Yuhuang's methanol project gains momentum

Charlie Yao has a plan. He wanted to build a $1.85 billion methanol production facility on 1,200-acres of farmland in St. James Parish, Louisiana.

A little over a week ago, he moved one step closer to achieving his dream.

Yuhuang Chemical Industries Inc. (YCI), a wholly owned subsidiary of Shandong Yuhuang Chemical Company, Ltd., announced on Aug 23 that it has entered into a business agreement with the Wichita, Kansas-based Koch Methanol Investment, a company that distributes chemicals. As part of the deal, Koch has acquired an indirect minority equity interest in YCI Methanol One, LLC.

The deal also gives Koch affiliates methanol offtake rights from the Yuhuang facility, as well as the right to construct, own and operate the methanol terminal assets for the outbound flow via ship, rail and truck.

"The decision by Koch Methanol to invest in YCI Methanol sends a clear signal to the industry about the strength of this facility," said Yao, CEO and president of YCI.

"The new facility is located in a region with convenient access to natural gas, a highly skilled workforce, and world class transportation infrastructure, allowing us to be very competitive in our production and distribution," Yao said. "If viable, there is also suffi cient land to add a second and third plant."

Located in a strategic location near the Mississippi River, YCI is the biggest green-fi eld investment in methanol by a Chinese company in Louisiana.

The company's corporate office is located in Houston, while the land for its production facility, which was purchased in 2015, is located in St. James Parish, Louisiana.

Yao said he chose the Louisiana location because the state government offered better incentives and the site also has easy access to railroad and waterway, which will help delivery of the company's products.

The Houston offi ce employs around 60 people, and the St. James Parish complex employs around 30 people, Yao said. Almost all of the workers are local hires.

According to Yao, the idea for YCI got hatched in 2009 when Wang Jinshu, chairman of Yuhuang Chemical, decided to take his business outside China.

"He chose the US because it has a big market for methanol, and it also has lower costs for natural gas, a feedstock for methanol," Yao said.

Methanol is a chemical used in the manufacturing of numerous every-day consumer products, such as paints, plastics, furniture and carpeting. It is produced from synthetic gas, which could be made from biomass, agricultural and timber waste, solid municipal waste and a number of other feedstock.

According to MarketsandMarkets, which provides industry research for companies, the global methanol market is expected to reach $54.16 billion by 2021. The global production of methanol is 40 million tons per year.

A 2017 report from IHS Markit shows that Northeast Asia, which also accounts for 54 percent of global methanol capacity, is the world's largest consuming region for methanol. It's followed by North America, Western Europe, Middle East and Southeast Asia.

YCI announced the St. James project in 2014, and Yao, a former general manager at Shell with over 10 years of industrial technical and manufacturing experience under his belt, offi cially took the reins as the company's CEO the same year.

Yao said YCI gave him a platform for building a startup company. In addition, he was very impressed by Wang's determination and vision.

The project also caught the eye of Bank of China, which arranged a syndication loan of $800 million for the company.

"The management group of Yuhuang is very determined, responsible and professional," said Xu Chen, president and CEO of Bank of China USA and the chairman of China General Chamber of Commerce-USA, which serves 1,500 Chinese member companies.

Based on sharp judgment and years of experience in the industry, Yao decided to purchase steel from the US market when the Trump administration took over. That decision prevented the company from being affected by the tariffs that the administration later placed on imported steel.

Xu said the investment environment for overseas Chinese companies is important, but it is also essential for the companies to be professional and confi dent about their own operations in order to succeed.

Yao said commercial production of methanol for YCI is expected to begin in mid 2020.

Around 60 to 70 percent of its products will be sold to customers in the US, while 20 to 30 percent go to the Chinese market, and 10 percent will be delivered to Europe.

The plant is projected to create 100 permanent jobs, while construction of the facilities will result in 1,000 construction jobs.