Chemtrade Logistics Income Fund was scheduled to break ground on the expansion of its Cairo, Ohio, ultrapure sulfuric acid plant on Dec. 9. The Cairo investment is US$50-$55 million and will lead to a 60% increase in production capacity, with an expected 25% internal rate of return. The expected start-up of the expansion is set for 2024.
The expansion is part of a $270 million growth capital expenditure that the company expects to incur through 2027 to complete organic growth targets and capital investments. Chemtrade is targeting to generate incremental annual adjusted EBITDA of $45 million by year-end 2025 and incremental adjusted EBITDA of $75 million by year-end 2027.
Chemtrade has also announced plans for a greenfield ultrapure acid joint venture – KPCT Advanced Chemicals LLC, in Casa Grande, Ariz. The jv is with privately-held Kanto Group, with Chemtrade holding 49%. The plant will use Kanto technology, which the company said is currently in use for leading semiconductor producers in Asia.
The Arizona plant will have a total annual capacity of approximately 100,000 mt and is expected to start up in 2025. Chemtrade puts the cost of the Arizona project at US$175-$250 million, and the company expects to realize an internal rate of return of 20% plus of its investment.
Chemtrade said it is already the leading North American producer of ultrapure acid to the semiconductor manufacturing sector. It said the Cairo expansion and the Arizona jv will allow it to further strengthen its leading market position while capturing anticipated demand growth from announced semiconductor industry capacity expansions. The company expects demand to increase by 2-3 times over the next five years, given the semiconductor expansion taking place in North America.
Chemtrade is also looking at organic growth in the hydrogen field, saying it already produces green hydrogen through sodium chlorate and chlor-alkali manufacturing processes using hydro-electric power. The company said it is developing projects at Prince George, B.C., and Brandon, Manitoba, sodium chlorate plants to monetize the hydrogen streams. Construction at Prince George is expected to commence in 2022, with production beginning in 2023. It said the Brandon opportunity is expected to be even more significant given the facility’s scale.
Chemtrade also sees organic growth projects in its Water Chemicals segment and expects to undertake small projects to expand capacity. It said these are proceeding on schedule for completion this year and are expected to contribute more meaningfully in 2023. It also sees opportunities to expand into new specialized products, and could consider smaller acquisitions in the future.