Chinese firms build in Louisiana

Two Chinese firms are keen on using Louisiana as a launching pad into the U.S. chemical market. Wanhua Chemical plans to build a $1.1 billion methylene diphenyl diisocyanate (MDI) plant somewhere in the state. Separately, Yuhuang Chemical has begun erecting a $1.9 billion methanol complex in St. James Parish.

The projects are the two largest-ever ­direct investments in Louisiana from China.

Wanhua is the world’s largest producer of MDI, a polyurethane raw material also made by U.S. and European firms such as BASF, Covestro, Dow Chemical, and Huntsman Corp. According to the consulting firm IHS Markit, Wanhua’s 1.8 million metric tons of annual MDI capacity represents about 24% of the world’s total.

Wanhua says the plant will have about 400,000 metric tons per year of capacity when it starts up in 2020. It expects to wrap up site selection later this year. It will spend about $950 million. An unnamed partner will invest about $170 million.

Wanhua, which had sales of about $3 billion in 2015, operates two MDI plants in its home country. In 2011, it branched out overseas with the $1.7 billion purchase of the Hungarian polyurethane maker BorsodChem.

At IHS Markit’s World Petrochemical Conference in Houston last month, senior analyst James Elliott noted that more MDI capacity would be needed in the next five years to keep up with demand, which is growing at about 4% per year globally.

The supply situation is particularly acute in North America. “From 2011 to 2016, we have seen a fallow period of MDI additions,” Elliott said.

Meanwhile, construction on Yuhuang’s 1.8 million-metric-ton-per-year methanol plant started in January, and the company hopes to complete the unit by the end of 2019.

When Yuhuang disclosed the project in 2014, it was part of a spate of announcements from Chinese companies about building methanol plants in the U.S. based on cheap shale gas. Most firms intend to export the methanol to China, where it would be used to make olefins. Yuhuang, however, has consistently said it wants to market a significant amount of its output locally and produce methanol derivatives.