Mitsubishi Divests India and China PTA Assets

Japan’s Mitsubishi Chemical Corp. (MCC) has announced it will sell its production facilities for PET feedstock PTA in India and China by the end of this year, citing continuing oversupply and competitive pressure in both markets. The group is retaining its PTA assets in Indonesia and Thailand. Altogether, MCC will shed nearly 2 million t/y of PTA output capability in the two countries, significantly paring its stake in the market altogether. In a deal reported to be worth around $48 million, it will transfer 95% of MCC PTA India (MCPI) to US-based Chatterjee Management, an investment vehicle of Indian-born entrepreneur Purnendu Chatterjee with an estimated $900 million in assets.

In China, the two MCC group companies are being sold to separate investors. Ningbo Mitsubishi Chemical (NMC) will be bought by Hong Kong-based Union King Holdings while MCC Advanced Polymers Ningbo, which makes polytetramethylene ether glycol (PTMEG), will be sold to Ningbo Hongbang Petrochemicals. Along with PTA, the Japanese player said the PTMEG market has also suffered from excess capacity while demand into spandex has slowed.

Financial terms were not disclosed for either of the Chinese deals, both of which are set to be finalized at the end of December. The Indian transfer is planned to be completed by the end of October.  Following the divestments, MCC said it will be able to improve its overall profitability by growing its performance products, industrial materials and healthcare businesses.

MCC pulled out of the Japanese market, where it produced some 250,000 t/y of PTA, in 2009. At the time it said it planned to concentrate on the markets of China, India, Indonesia and South Korea. Industry observers view the latest asset sale as a prelude to its withdrawal from additional commodity chemicals businesses.

The group said the PTA business in Indonesia is currently seeing stable profits, while the Korean joint venture, Sam Nam Petrochemical, is expected to benefit from rationalization and downsizing efforts of the recent past. In both cases, the production facilities are integrated into the respective value chains.

MCC blames the PTA overcapacity in China on “extremely large-scale investment,” reflecting government efforts to attract foreign investment after the 2008 financial crisis. Explaining its decision to pull the plug, it said it expects “no change” in the PTA business situation in China or in India, from where the Chinese market is partly supplied.