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Mutually exclusive projects, in its true meaning, are projects that cannot occur at the same time. In this particular meaning the Merseyside and Rotterdam projects are not mutually exclusive because (lacking information about financing capabilities of Diamond Chemicals) can actually be done simultaneously. But what really matters here is if both projects are mutually exclusive in economic terms, meaning if it is economically feasible to support both projects at the same time.
In contrast to its true meaning, in economic terms these two projects are mutually exclusive. Diamond Chemicals cannot approve both projects without incurring huge losses and collecting no benefits at all.
The Polypropylene industry is facing a huge recession in the recent years and although this recession is expected to fade away, there is still no signs of an economic recovery. Also, this is a fierce competition, with many players and few new target markets to expand. Also, there is little ability to differentiate products or change market price by a single firm (since Polypropylene is a commodity).
Both the Merseyside and Rotterdam project predict to increase plants output by 7% if Diamond Chemicals Plc invest in them. While it may seem feasible to sell 7% extra Polypropylene it looked absolutely impossible to sell 14% more output with the current economic conditions. With that said, it would make no sense for the Diamond Chemicals to approve both projects.
Furthermore, the Rotterdam new innovative system will be extremely expensive to dismantle, turning the project irreversible. This means Diamond Chemicals would have to make a commitment to this new technology and to this project making it impossible to try the Merseyside project once the Rotterdam project is taken if this new Japanese technology does not have success.