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October 11, 2018 02:00 AM

Covestro to invest $1.7 billion in Texas MDI expansion

Urethanes Technology International
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    Covestro will expand MDI production at its Baytown, Texas, site.

    BAYTOWN, Texas—Covestro A.G.'s board has given a green light to build a $1.7 billion plant at its Baytown site.

    The move will add 500 metric tons per year at its Baytown campus, taking its total North American MDI capacity to 740 metric tons per year. Covestro said the 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 metric tons per year plant at the site.

    Once online, Covestro said it will become the MDI capacity leader in the region by 2024.

    "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.

    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 metric tons 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.

    Earlier in 2018, Covestro disclosed plans to raise MDI capacity Shanghai from 500 to 600 metric tons per year in two stages.

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