence to build at the same chemical park a wholly owned facility capable of making 80,000 tonnes of tetrahydrofuran and 60,000 tonnes of polytetrahydrofuran (PolyTHF) annually. Completion is expected by the end of next year. 'It will be the largest PolyTHF production facility worldwide and will supply the rapidly developing Chinese spandex fibres market,' the company said. The chemicals are used in the production of spandex, which is used in swimwear, sportswear and other garments. China has three petrochemical industry parks in Huizhou, Guangdong province; Nanjing, Jiangsu province; and Caojing near Shanghai, which look to compete with production centres worldwide.