Mitsubishi Chemical Holdings plans to sell off its Chinese and Indian operations of terephthalic acid (PTA), the primary raw material used to manufacture various polyester products, amid profitability concerns in light of a persistent glut of the acid.
MCC PTA, Mitsubishi Chemical Corporationâ€™s PTA venture located in Haldia (West Bengal), started commercial production at the plant in 2000 with an aim to produce high-quality products to gain market share in the ASEAN countries. But, with Chinese manufacturers increasing output since around 2012, resulting in an oversupply, Mitsubishi Chemical has decided to pull back due to profitability concerns. The business has bled an operating loss for four straight years since fiscal 2012.
Mitsubishi Chemical will offload its share in the Indian PTA venture to a US-based fund that owns a chemical manufacturer in Haldia, West Bengal, while the Japanese firm plans to sell its shares in a Chinese unit to an oil refinery in Ningbo, Zhejiang Province. The two transactions are expected to total 10 billion yen to 20 billion yen ($95.5 million to $191 million). The divestment, to be completed by the end of December, will cut annual revenue by 150 billion yen or so.
In India, PTA manufacturers - Reliance Industries and MCC PTA India - have been raising the issue of dumping in the country. This resulted in imposition of anti-dumping duty on purified terephthalic acid imports from China, Korea, Thailand and the European Union in July 2014.
However, the PTA user industry, ie polyester fibre producers, claim that anti-dumping duty has raised the raw material cost for these companies and has eroded their profit margins and made Indian polyester fibre producers less competitive globally.
But Mitsubishi Chemciasl will keep its PTA business in Indonesia, which supplies chiefly to group operations, as well as one in South Korea where Mitsubishi Chemical holds a stake in a production facility of an affiliate not included in its group results.
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