Lealea Enterprise Co (力麗), which makes polyester yarns, announced on Friday that it is investing US$100 million to build a factory in Fangyuan Township (芳苑), Changhua County.
The plant is scheduled to manufacture nylon 66 products that would double the firm’s annual revenue to NT$2 billion (US$66.93 million) after the factory is built in 2016.
“We are currently in talks with US-based Invista Inc to purchase the technical knowhow, and we expect to finalize the deal by the first quarter of next year,” Lealea chairman James Kuo (郭紹儀) told reporters on Friday.
Once the deal has been sealed, the company would start building the factory next year, with construction likely to take two years, Kuo said.
Monthly capacity is expected to reach 2,400 tonnes and 1,200 tonnes of nylon 66 chips and filament yarns respectively, Kuo said, adding that Invista would provide the materials for the products.
“We will be the first company in Taiwan to make nylon 66 chips,” he said.
Kuo said global demand for nylon 66 chips and yarns is around 1.2 million tonnes a year, while demand for nylon 6 chips and yarns is 5 million to 5.5 million a year.
However, prices for nylon 66 chips and yarns were 30 percent higher than for nylon 6 products, Kuo added.
“Nylon 66 is more suitable for knitted fabrics for personal clothing because of its texture,” he said.
Kuo, who is also chairman of Li Peng Enterprise Co Ltd (力鵬), which makes nylon products, said Li Peng Enterprise is investing NT$300 million to NT$400 million in a dyeing and finishing plant, which will be used to process Lealea’s nylon 66 products.
Li Peng would expand its capacity to process dyed nylon 66 yarns, similar to that of textile company Toung Loong Textile Manufacturing Co (東隆興業), Kuo said.
Looking ahead, Li Peng’s shipments are likely to grow 3 percent to 5 percent from about 300,000 tonnes this year on Chinese demand for nylon products, which is expected to rise by 20,000 tonnes, or 5 percent, from this year, the company said.
However, prices for nylon products are not likely to post significant increases next year because prices for cotton, which is used to substitute nylon, will remain flat in the first half of next year as Beijing continues to subsidize cotton production and impose import tariffs, Kuo said.
“The Chinese government promised to purchase local cotton for less than US$1.20 per pound and impose a tariff of between 120 percent and 150 percent on cotton imports from Taiwan,” Kuo said, adding that the global cotton price is about US$0.85 per pound.
Gross margin for Li Peng’s nylon products is to remain at US$320 to US$350 per tonne next year, the company said.
Li Peng posted revenue of NT$24.36 billion from January through last month, up 4.24 percent from the NT$23.37 billion a year ago, according to a filing to the Taiwan Stock Exchange.
Lealea revenue is set to rise by NT$700 million next year after the purchase of eight false twisting machines this year, increasing their number to 10, the company said.
Lealea posted revenue of NT$11.39 billion this year, down 15.44 percent from the NT$13.47 billion the previous year, the filing said.