Accepting the gloomy reality of the PVC market, Xinjiang Zhongtai Chemical Co. Ltd. has officially canceled a 800,000-ton PVC resin project and instead is moving the investment costs into other projects.
The company is redirecting 120 million yuan ($19.5 million) of raised funds for the PVC project to build a 600,000 ton calcium carbide project, it said in a Sept. 11 announcement.
Explaining the reasons for the change, Zhongtai said its existing capacity already meets current market demand, and it would be difficult for the additional investment to generate expected return.
The new calcium carbide project, on the other hand, will vertically expand the company's value chain, increase the self-sufficiency of the PVC feedstock and reduce its raw materials supply risk and cost, Zhongtai said.
Back in November 2012, Zhongtai announced plans to issue additional shares and raise fund for the second phase of its 1.2 million ton PVC resin project in Fukuang, Xinjiang. The first phase boasts 40,000 tons of annual capacity.
Last March, publicly listed Zhongtai received the green light from the China Securities Regulatory Commission to proceed with the expansion. However, institutional investors were reluctant to jump in and Zhongtai were only able to rake in less than a third of the 5 billion yuan ($815 million) it targeted.
As overcapacity issues escaladed in China's PVC industry, Zhongtai put a temporary hold on the project in October 2013 and eventually decided to terminate the project this summer.
The company has invested 199 million yuan ($32.4 million) in the design and ground preparation of the PVC expansion project, but it said it doesn't expect to see a significant negative impact on its financials.
For the first half of the year, Zhongtai reported 5.3 billion yuan ($864.6 million) in sales, 7.3 percent less than the previous year. But net profit shot up 489.5 percent to 114 million yuan ($18.6 million).
Zhongtai has also been in the development phase of graphene composite materials that have potential uses in lithium-ion batteries.