Keyuan Petrochemicals, Inc., a leading independent manufacturer and supplier of various petrochemical products in China, announced that on September 1st, it commenced construction of its first Styrene-Butadiene-Styrene ("SBS") production facility in Ningbo, Zhejiang Province, which will be adjacent to its current production facility. The new SBS facility is expected to add 70,000 metric tons to Keyuan's production capacity by the end of 2011 with an estimated cost of $17.5 million in capital expenditures. The current estimated schedule of the SBS facility is as follows:
Phase I: Civil engineering from September 2010 to March 2011
Phase II: Equipment installation from April 2011 to September 2011
Phase III: Trial runs from October 2011 to November 2011
Production is expected to commence after the trial runs are complete
"Due to rising demand for SBS from products consumers as well as basic materials and industrial customers, there is a shortage of SBS in China" stated Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan. "Once we complete construction of our new SBS facility, Keyuan will be one of the leading producers of SBS in China."
China's current production capacity of SBS is approximately 600,000 tpa while domestic demand is projected to reach 750,000 metric tons in 2010, resulting in China importing a substantial percentage of its needs from Japan, Korea, Taiwan and the U.S. Demand for SBS in China is expected to grow 6-7% pa for the next several years. Average selling price is expected to be approximately US$2000 in 2012. The supply shortage and value- added nature of SBS provides healthy margins for the few domestic producers. Keyuan expects to generate net profit margins of 10% for the SBS it produces once it reaches normal production levels. The new facility is anticipated to achieve 80% utilization rate in 2012, the first full year of production, and generate approximately US$110 mln of sales and US$10-11 mln of net income.