Indorama to build plant in N. America

Goal is to become world's third largest

Aranee Jaiimsin

Indorama Polymers Plc (IRP), a SET-listed manufacturer of polyethylene terephthalate (PET) polymers, will invest US$105 million (3.69 billion baht) to build a new plant in North America with a capacity of 300,000 tonnes per year.

Chief executive Aloke Lohia said yesterday that the investment cost was based on the assumption that each tonne of PET polymer capacity required a start-up budget of $350 or 12,295 baht.

The exact investment cost, taking into account the plant location, could be finalised in the next quarter when the feasibility study is finished, he said.

IRP will be able to manufacture 540,000 tonnes of PET polymers by the end of the year and capacity would increase to 603,000 tonnes per year in 2008.

According to Mr Lohia, the company controls a 4.5% share of the world market at present. It aims to increase its market share to 7% and become the world's third largest PET polymers producer in 2009, when it expands its annual production capacity to 1.22 million tonnes.

With an improved economy of scale that comes with the production capacity expansion, IRP could offer competitive prices to clients when competition is intense, as it has been this year.

He said IRP's spreads in the last quarter of 2006 dropped 14.02% to $233 per tonne from $271 in the previous quarter. He estimated the spread in the first three months of 2007 shrank further due to growing supply in the United States and other parts of the world.

"Together with reducing overhead costs and better discounts from raw material suppliers, our increasing production volume could also enable us to maintain the level of net profit margin," he said.

The net profit margin of the industry is around 10%.

To quickly increase its market share, Indorama has a strategy to acquire rivals operating mainly in markets where demand does not justify capacity expansion, Mr Lohia said.

The PET price this year is forecast at around $1,260 to $1,300 a tonne, on par with last year's level.

Bangkok Post

Friday April 06, 2007