Covestro investing €1.5bn in Texas MDI capacity

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Photo by Covestro AG Covestro's production site in Baytown, Texas.

 

Covestro AG's board has given a green light to spend €1.5bn  to build a plant for 500 kilotonnes per annum (ktpa) year MDI capacity at its Baytown, Texas, site, taking its NAFTA MDI capacity to 740ktpa.

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 90ktpa 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 position," the company added.

"Demand for MDI will continue to grow for the foreseeable future and likewise promises attractive capacity utilisation 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 utilisation 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 400ktpa in the second half of 2019.

Covestro said the global MDI market is growing at around 5% 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 600ktpa per year in two stages.

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