Courtaulds delays plans for Far Eastern Tencel plant

Asia's growing economic crisis has forced Courtaulds, the chemicals group, to postpone plans for the construction of a pounds 150m fibre plant in the Far East. As Andrew Yates reports, the news came as Korean giant Hyundai confirmed it was delaying work on its UK factory.

Gordon Campbell, chief executive of Courtaulds, said: "We were looking to set up a plant in Indonesia or Korea. But now we would like a bit of time to see what happens over there."

The new plant would have produced Tencel, Courtaulds' new "wonder fibre" and its location was to be announced last autumn. The news came as Hyundai, the Korean electronics group, confirmed long-running rumours it was delaying construction work at its Scottish plant.

Building delays at the group's new pounds 120m Tencel factory in Grimsby meant the construction of the Asian plant had already been put back by several months. Now the downturn in the Far East has lead to it being postponed indefinitely.

Courtaulds said that the economic crisis had already led to a dramatic fall in imports to the area from the West, with orders drying up at some of Courtaulds businesses. Mr Campbell said Asian economies would react to the severe problems at home by dumping their products on the developed world. "They will try to export their way out of trouble," he said.

Tencel is the first man-made fibre to be invented for more than 30 years. Courtaulds claims it is a soft as silk, but it is much tougher and doesn't wrinkle. The new Asian plant was part of the group's plan to expand the production of Tencel rapidly over the next few years. However, Courtaulds remains confident that further delays will not hamper its long-term output plans.

The disappointing performance of the group's viscose business, which has been dogged by overcapacity and the damaging affects of the strong pound, has seen Courtaulds' share price tumble from 605p five years ago to 285p. Mr Campbell said the slump in Courtaulds' value could leave it open to a bid. "We have not had talks with anybody or had an approach. However, I wouldn't be surprised if we did get one," he said.

Meanwhile, Hyundai Semiconductor Europe said it was delaying construction work at its Dunfermline plant because of continued economic problems in South Korea.

Hyundai announced in December that investment in manufacturing equipment and tooling would be pushed back by a year, pending recovery in the Asian markets. The group said yesterday that it did not expect this rescheduling to be changed as a result of the delay to UK construction work.