TOKYO -- Japanese trading house Sumitomo and Spain's Cepsa group are partnering on what will be one of China's biggest factories for phenol, a raw material for high-grade plastics used in cars and electronics.
Work is already underway on the plant in Shanghai, which is slated to begin production at the end of the year. It will be able to churn out 250,000 tons of phenol annually.
A subsidiary of the Spanish energy company owns 75% of a joint venture set up to build and operate the factory, with Sumitomo holding the remaining 25%. The partners are expected to spend around 30 billion yen ($291 million) on the project.
The factory will also produce 150,000 tons a year of acetone, a raw material for acrylic resins.
With ample experience in building and running phenol plants, Cepsa is moving into China, the world's biggest market for the chemical, for the first time. Sumitomo has sold Cepsa products to automotive and electronic parts makers in Asia for 25 years. It expects to book 60 billion yen to 70 billion yen in sales from the new facility in 2015.
Rising output of cars and electronics has stretched China's supply of phenol, with 1.7 million tons of demand outstripping the 1.4 million tons produced. Imports continue to plug the gap between supply and demand, which is expected to reach 2 million tons next year, accounting for a fifth of the global total.
The Sumitomo-Cepsa plant will rival the capacity of another Japanese-backed phenol factory going up in Shanghai. It is being built by Mitsui Chemicals and China's Sinopec and is expected to begin production soon, with a potential output of around 250,000 tons a year.