Corpus Christi PET plant marks fourth US chem project hit by costs

HOUSTON (ICIS)–An integrated polyester plant being built by Alpek, Indorama and Far Eastern New Century (FENC) is the fourth chemical project to be hit by cost overruns.

The three companies are partners in the Corpus Christi Polymers (CCP), which is building a project in Corpus Christi, Texas, that will produce purified terephthalic acid (PTA) and polyethylene terephthalate (PET).

Earlier this week, the three joint venture partners decided to temporarily halt the project because of inflation as well as high construction and labour costs.

The joint venture did not disclose the magnitude of the costs.

CORPUS CHRISTI JOINS GROWING LIST OF COST OVERRUNS
The project in Corpus Christi is the fourth chemical project that reported significant cost overruns this year. The following lists the other three.

• The capital budget for the second commercial-scale plant of Origin Materials rose to $1.60bn from $1.07bn. Origin also is splitting the project into two phases, delaying the startup and reducing the scale of the plant. The project will produce renewable oils that can be processed into biofuels and feedstock that can be converted into a component used to make polyethylene terephthalate (PET) or polyethylene furanoate (PEF)
• Phillips 66 expects to spend $1.25bn to convert its San Francisco refinery in Rodeo, California, to produce renewable fuels, up 47% from an earlier estimate of $850m made in May 2022
• The costs for an ultrapure sulphuric acid plant being built in Casa Grande, Arizona, have increased to $300m-380m, up 50%. The project, currently on hold, is being developed by Chemtrade Logistics and joint-venture partner Kanto Group

REASONS FOR OVERRUNS
Costs are rising in part because of a severe shortage of qualified skilled workers, which has contributed to higher salaries.

Construction pay is rising at its fastest rate in two decades, said Ken Simonson, chief economist for the Associated General Contractors of America (AGC), a trade group that represents companies that build infrastructure, industrial plants and other nonresidential construction projects.

He made his comments in an interview with ICIS, which had earlier reported on the cost overruns hitting chemical projects.

For construction materials, some shortages persist, such as for transformers, switch gears and other electrical equipment, Simonson said.

Diesel prices have recently risen by their largest amount since 1990, contributing to construction costs.

Recent tariffs that the US imposed on steel and other materials have set a floor on prices, Simonson said. As inflation cools, those tariffs will keep prices for those materials at an elevated level.

SURGE IN MANUFACTURING CONSTRUCTION
An incredible surge in US manufacturing projects has increased demand for construction labour and materials.

The following chart shows the increase in construction spending for manufacturing projects. Figures are in millions of dollars.

Source: US Census Bureau

In July 2023, the most recent month for which data are available, spending in manufacturing spending rose by 71% year on year.

Simonson listed some of the reasons behind the surge in spending.

• Semiconductor fabrication plants (fabs), other electronics projects
• Petrochemical plants and liquefied natural gas (LNG) plants
• Electric vehicles (EVs) and associated battery plants
• Projects intended to shorten and simplify supply chains by bringing manufacturing closer to customers
• Renewable energy and carbon-capture projects
• To qualify for many government incentives, projects need to contain a certain amount of materials made in the US. Consequently, companies are building more plants to produce those materials in the US