(Yicai Global) March 4 -- Wanhua Chemical Group's shares rose after the company said it will form a joint venture with a petrochemicals maker under the Fujian government to build a polyurethane raw material plant in the Chinese province.

Wanhua Chemical's stock [SHA:600309] climbed as much as 2.4 percent in Shanghai before ending the day 1.2 percent higher at CNY49.90 (USD7.19).

The chemicals giant will contribute CNY2.4 billion (USD344.7 million) in cash, 80 percent of the total investment, to the project with Fujian Petrochemical Group, the Shandong province-based company said in a statement late yesterday. The new plant will turn out 400,000 tons of methylenediphenyl diisocyanate and 400,000 tons of polyvinyl chloride a year.

MDI is one of the main raw materials used in the production of polyurethane. Wanhua Chemical's market share exceeds 20 percent of total global demand of about 7 million tons, public records show.

The JV will acquire a 64 percent stake in the MDI project firm Fujian Cornell Polyurethane for free, and the stake of Cornell Polyurethane's original actual controller will drop to 16 percent.

Chematur Technologies

Cornell Polyurethane's former major shareholder sold its MDI assets to Wanhua Chemical for CNY925 million (USD132.9 million) last July, including all of its stake in well-known MDI production technology services provider Chematur Technologies, and pledged to transfer the Fujian MDI project's development rights to Wanhua Chemical.

Founded in 2017, Cornell Polyurethane planned to build an MDI project with an annual capacity of 800,000 tons for CNY12.6 billion. The first phase, with a total investment of CNY6.6 billion and an annual capacity of 400,000 tons, was scheduled to go into operation in October, but construction work has made no progress since the project secured government approval.

As part of the deal to build the JV, Wanhua Chemical agreed that Fujian Petrochemical adds the toluene diisocynate and PVC production equipment of its subsidiary Fujian Southeast Electrochemical into the JV in exchange for a 20 percent stake. TDI is another important raw material for polyurethane production.

The JV will launch MDI production lines, expand the annual TDI capacity to 250,000 tons and build a PVC plant with an annual capacity of 400,000 tons. In addition, Wanhua Chemical will take a 49 percent stake in Southeast Electrochemical to boost its caustic soda output.

Southeast Electric, which specializes in chlorine and alkali chemical production and auxiliary thermoelectric supply, will provide raw materials and supporting utilities for the MDI and TDI projects, the statement said, without revealing the investment amount for the projects.

Editor: Peter Thomas