Industry News

Keyuan Petrochemicals Expands the Production Capacity of Asphalt and SBS

Published on 2010-08-27. Author : SpecialChem

NINGBO, China -- Keyuan Petrochemicals, Inc. ("Keyuan" or "The Company"), a leading independent manufacturer and supplier of various petrochemical products in China, announced it entered into land use right transfer agreements with the local government of Ningbo.

Pursuant to the land use right transfer agreements, Keyuan acquired four parcels of land adjacent to the Company's current facilities totaling approximately 1.2 million square feet. The total cost of the land was approximately $5.8 million, lower than the Company's original $20 million projection. By acquiring the land, the Company will be able to begin the construction of a storage facility, a raw material pre-treatment facility and an asphalt production facility as the Company originally planned. In addition, in the third quarter of 2010, the Company will also begin building a new Styrene-Butadiene-Styrene ("SBS") production facility on the land, which will be included in the expansion plan together with the three facilities mentioned above. SBS is commonly used in soles of shoes, tire treads and other products that require a hard rubber to remain sturdy for a long time. China's current production capacity of SBS is approximately 600,000 metric tons per year while domestic demand is projected to reach 750,000 metric tons in 2010.

"We are pleased to have secured the land we needed to begin our next phase of expansion," said Mr. Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan. "We see a tremendous opportunity to gain market share in the SBS market, given the value-added nature of the product and the supply-demand imbalance that exists today. Our expansion plan includes four new state-of-the-art facilities and they will not only allow us to increase our capacity and expand into new markets but also make us more efficient."

Once completed, the new facilities will add an additional 100,000 MT of petrochemical storage capacity, a raw materials pre-treatment plant, 300,000 MT asphalt production capacity, and 70,000 MT of SBS production capacity. We expect the SBS facility and the storage capacity expansion to be completed in the second half of 2011; and the raw materials pre-treatment and asphalt production facilities to be completed in the 1st half of 2012.

The total build-out of the storage, pre-treatment and asphalt facilities will be approximately $70 million, including $20 million for facility construction, $40 million for new equipment, and $10 million for working capital. Management expects that these three projects together will increase sales by as much as $298 million and net income by approximately $30 million per year.

The total cost of the SBS facility will be approximately $17.5 million. Management expects the SBS facility will generate approximately $110 million in sales and between $10 million to $11 million in net profit annually once it reaches full capacity.

About Keyuan Petrochemicals, Inc.

Keyuan Petrochemicals, Inc., established in 2007 and operating through its wholly-owned subsidiary, Keyuan Plastics, Co. Ltd., is located in Ningbo, China and is a leading independent manufacturer and supplier of various petrochemical products. Having commenced production in October 2009, Keyuan's operations include an annual petrochemical manufacturing design capacity of 550,000 MT of a variety of petrochemical products, with facilities for the storage and loading of raw materials and finished goods, and a technology that supports the manufacturing process with low raw material costs and high utilization and yields. In order to meet increasing market demand, Keyuan plans to expand its manufacturing capacity to include an SBS production facility, additional storage capacity, a raw material pre-treatment facility and an asphalt production facility.

Safe Harbor Statement

This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. For example, statements about the future use of the proceeds are forward looking and subject to risks. Keyuan Petrochemicals, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q and 8-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statement on Form S-1, as amended. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Source: Keyuan Petrochemicals, Inc.

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