Chemical Week • July 3/10 • Chemtrade puts ultrapure sulfuric acid JV on hold

Chemtrade Logistics Income Fund announced on June 23 that it is putting its KPCT Advanced Chemicals Inc. joint venture (JV) project on hold due to cost overruns. FEED studies found that aggregate capital costs for the project, an ultra-high-purity sulfuric acid plant in Arizona, will be $300 million-$380 million, about 50% more than originally estimated, Chemtrade said.

Chemtrade and JV partner Kanto Group have “made the decision to put the project on hold while revised commercial agreements are negotiated with customers to ensure that the project generates an acceptable level of return,” the company said. “In light of this decision, Chemtrade will provide an updated organic growth capital expenditure range for 2023 when it releases its second quarter results in August 2023.”

Most of the overruns are due to higher labor costs to build the plant, while some are due to equipment costs and “changes in scope to ensure compliance with regulations,” according to Chemtrade.

The JV was announced in 2022, and startup of the 100,000 metric ton plant was expected in mid-2024, with the goal of supplying the North American electronic chemicals market. “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 ultrapure sulfuric acid to the new fabs being built and expect to provide additional updates on this project before the end of 2023,” said Chemtrade CEO Scott Rook.

Another sulfuric acid expansion project at Cairo, Ohio, which is fully owned and operated by Chemtrade, “continues to be on time and on budget, with an expected start-up in 2024,” Rook added. That project has a budget of $50 million.

Meanwhile, Chemtrade said that it expects full-year 2023 adjusted EBITDA to exceed $450 million, higher than previously forecast and an approximately 4.5% increase from 2022.

“This guidance considers the recent declines in the Northeast Asia spot index value for caustic soda,” Chemtrade said. “Caustic soda now represents less than 60% of realized [electrochemical unit] netbacks, which is significantly lower than the approximately 80% level from a few years ago. Sodium chlorate is now also a more significant contributor to the adjusted EBITDA of the electrochemicals segment.”