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Covestro production site in Baytown, TX, USA (Source: Covestro)

11. October 2018

Covestro to build new MDI plant in the USA

Covestro announced that it will invest approximately EUR 1.5 billion to build a new world-scale MDI plant at its existing site in Baytown, TX, USA. Covestro said this will be the largest single investment in the history of the company.

Total capacity of the new train will be 500 kt/y and start of production is expected in 2024. At the same time an older, less efficient MDI unit with 90 kt/y production capacity will be closed. Thus, total MDI capacities of the company in the NAFTA region will reach around 740 kt/y by 2024.

“Demand for innovative MDI materials 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’s time to put it into action”, said CEO Dr. Markus Steilemann. “With the new MDI train in Baytown, we will further strengthen our global leading position in polyurethanes, even better serve our customers and create long-term shareholder value.”

View on Covestro's production site in Baytown, TX, USA (Source: Covestro)

View on Covestro's production site in Baytown, TX, USA (Source: Covestro)

According to the company, the global MDI market is expected to grow by about 5 % per year in the long-term, outgrowing the world’s global domestic product (GDP) by about 2 %. Key MDI market drivers include the substitution of less performing and less sustainable materials as well as global megatrends such as an increasing demand for energy efficient insulation solutions. The expected global MDI demand growth translates into the need for approximately one additional world-scale plant per year, said Covestro.

Although the company is already doubling its MDI production capacity in Brunsbüttel, Germany, from 200 kt/y to 400 kt/y in the second half of 2019, the strong growth in demand creates further significant market opportunities, said Covestro. Therefore, the investments – which are part of the already announced investment increase of up to EUR 1.2 billion per year for the next three years – will help the company to maintain and strengthen its position and support further profitable growth.

CFO Dr. Thomas Toepfer explained: “Even with all capacity increase announcements considered, the projected industry supply is not sufficient to fully balance the expected demand growth. We are therefore confident that we will reach high utilisation rates of our new capacities soon after the start-up, making the investment highly efficient. Building on existing infrastructure and processes, it will be a prime example of our value creating investment approach.”

Covestro said its global MDI investment programme also includes the continuation and expansion of its Tarragona, Spain, and Caojing, China, sites as well as investments into its production site in Antwerp, Belgium.

The decision to build the new world-scale plant in Baytown was taken following a thorough analysis of different options. Besides the attractiveness of the domestic market, main advantages of the site are leading cash costs as well as significant benefits in terms of available infrastructure and logistics, said the company. The superior cost position is mainly driven by economies of scale and a high degree of vertical integration. Furthermore, low energy and shipping costs due to high domestic demand in North America add to the Baytown case. With the new plant, Covestro’s future MDI capacities in North America of 740 kt/y by 2024 will also catch up to the company’s future capacities in EMEA (820 kt/y by 2022) and APAC (670 kt/y by 2021).

www.covestro.com

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