Chemical Industry Summary
The Q4 earnings reporting season is now more than halfway complete and reported earnings for US companies have either been near expected levels or have demonstrated some upside versus consensus estimates. Many companies are reporting positive earnings momentum and express cautious optimism for 2017 based on macro trends. While there is a consensus that 2017 will be better than 2016, the question is one of degree. Price momentum is being seen for methanol, caustic, basic olefins and polyolefins. Global refining margins are still subdued.
There is considerable debate on how much impact the new US grass-roots crackers will have on industry margins as several new units will begin operation in 2017. Dow Chemical has suggested that the impact will be subdued as global operating rates for Polyethylene will be steady and demand growth will absorb the additional production. However, CMR believes that by the end of 2017, the current bargain US ethane prices will begin to feel the impact of the increased feedstock demand and the pull of ethane exports that are expected to increase by300,000 MT per year by 2018.
All industry participants are looking to see what impact the recent OPEC production cuts will have on global oil prices. CMR’s view is that the market’s current level of optimism may not be rewarded in the near term.
Macroeconomics and Geopolitics
Americas
The first 100 days of the Trump administration are starting off quite turbulent, with significant executive orders issued ahead of getting the president’s full cabinet in place. Major policy impacts are expected in the areas of trade, energy the environment and tax policy, all of which could impact the domestic chemical industry. Political partisanship is roiling the process of getting the new administration in place and appointments to several key cabinet post positions have been delayed.
In late January, the Bureau of Economic Analysis released its advanced estimate of USGDP growth in Q4 of 1.9%. Lower exports were cited as a factor that growth came in below that reported in Q3 of 3.5%. In its early February forecast, the Conference Board expects the full-year GDP growth of the US economy in 2017 to be 2.3%, up 0.7% from 2016. The forecast calls for accelerating economic activity throughout the year. The US jobs report for January came in at 227,000 jobs added, up 17,000 from December. This number was the largest number since September and up 24% from the prior 3-month average. The unemployment rate of 4.8% edged up slightly as more discouraged workers have decided to re-enter the workforce. The labor participation rate of 62.9% edged up 0.2% in January. Statistics indicate that most job gains were observed in the relatively low-paying service sectors.
After the December increase of 0.25%, the Fed signaled that three more interest rate increases of the same magnitude were likely in 2017. However, in light of the current US economic indicators, the consensus opinion is that the scheduled March increase will be delayed. This will leave the bulk of the increases for the later part of 2017, if they are enacted. In January, the US manufacturing PMI index improved to 55.1, up from December and signaling strong expansion at the beginning of the year. In January, US auto sales of light cars and trucks were 17.48 million units, down 4.5% from December’s record of 18.3 million units, the highest level in over 10 years. US housing starts in December were very strong at 1,226 thousand on a seasonally-adjusted basis. For the last three months, average starts were 1,216 thousand on a seasonally adjusted basis, up 7% from the comparable period in 2016. In its February forecast, the NAR (National Association of Realtors) boast its forecast for US housing starts for years 2017 and 2018 to 1.258 and 1.368 million starts. If these predictions are seen, this would represent roughly an 8.3% per year increase in housing starts for both years, down from a prior view of closer to 10% growth per year. Existing home sales in December were 5.61 million. Average housing prices for existing home sales in December was US$234,900, up 6.8% from last year.
Mexico’s PMI in January of 50.8 was up slightly from 50.2 seen in December and is in flat growth territory. US President Trump’s trade policies could prove to be highly significant for Mexico, the US largest trading partner. Canada’s PMI of 53.5 recorded in January was up strongly from the 51.8 recorded in December and was at its highest level since December 2014.
Brazil’s manufacturing sector recorded a January PMI of 44.0 represents a seven-month low, with no leading indicators moving in positive direction. The Brazilian manufacturing sector has been in contraction territory since the end of 2014. In its Q4 forecast, the IMF expects Brazil’s GPD to fall 3.2% in 2016, following a 3.8% drop last year.
