Germany-based Covestro’s decision to locate its new methyl di-p-phenylene isocyanate (MDI) plant in the US follows its 
long-term strategy of having production within its main regional markets.

Covestro CEO Markus Steilemann said MDI capacity has been increased in Europe and China over the last few years, making the decision to locate the new facility in the US the logical choice.

Covestro will invest around €1.5bn to build a new world-scale MDI plant in Baytown, Texas, with start-up scheduled for 2024.

“It is a very natural move to make sure that we continue to keep a very strong position in North America because in general, MDI markets are regional. So it is important to continue to ensure we can continue to supply North American customers from our North American plants,” said Steilemann in an interview with ICIS on the sidelines of the European Petrochemical Conference (EPCA).


He pointed out that Covestro has invested globally over the long term, starting from the late 1990s and early 2000s – and 
in China with its €3.1bn integrated chemical site close 
to Shanghai.

The company is also strengthening its position in Europe with the current repurposing of a toluene di-isocyanate (TDI) plant at Brunsbuttel in northern Germany to MDI, increasing the site’s capacity to 400,000 tonnes/year.

It also plans to debottleneck its Tarragona, Spain MDI plant from 170,000 tonnes/year, to 220,000 tonnes/year.


The CEO said intensive studies into the industries Covestro serves today led it to forecast 5%/year MDI demand growth globally for the foreseeable future. These sectors include electrical appliances, building and construction and the automotive industry.

“We also see exciting opportunities in new applications, for example wind turbine blades, which have quite promising growth rates and where PU-based systems can play a significant role in the future,” he added.

Covestro considered all publicly announced capacities in terms of capacity and date 

“We want to take a global capacity leadership position here and we think now is the 
right time to invest further in the profitable growth of our 
MDI business.”

Today Covestro is number one globally in polyurethanes and number three in MDI.

“We currently operate with around 20% MDI market share and after the plant has fully started up we expect to still have around 20% of the market,” said Steilemann.

Steilemann said Covestro has not yet seen any significant impact on its business from the US-China trade war.

“In particular we strive to serve MDI customers in North America from plants in North America. Sometimes we have a need to shift material inter-regionally due to short-term S&D (supply and demand) considerations. But our general approach is from the region for the region,” he said.


Covestro is still committed to mergers and acquisitions (M&A) as part of a three-pronged 
approach to creating shareholder value.

“We are strongly committed to create value for our investors so all options are on the 
table – an attractive dividend policy, a share buyback programme, acquisition opportunities, and spending money 
on profitable growth opportunities in our core products. All three aspects create value for our shareholders.”

He added that the project is value creating with return on capital employed significantly above the weighted average cost of capital.


The Americas market should absorb output from Covestro’s new MDI plant at Baytown, Texas, and not go into structural length. ICIS consultant Rob Peacock said that by 2024, the US will probably need additional capacity to meet demand growth over the next 6 years.

Before today’s announcement, ICIS forecasted an "additional" speculative (or unannounced) capacity increase of 300,000 tonnes/year by 2022, rising to 600,000 tonnes/year by 2026 in order to meet growing demand in both North and South America. That will now be replaced with the new Covestro capacity.


"So while it may cause some short term length in the market, it should not really add much/anything in the way of structural length," Peacock said.

Covestro assumes that annual MDI demand growth rates of 5% will create sufficient additional market size to absorb the new production. Forecast global MDI demand growth translates into the need for approximately one additional world-scale plant per year, according to Covestro.