Dow signed a Memorandum of Understanding with the Zhanjiang Economic and Technological Development Zone Administrative Committee (Zhanjiang EDZ) on Thursday, to build Dow South China Specialties Hub and further capture growth in the world's largest chemicals market.

Dow plans to invest around $250 million to construct specialty polyurethanes and alkoxylates facilities, with a total product capacity of about 250,000 tons. The site also offers opportunity for future development and expansion at the Specialties Hub, said the company.

The new manufacturing hub would extend Dow's local reach, further enhancing supply reliability, responsiveness to market needs and customized innovation, and better positions customers for success in markets including automotive, pharmaceuticals, cleaning chemicals, apparel, lubricants and adhesives, said the company in a release.

Analyst said the chemical business in China remains attractive for foreign companies despite the impact of COVID-19, due to the huge consumption potential of the domestic market and Dow's manufacturing base will enhance its market in the Asia-Pacific.

"Economic development and growth in per capita income will drive China's growth in chemicals demand, and China will lead the global expansion in petrochemical capacity, seeing continuous growth out to 2050," said Tang Sisi, an analyst at research firm BloombergNEF.

"A greater share of demand will be met by domestic production, leading to lower dependence on imports and businesses like chemicals and lubricants are also in line with oil majors' low-carbon target."

The Asia-Pacific is the world's largest chemicals market, with local demands evolving toward high-value, specialty chemicals that help customers meet rapidly-developing megatrends in mobility, urbanization and sustainability, said Jon Penrice, Dow Asia-Pacific president.

"The establishment of the Dow South China Specialties Hub would further position Dow to provide industry-leading materials science solutions to continue to grow with our customers in China and throughout the entire region," he said.

Located at Donghai Island in Zhanjiang, the farthest southern tip of mainland China, the hub enjoys unique advantages including a deep-water port, transportation networks, and a world-class chemical park with advanced infrastructure and services that enable Dow to cover demand across the Asia-Pacific.

Liang Pei, Party secretary of Zhanjiang EDZ, said the petrochemical park at the Donghai Island will become world-class with modern infrastructure and necessary supportive policies to Dow and the park's other companies.

According to Henry Ling, vice-president of operations, Dow Asia-Pacific, the new hub will adopt and employ advanced digital, intelligence and automation technologies to create a manufacturing space of world-class safety, productivity, reliability and sustainability performance

"The South China Specialties Hub will be built to Dow's world-class environmental, health and safety standards and aligned to Dow's recent commitment to become net carbon neutral by 2050," he said.