Europe
The European economy continues to move in the positive direction in part due to continued economic stimulus from the ECB. Growth in Europe has continued to move closer to that of the US. For 2016, the European Union forecasts GDP growth of 1.7% as final numbers are tallied. For 2017/2018 the EC expects GDP growth at 1.6% and 1.8%, both estimates increased 0.1% in recent weeks. In December, the €2.3 trillion stimulus program was extended for 9 months.
Significant economic risks are still in play for Europe in 2017. The potential “Frexit” with France exiting the EU will come into discussion during the upcoming election in France with timing for a potential run-off election on May 7th. The head of the National Front, Marine Le Pen has advocated for France leaving the European Union. Ms. Le Pen has identified herself as “Madame Frexit”. The other significant risk to Europe is the re-emergence of Greek debt issues and potential defaults.
All countries in the Eurozone showed strong month-on-month improvement in manufacturing sector activity in December. The composite manufacturing PMI for the region was reported at 55.2, a result that constituted a 69-month high. Several countries reported multi-year highs, most notably France and Germany, the two largest European economies. Greece was again a laggard with a PMI of 46.6, a 16-month low. Greece continues to suffer from its debt burden and need to restructure governmental outlays.
Similarly, Eastern Europe and Russia showed positive manufacturing trends in December. Russia’s manufacturing PMI registered a 70-month high at 54.7 in January. This is the sixth month that manufacturing activity has improved, spurred by strong order patterns. Poland’s manufacturing sector has been in expansion for nearly two years. For January, Poland showed a manufacturing PMI of 54.8 was a 22-month high.
Asia
China’s Q4 GDP growth came in at 6.8%, slightly ahead of the expected level of 6.7%. This level of growth was consistent with the government’s goal: to cool the economy, to move the economy towards domestic consumption (away from export purchasing)and investment driven growth. January’s PMI index was recorded at51.0, indicating that the rebound of its manufacturing Q4 sector has cooled from the November/December pace.
China’s auto production in December was 3.06 million vehicles, up 14% from the same month in 2015, and at the highest level all year. For the full year of 2016, auto sales of near 28 million are up 14% from last year, a significant rebound from 2015 that saw 24.5 million vehicles produced.
Feedstock – Crude Oil
The global crude oil market was encouraged by OPEC’s report indicating that January’s production level of 32.139 million barrels per day was 890,000 barrels per day below the December result. This number implied a 90% compliance to the targets agreed to at the annual OPEC meeting held in Vienna in late November. Russia’s reported production of 11.03 million barrels per day was approximately 100,000 barrels per day lower that December, but not close to the 300,000 Bpd reduction that was pledged. Other non-OPEC producers pledged cuts of 258,000 Bpd. In January, non-OPEC production was up 1.0 million Bpd as incremental production, encouraged by higher prices, was seen from various sources including North American shale oil producers.
In its Feb 11 webinar, OGJ editor Bob Tipee indicated that the US$10/bbl. increase seen in crude prices since the November OPEC announcement is primarily related to news flow and market expectations. The OGJ view is that 70% of the recent price increase was due to the announced OPEC cuts and 30% was due to the non-OPEC cuts. It should be noted that the announced cuts are only committed through June 2017 and would need to be renewed in June 2017. As of February 13th, WTI spot prices in the US were near US$53 per barrel, approximately flat with last month. The December ’17 NYMEX futures price is only near US$55/Bbl. currently, indicating that the market does not believe that significant future price expansion is likely. While crude prices have been relatively stable throughout January and February, trading in a US$5/Bbl. range, there is some concern in the market that crude prices could quickly give back the US$10/Bbl. gain seen since November, should the OPEC production numbers begin to show non-compliance with targets, or production growth in other regions. These scenarios could delay re-balancing the crude oil market past 2017.
