Keyuan Petrochemicals begins SBS facility construction in China

Source: Keyuan Petrochemicals

Keyuan Petrochemicals, Inc. (OTC Bulletin Board:KYNP), a leading independent manufacturer and supplier of various petrochemical products in China, 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, tire treads 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 split into three phases.

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 completed. 

"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 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 U.S. Demand for SBS in China is expected to grow 6%-7% 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% 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 $110 million of sales and $10 million to $11 million of net income.

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