The move by Far Eastern New Century Corp (遠東新世紀), one of Taiwan’s leading textile makers, to set up a purified terephthalic acid (PTA) joint venture in China reflects the company’s ambition to enhance its vertical integration, an analyst said yesterday.
Far Eastern announced on Monday that it would join forces with China’s Sinopec Yizheng Chemical Fiber Co (中國石化儀征化纖) to build a PTA firm in Yangzhou, Jiangsu Province. The plant will have an annual capacity of 1 million tonnes.
The partners signed a letter of intent for the joint venture, with Far Eastern to hold a 60 percent stake in the new company and Yizheng to own the remaining 40 percent.
The proposed 3.8 billion yuan (US$569 million) venture has been approved by Chinese authorities, and Far Eastern said construction of the new plant is expected to be completed in two years, with production scheduled to start no later than 2013.
“PTA is the main raw material of Far Eastern’s polyester-related products. The investment is expected to help the company secure supplies of the raw material,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said. “The investment shows the company’s efforts to vertically integrate its business and avoid possible raw material shortages in the future.”
Far Eastern produces about 1.6 million tonnes of PTA a year, including 1 million tonnes in Taiwan and 600,000 tonnes in China.
Far Eastern said it expected to add another 600,000 tonnes from the new plant in Yangzhou.