German polymer manufacturer Covestro will invest around €1.5bn in a new world-scale methylene diphenyl diisocyanate (MDI) plant at its existing site in Baytown, US, making it the largest single investment by the company so far.
The new train will have a total capacity of 500 kilotons MDI per year and production is expected to begin in 2024.
An older MDI unit of 90 kilotons production capacity will be closed.
After the new plant begins production, total MDI capacities of Covestro in the NAFTA region will be around 740 kilotons per year.
Covestro CEO Markus Steilemann said: “Demand for innovative MDI materials 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’s time to put it into action.
“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.”
Covestro will double its MDI production capacity in Brunsbuettel, Germany, from 200 to 400 kilotons per year in 2019.
The investments, which are part of the previously announced increase of up to €1.2bn per year for the next three years, are expected to help Covestro strengthen its position and support further profitable growth.
The company also intends to capitalise on its technical and innovation capabilities as well as on its leading cost position.
Under a cost-effective CAPEX approach, Covestro uses existing infrastructure and supply networks to achieve lower specific investments and higher Return on Capital Employed (ROCE).
The company’s global investment programme includes the continuation and expansion of Covestro’s Tarragona (Spain) and Caojing (China) sites as well as investments in the production site in Antwerp, Belgium.
Covestro has decided to build the new plant in Baytown as it offers several advantages, such as an attractive domestic market, leading cash costs as well as benefits in terms of available infrastructure and logistics.
The firm said that the new plant will increase its future MDI capacities in North America to 740 kilotons per year by 2024.
Image: Covestro production site in Baytown, US. Photo: Courtesy of Covestro AG.