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German plastics maker Covestro to spend 1.5 billion euros on new US plant
Oct 09, 2018 (Agencia EFE via COMTEX) --

New York City, Oct 9 (efe-epa).- Germany's Covestro is set to spend 1.5 billion euros ($1.72 billion) on a new plant at an existing site in eastern Texas (United States), the company said Tuesday, according to a report by Dow Jones Newswires supplied to EFE.

The new facility in Baytown (a Houston suburb) will be used to manufacture methylene diphenyl diisocyanate – or MDI – a chemical needed for the production of rigid foam, an insulation material used in buildings and refrigerators.

The plant will have an annual production capacity of 500 kilotons of MDI and be operational by 2024, the company – which is based in Leverkusen, Germany – said in a statement.

At the same time, it will mothball an older, less efficient MDI unit with a capacity of around 90 kilotons.

Total production capacity in the US, Mexico and Canada will be 740 kilotons a year by 2024, Covestro said.

The expansion is driven by strong demand for MDI, the company said.

"The investments – which are part of the already-announced investment increase of up to 1.2 billion euros per year for the next three years – will help Covestro maintain and strengthen its leading position and support further profitable growth," Chief Financial Officer Thomas Toepfer said, according to the statement.

The company is already doubling its MDI production capacity in Brunsbüttel, Germany, to 400 kilotons a year from 200 kilotons, Dow Jones added in its report to EFE.

Baytown has afforded Covestro a number of advantages, including low costs, infrastructure and logistics, the company said.

"The superior cost position is mainly driven by economies of scale and a high degree of vertical integration," Covestro said.

Low energy and shipping costs also contributed to the investment case.

"Covestro follows a cost-effective capex [capital expenditure] approach by leveraging existing infrastructure and supply networks to achieve lower specific investments and higher return on capital employed," the company said.

By Nina Trentmann

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