Covestro invests €1.5 billion to build world-scale MDI plant in Texas

Covestro Baytown, TXResponding to sustained projected global demand for methylene diphenyl diisocyanate (MDI), a precursor for rigid polyurethane foam used in insulation and other applications, Covestro (Leverkusen, Germany) has announced an investment of approximately €1.5 billion ($1.7 billion) to build a new world-scale MDI plant in Baytown, TX. It is the single largest investment in the history of the company, which reported €14.1 billion ($16.1 billion) in sales in 2017. Start of production is expected in 2024.

The total capacity of the new train will be 500 kilotons of MDI per year. Covestro will shut down a less-efficient MDI unit producing 90 kilotons when it comes on board. The company’s total MDI capacity in the NAFTA region will reach around 740 kilotons per year, making Covestro the industry capacity leader in the region by 2024.

“Demand for innovative MDI materials will continue to grow for the foreseeable future and likewise promises attractive capacity utilization rates,” said CEO Dr. Markus Steilemann. “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.”

The global MDI market is expected to grow by about 5% per year, outperforming the world’s global domestic product index by about two percentage points, said Covestro in the news release. Key MDI market drivers include the substitution of materials that do not perform as well and do not have a good sustainability profile as well as global megatrends, such as increasing demand for energy-efficient insulation solutions. To satisfy expected global MDI demand in the years ahead, it has been estimated that approximately one additional world-scale plant would need to be built each year.

Covestro previously announced that it would double its MDI production capacity in Brunsbüttel, Germany. With the new plant in Baytown, Covestro’s future MDI capacities in North America of 740 kilotons per year by 2024 will catch up to the company’s future capacities for Europe, Middle East and Africa—820 kilotons per year by 2022—and Asia-Pacific—670 kilotons per year by 2021. 

Despite these capacity increases, “the projected industry supply is not sufficient to fully balance the expected demand growth,” said Covestro Chief Financial Officer Thomas Toepfer, PhD. “We are therefore confident that we will reach high utilization rates of our new capacities soon after start-up, making the investment highly efficient. Building on existing infrastructure and processes, it will be a prime example of our value-creating investment approach.”

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