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News
October 09, 2018 02:00 AM

Covestro investing $1.7B in Texas MDI capacity

Simon Robinson
Urethanes Technology International
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    Covestro AG
    Covestro's production site in Baytown, Texas.

    Covestro AG's board has given a green light to spent 1.5 billion euros ($1.7 billion) to build a plant for 500 kilotonnes per year MDI capacity at its Baytown, Texas, site, taking its NAFTA MDI capacity to 740 kilotonnes per year.

    This move marks the largest single investment in the history of the company. Production is expected to start in April 2024. While expanding, the company is also taking the opportunity to shut down a small 90 kilotonnes per year plant at the site.

    Covestro said the expansion will make it "industry capacity leader in the region by 2024."

    "When it is onstream, Baytown will strongly underline its global industry capacity leadership positio," the company added.

    "Demand for MDI will continue to grow for the foreseeable future and likewise promises attractive capacity utilization rates. We have already announced a significant increase in capital expenditures. Now it it's time to put it into action," CEO Markus Steilemann said.

    Covestro Chief Financial Officer Thomas Toepfer said that "even with all capacity increases announced, the projected supply is not sufficient to balance expected demand growth." He added that the new plant would be at a high utilization rate soon after the start-up, which will make the investment "highly efficient."

    The Baytown site is large and vertically integrated, making cash costs low, the company said. Additionally, it has good infrastructure and is surrounded by a fast-growing market. This combination reduces delivered costs to the local market.

    Earlier this year, Covestro announced that capacity in Brunsbuttel, Germany, will doubled to 400 kilotonnes per year in the second half of 2019.

    Covestro said the global MDI market is growing at around 5 percent per year and the rigid polyurethane insulation market, which is based on MDI, is also growing strongly.

    Also this year, Covestro announced plans to raise MDI capacity Shanghai from 500 to 600 kilotonnes per year in two stages.

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