Mitsubishi Chem To Divest Chinese And Indian Businesses Manufacturing PTA

Mitsubishi Chem to divest Chinese and Indian businesses manufacturing PTA

28-Jul-16

Mitsubishi Chemical Holdings' has decided to divest Chinese and Indian businesses that make purified terephtalic acid (PTA), a feedstock to PET. These operations of the Japanese major have combined sales of around 130 billion yen (US$1.23 bln) a year, as per asia.nikkei.com . The decision to pull out of production of an overabundant polyester feedstock in China and India continues its efforts to move up the value chain.
The Japanese group said Wednesday it will divest Chinese and Indian businesses that make purified terephtalic acid, or PTA, a precursor to PET plastic. The operations have combined sales of around 130 billion yen ($1.23 billion) a year.

With annual sales of about 250 billion yen in 2010, PTA was among the highest figures for any one product at the company. And the operating profit margin was 5-10%. However, in 2012, the situation started reversing with the several PTA plants in China coming on stream. Global production capacity is now said to exceed demand by nearly 50%. With prices slumping, Mitsubishi Chemical apparently decided that it could no longer justify keeping the operations, even with significant cost cuts. It has agreed to transfer its stake in the Chinese PTA business to a local petrochemical company, and its interest in the Indian business to a U.S. fund.
Without Indian and Chinese PTA production, the company will have no notable money-losing businesses left. It will be able to allocate more resources to such promising fields as carbon fiber and highly functional resins.