Keyuan Petrochemicals adds desulfurization process at BTX Aromatics Refining Facility

Keyuan Petrochemicals, Inc., leading independent manufacturer and supplier of various petrochemical products in China, has completed and placed in service, effective July 1, 2010, a new desulfurization process at its current refining facility for BTX aromatics. By reducing the sulfur content, the Company will be able to realize higher selling prices and improved margins on certain of its BTX aromatics. More specifically, the new process is being applied to Keyuan's BTX light aromatics, which account for 200,000 tons of the Company's total BTX aromatic production capacity of 345,000 tpa. At the Company's current utilization rate of 100%, the higher pricing on BTX light aromatics could generate approximately US$2.9 mln in additional net profit per year. The total investment made in adding the desulfurization process totaled about US$4.4 mln and is expected to be recovered within 1.5 years. BTX Aromatic products include benzene, toluene, xylene and other chemical components for further processing into oil resin, gasoline and solvent materials used in paint, ink, construction coating and pesticides. "Keyuan strives to use technological capability to enhance our product offerings to better meet our customers' demands for more value-added, refined products," stated Mr. Chunfeng Tao, founder, chairman and chief executive officer of the Company. "By adding this desulfurization process, we will be able to realize higher average selling prices for our light aromatics, further enhance our margins and improve the return on our installed asset base. In addition to this process improvement, as previously announced, we are also expanding our overall production and facility capacity in order to capitalize on China's growing demand for refined petrochemical products." Growing demand driven by China's robust economic growth, coupled with under-developed domestic production capacity, has led to an imbalance in supply and demand for refined petrochemical products that is likely to persist for many years. Due to the supply-demand imbalance that exists in China, Keyuan's customer order requests for 2010 have exceeded its current annual production capacity. At March 31, 2010, Keyuan had annual petrochemical manufacturing capacity of 550,000 MT of a variety of petrochemical products, including BTX aromatics. In order to grow its business to meet its backlog and increasing customer demand, Keyuan plans to expand its petrochemical manufacturing capacity to 600,000 tons in 2011. The Company also plans to double its storage capacity to 200,000 tons by the end of 2011, and to add a new raw material pre-treatment facility and an asphalt production facility in 2012.