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 $5.8m, lower than the company’s original $20m 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.
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.
Once completed, the new facilities will add an additional 100,000MT of petrochemical storage capacity, a raw materials pre-treatment plant, 300,000MT asphalt production capacity, and 70,000MT of SBS production capacity.
The company expects 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 $70m, including $20m for facility construction, $40m for new equipment, and $10m for working capital.
The total cost of the SBS facility will be approximately $17.5m.
