Covestro (1COVG.D): Capacity Expansion Clouds MDI Upside - Marginal Negative for BASF

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Covestro (1COVG.D): Capacity Expansion Clouds MDI Upside - Marginal Negative for BASF

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01 Jul 2026 00:00:00 ET │ 12 pages

Covestro (1COVG.D)

Capacity Expansion Clouds MDI Upside - Marginal Negative for BASF

CITI'S TAKE

Neutral Covestro plans to build a 660kt world-scale MDI facility (5% of global

nameplate) in Shanghai and is studying a potential Middle East site. While Price (30 Jun 26 08:28) €59.80

capacity expansion is not surprising given ADNOC’s backing, the chosen Target price €62.00

locations are, given earlier preferences for the US and a potential shift Expected share price return 3.7%

away from the “local-for-local” model. The addition reduces the likelihood Expected dividend yield 0.0%

of a tighter MDI market this decade, with our supply/demand model now Expected total return 3.7%

pointing to global utilisation in the mid-, rather than high-80s by 2030,

Market Cap €12,432M versus ~81% currently. Accordingly, we view the development as

US$14,151M marginally negative for BASF.

Covestro announced yesterday its intention to build a new world-scale MDI

facility in China, alongside a feasibility study for a potential new site in the Middle Sebastian Satz, CFAAC

East. The former would be a 660kt plant - equivalent to roughly 5% of global +44-203-569-3662

nameplate capacity - constructed as a brownfield expansion at its existing Shanghai sebastian.satz@citi.com

site, with an estimated capex of €1.5–2.0bn (FAZ, 30 June). Ranulf Orr, CFA

+44-20-7986-3922

ranulf.orr@citi.com

We are not surprised by Covestro’s decision to expand MDI capacity. We have Omi Pallavi

consistently argued that the stronger balance sheet and financial backing of its new +44-20-7508-1367

majority owner, ADNOC, would enable the global nr.3 player to pursue investments omi.pallavi@citi.com