China will set up a chemical distribution centre in Hungary that would facilitate the supply of Chinese chemical products to battery factories and other industrial plants across Europe, investigative news site Direkt36 reported on June 27, citing internal government documents.

The project dubbed "Europe-China Chemical Trade and Dual HUB System" is at an advanced stage and is overseen by Antal Rogan, the head of the cabinet office, who also oversees intelligence services.

The decision to establish a Chinese chemical distribution centre in Hungary was made in March, and a formal agreement is expected to be signed in China in September. The planned locations include the BILK intermodal terminal, located in the southern part of Budapest and Zahony, a border town near Ukraine. The documents suggest that China will have the capacity to transport up to 2mn containers of chemical products to Europe annually with a fleet of 24,000 trains.

The project falls in line with the government’s aspirations to turn Hungary into a major EV battery production hub and diversify its dependence on traditional vehicle manufacturing. Electric vehicle batteries have become Hungary's number one export product of Hungary over the past 1-1.5 years and if all projects in the pipeline come into operation, the country could become the third-largest producer of EV batteries globally.

Two of the three largest South Korean EV makers (Samsung, SK Innovation) are already present and are expanding production to meet soaring demand. Hungary’s proximity to European markets makes it an attractive investment destination.

A string of investments by Chinese manufacturers has been announced recently. CATL, the world’s leading battery maker, is setting up a 100 GWh plant in the Debrecen industrial park on 221 hectares from €7.4bn, the largest greenfield investment in Hungary. The government has earmarked some €700mn for the project, which ranks as the largest Chinese greenfield investment not only in Hungary but in Europe.

The eastern Hungarian city near the Romanian border could be the home of a €1bn battery plant by China's Eve Power, the ninth-biggest battery maker in the world, and Sunwoda is also planning to build a battery factory in Hungary targeting the European markets.

According to ministry documents obtained by Direkt36, the chemical distribution centre would be set up by Austrian-owned railway company Rail Cargo Hungaria and Acemil, a newly created private equity fund. Based on publicly available data, Direkt36 claims that Acemil is linked to the entourage of Rogan.

The company’s office is owned by the consulting firm of Balazs Kertesz, a lawyer, and a confidant of the minister. According to Chinese news sources, he also attended one of the official meetings of the project in person.

Kertesz's name popped up during the controversial golden visa scheme. Under the programme running from 2013 until 2017, around 20,000 non-EU citizens received residence permits in Hungary and EU countries, including 1,300 from Russia.

At an extraordinary press briefing on Tuesday, Budapest mayor Gergely Karacsony said the "local government will use all existing legal means to stop the insane plan that would turn Budapest into a colony of Chinese battery manufacturers, a dumping ground for hazardous materials, by all possible legal means". A motion will be put up for a vote at the Municipal Assembly to block the initiative, he said.

Direkt36 has visited the planned site in southern Budapest, where the railway tracks run in some places only a few tens of metres from the residential buildings in a suburban area.