The global MDI market is stronger than ever. We’re investing in a new ‘world-scale’ MDI plant in Texas to meet long-term market demand and cement our global role as a market leader.
New technologies are responding to the continued growth of the global population – due to reach 8.5 billion by 2030 – and increasing strain on the world’s resources. This trend is driving the polyurethane (PU) industry, requiring stronger, more sustainable and efficient products – and MDI (methylene diphenyl diisocyanate) is a key component here.
In a huge milestone for Covestro and a sure sign of a strong future for the polyurethane industry, our Supervisory Board recently gave its seal of approval to a EUR1.5bn investment in MDI. It is the single largest investment in the company’s history.
This latest venture will bring to life ambitious plans for a new 500 kiloton MDI plant to our existing site in Baytown, USA. Alongside further investment to increase reliability, efficiency and state-of-the-art technology to our portfolio of products, we’ll cement our reputation as a trusted partner and reliable source of in-demand resources to a growing customer base.
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 Baytown are leading cash costs as well as significant benefits in terms of available infrastructure and logistics. 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.
By the time the new plant opens for production in 2024, our total MDI capacity in the North America region will reach 740 kilotons a year.
Supply and demand
It’s an ambitious task. Our investment is grounded on a strong forecast for the MDI market – expected to grow by 5% per year in the long-term. The opportunity is clear: with demand increasing at such a rate, it’s predicted that global growth will translate into the need for approximately one additional world-scale plant being built every year just to keep pace.
This forecast is related to the increasing substitution of lower-performing and less-sustainable materials in new technologies, such as electric vehicles. Polyurethane stands to gain a lot here, becoming more prevalent in electric and autonomous vehicle platforms and replacing traditional materials to help reduce weight without sacrificing performance.
Another key market driver is the increasing demand for energy efficient insulation. MDI is a precursor to rigid foam, an outstanding insulator used in appliances like refrigerators as well as the walls and ceilings of homes and commercial buildings. A rising population and growing middle class in multiple markets equal increased demand in these areas.
“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, better serve our customers and create long-term shareholder value.”
We’re also increasing production elsewhere: the plant in Brunsbuettel in Germany will see production rise from 200 to 400 kilotons per year by the second half of 2019 and we’re expanding sites in Tarragona in Spain and Caojing in China, as well as boosting investments in Antwerp, Belgium.
Our MDI capacities are expected to reach 670 kilotons per year in the Asia-Pacific region by 2021, and 820 kilotons per year in Europe, the Middle East and Africa by 2022. And our cost-effective global investment approach will utilize existing infrastructure and supply networks to achieve lower specific investments, cost savings and higher return on capital.
Carsten Weißleder, Senior Vice President and Head of Global Product Management for Polyurethanes, says this is about more than supply and demand.
“At Covestro, we strive to be the trusted partner that customers need to help drive growth and success. That’s why we work to maintain an efficient global network and a comprehensive product portfolio, whilst constantly investing in state-of-the-art technology so our customers can reap the benefits.”
All in all it’s a good time for investment in MDI. And Covestro is leading the way.