Keyuan breaks ground on 70kt/year SBS plant

ERJ staff report (DS)

Ningbo, China -- Keyuan Petrochemicals, Inc said on September 1st, that it has commenced construction of its first Styrene-Butadiene-Styrene ("SBS") production facility in Ningbo, Zhejiang Province, which will be adjacent to its current production facility.

SBS is commonly used in soles of shoes and other products that require a hard rubber to remain sturdy for a long time due to its durability. 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

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, resulting in China importing a substantial percentage of its needs from Japan, Korea, Taiwan and the US Demand for SBS in China is expected to grow 6 percent-7 percent per year for the next several years. Average selling price is expected to be approximately $2,000 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 percent for the SBS it produces once it reaches normal production levels. The new facility is anticipated to achieve 80 percent utilisation rate in 2012, the first full year of production, and generate approximately $110 million of sales and $10 million to $11 million of net income.

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Press release from Keyuan