Mitsubishi Gas to Invest 200 Billion Yen in Methanol

Mitsubishi Gas Chemical Co., the world’s fourth-biggest methanol maker, is investing about 200 billion yen ($1.76 billion) over three years expanding overseas production to achieve a 30 percent increase in pretax profit.

Mitsubishi Gas targets pretax profit of as much as 65 billion yen as early as the year ending March 31, 2010, from 50 billion yen last fiscal year, said President Hideki Odaka. The Tokyo-based company is building a new methanol plant in Saudi Arabia, and plans plants in Venezuela and Brunei.

Odaka is confident Mitsubishi Gas can win market share from competitors who face narrowing margins because of high natural gas costs. Methanol prices in Asia have doubled in the past five years. Mitsubishi Gas’s business tie-up with Saudi Arabia on gas supplies has allowed the company to keep its spending on the raw material almost unchanged for 30 years.

“With our new plants we can stay competitive,” Odaka said in an interview on July 6. “We’ll benefit even if methanol prices drop by half.”

Mitsubishi Gas was the first Japanese company to set up a chemical plant in Saudi Arabia. It started making methanol in the Middle East nation in 1983. The price of gas Saudi Arabia offered the company then “is still our cost now,” Odaka said.

Japan Saudi Arabia Methanol Co., in which Mitsubishi Gas holds a 47 percent stake, has a joint venture with Saudi Arabia. The venture, Saudi Methanol Co., can produce 3.3 million tons a year and plans to expand capacity to 5 million tons by the first quarter of 2008.

Asian Demand

Mitsubishi Gas plans to double its methanol capacity to 8.5 million metric tons a year, from 4 million tons now. Demand for the light alcohol used for coatings and plastics is estimated to grow about 3 percent a year, Odaka said.

Global demand may increase to 43.2 million tons in 2010, from 34.6 million tons in 2005, according to data compiled by the company. Sales in Asia will account for about 40 percent of worldwide demand in 2010.

Mitsubishi Gas is partnering with the Brunei government and Itochu Corp. on a project in Brunei that may cost more than $3 billion. The plant will be completed in the first quarter of 2009. Mitsubishi Gas has plans to build an 850,000 tons methanol plant in Venezuela, in addition to an existing 730,000 tons facility. It’s also studying a $2 billion project in Chongqing, China.

“We haven’t decided yet whether to go ahead with the China project,” Odaka said. “The point is natural gas prices. From an economic point of view does it make sense to do so?”

Methanol Prices

Odaka expects methanol prices to stay above $250 a ton until 2008 and drop to about $200 a ton in 2009 as new plants, including those of Mitsubishi Gas, start production. Methanol shipped to Japan was $310 a ton as of June 30, according to oil-pricing service Platts.

Shares of Mitsubishi Gas fell 16 yen, or 1.3 percent, to close at 1,229 on the Tokyo Stock Exchange, their lowest since June 22. They earlier fell as much as 3.6 percent to 1,200 yen. The Topix Chemicals index rose 1.1 percent.

In addition to the methanol plants, Mitsubishi Gas plans to invest as much as 50 billion yen in expanding its capacity to make polycarbonate, a type of plastic used in computers and vehicles. The company will expand polycarbonate output in Thailand and may build a 2 billion yen plant in China, Odaka said.

“We want to build the Chinese plant because demand there is soaring,” Odaka said. “We’re just waiting for China’s approval.”

Source: www.bloomberg.com