Staying on top

08 April 1996 00:00  [Source: ACN]

Guangdong's main producer of polyester chip and filament plans to boost production with investment in three chemical fibres plants

By Annie Fung

KAIPING Polyester Enterprises Group (KPEG) of China plans to invest in three chemical fibres plants and expand its industrial yarn production in a bid to maintain its position as Guangdong's largest polyester chip and filament producer.

Liang Shuxiang, KPEG general manager, told ACN of the investment plan at the inauguration of its new Rmb1bn (US$120m) 150 000 tonne/year polyester chips plant late last month.

The new projects would involve a total investment of US$200m. Liang said foreign funds would be sought in the form of equity participation and/or borrowings. The planned investments are for a 30 000 tonne/year filaments plant, a 50 000 tonne/year staple fibres plant, and a 30 000 tonne/year nylon engineering plastics plant.

KPEG also plans to expand its industrial yarn production from 5000 tonne/year to 10 000 tonne/year in 1997. Allied Signal will invest US$20m to take up a 70% interest in the project.

Liang told ACN that discussions on the staple fibres project with Itochu for a majority equity participation of 70% have reached an advanced stage, but he did not give details.

Negotiations with Mitsubishi Chemicals for a possible participation in the nylon engineering plastics project are also proceeding, he said.

As with the staple fibres project, equity shareholding for this venture will be 30:70 between KPEG and Mitsubishi Chemicals. Liang expects letters of intent to be signed between the parties shortly.

On the cost-effectiveness of these projects, Liang said he was confident that the market for chemical fibres would improve in two to three years.

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'Nylon engineering plastics will generate the highest return because it is quite a new industry in Guangdong and has good market potential,' Liang said.

He added there are no immediate plans for exporting the product because of intense competition from Taiwan and South Korea which have more advanced technology and better quality products.

He said current demand for domestic polyester chips is slack in China, partly due to the smuggling of imported chips to evade tariffs, and partly due to the suspension and merging of Chinese filament producers. He was also confident that the new projects could absorb the excess supply of raw materials produced by its polyester chips plant.

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Speaking at the opening of the polyester chips plant in Guangdong, Liang said, 'This plant is the largest one-off investment in Kaiping, and has the largest production scale and output value in the city.'

The plant is a joint venture between KPEG and Ever Joint, a Hong-Kong registered company. 'Production here will ease the demand and supply problem for raw materials for chemical fibres manufacturers and help boost the economy of Kaiping, which was upgraded as a city three years ago,' Liang added.

KPEG claims to be the largest polyester chip and filament producer in Guangdong. It has invested a total of Rmb3.5bn in production facilities to date. The group today has a total production capacity of 50 000 tonne/year of filament which consumes about a third of its total polyester chip output.

The new polyester chip plant has three production lines. Two of them, with a total capacity of 120 000 tonne/year, produce fibre chips while the third line produces 30 000 tonne/year of bottle-grade chips.

Wu Jun, KPEG deputy general manager, said he expects the polyester chip plant, which is still undergoing trial production, to be profitable in 18 months.

The plant's machinery and technology were provided by EMS-Inventa of Switzerland. Its president Hans Enzinger said he was not worried about the closing down and merging of filament plants in China as he believed the. major ones would survive eventually.

Profits and turnover for the KPEG group in 1995 were about Rmb70m and Rmb1.6bn, respectively. Similar figures were recorded in 1994. Liang expects profits to jump to Rmb150m in 1996.

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