Toronto-based Chemtrade Logistics Income Fund reported on June 23 that it and its joint venture partner, privately-held Kanto Group, have decided to put the KPCT Advanced Chemicals greenfield ultrapure sulfuric acid plant in Casa Grande, Ariz., on hold due to higher-than-expected capital costs, which came in at $300-$380 million, 50% higher than anticipated.
“The joint venture has now had a chance to analyze the results of the front-end engineering design (FEED) studies and has looked for cost savings where possible. However, Chemtrade believes the costs cannot be further reduced to any material extent,” the company said in a statement, adding that it is renegotiating commercial agreements with customers as a result.
The Arizona project was first announced in December (GM Dec. 9, 2022) with a projected annual capacity of 100,000 mt at a cost of $175-$250 million. The company said roughly half of the increased cost is due to high labor costs to build the plant, along with equipment costs and some changes in scope to ensure compliance with regulations.
“This was a difficult decision for us, but we need to make sure that any project we enter will achieve an acceptable level of financial return for our investors,” said Chemtrade President and CEO Scott Rook. “In this case, putting the project on hold will enable the joint venture to continue negotiations to secure acceptable contracts with offtake partners.
“While nothing is certain, given the expected growth in demand by the major chip producers for ultrapure acid in North America, we believe that we will reach agreements to supply KPCT ultrapure sulfuric acid to the new fabs being built and expect to provide additional updates on this project before the end of 2023,” he added.
Rook said Chemtrade’s ultrapure sulfuric acid expansion in Cairo, Ohio, remains on time and on budget, with an expected startup in 2024 (GM Dec. 9, 2022). Chemtrade said it will provide an updated organic growth capital expenditure range for 2023 when it releases its second quarter results in August 2023.
Chemtrade also reported that it expects 2023 adjusted EBITDAto exceed $450 million, up from 2022’s record level of $430.9 million. The company said the new guidance reflects recent declines in the Northeast Asia spot index value for caustic soda, as well as a higher EBITDA contribution from sodium chlorate in the company’s Electrochemicals (EC) segment.