The DOE reported US crude production for the first week in February at 9.0 million barrels per day, up about 200,000 Bpd in recent weeks, as shale-based production responds to incrementally higher pricing. Current US crude oil production is down 6.2% from the peak production of 9.6 million barrels per day seen in July 2015. The total reduction of crude oil in the US had been near 700,000 barrels per day from peak levels. However, this trend is expected to reverse as higher crude prices have spurred increased drilling activity, particularly in the Permian area. For the week of February 6th, US crude inventories not in the SPR (Strategic Petroleum Reserve) increased by 6 million barrels, up 6% from last month and 1.3% from 2016. This was the sixth month of increases. The recent US crude inventory of 509 million barrels is below the peak of 543 million barrels seen in April 2016.
For the week ending February 3, Baker Hughes reported that the US total rig count (oil and gas directed) was up again to729 rigs. This number is 9.6% above last month’s count. Since the beginning of May of 2016, the total rig count of 729 is up 80% from the May-2016 low of 404. Reports from Bloomberg suggest that near-term drilling CAPEX for shale producers could be up as much as 30% in 2017 over 2016. Many shale-based producers have improved drilling efficiencies and lowered break-even costs very near the current international crude prices.
Feedstock – Natural Gas & NGLs
Which the impending end of the peak heating season, US natural gas prices have begun to ease and have traded below US$3.00/MM BTU on a spot basis in recent days. Generally, most areas of the US have seen higher-than-normal temperatures associated with the El Nino effect, except for the North East US that is more highly dependent of heating oil. For the last week in January, underground gas inventories were reported by the EIA at 2.7 trillion SCF, representing 64.5% of capacity. This number is 31% higher than the most recent 5-year minimum. As gas withdrawals have begun to slow, these adequate inventories are likely to cap near-term gas pricing. Withdrawals in the last three weeks have slowed from 243 Bcf to 87Bcf.
With the cooling of US natural gas prices, ethane spot prices for January average near US$0.22 per gallon, down about 4cents/gallon. This pricing is near energy parity level, on a dollar per MM BTU basis, with natural gas pricing. CMR notes that this level of pricing cannot continue indefinitely, as no credit is available for offsetting producers’ transportation and fractionation costs. For ethane, these costs are typically US$0.05-0.07/gal above natural gas energy value but can be considerably higher if NGLs must be transported great distances.
The oil-to-gas price ratio is currently near 18:1, reflecting equivalent softer gas prices and steady oil prices. As a reminder, the economic equivalent price for cracker feedstock is near 8:1. US ethane crackers currently remain advantaged, but not by a large margin as in the near past.
For the week ending February 3, the EIA reports that US propane/propylene inventories were 55.8 million barrels, down 11% from last month and down 28.6% from a year ago. This is cited as a contributing factor for the recent strength in US propylene pricing. The current inventory trends reflect strong domestic demand (weather related) and increased US export capability. Spot prices for propane are currently near US$0.77/gallon, up about US$0.45 per gallon from last year, but still below international prices.
US Olefins & Polyolefins
US contract ethylene prices for January settled at up 1.25cents/lb., resulting in a net transaction price of 29.5cents/lb.for the month. Ethylene prices increases reflect the recent increase in feedstock prices, both for ethane and crude oil-based feeds. In addition, three operating issues including DuPont’s Orange cracker’s unplanned 2-week outage has reduced supply. While LyondellBasell’s Corpus Christi cracker is now back on-line following an extended turnaround that included an expansion, the company have reported that an operational issue will prevent the newly expanded cracker from running at its new capacity until modifications are made. The new Oxy/Mexichem cracker is reported to be in the commissioning process and is expected to start up in the first half of 2017. Spot ethylene prices have moved up from December’s average near US$0.25/lb.to US$0.32/lb.in January and are currently in the mid-30’s in February.
US contract propylene prices moved up 10.0cents/lb.in January with contract pricing at US$0.40 per pound for chemical grade and US$0.415/lb.for polymer grade. January spot prices for propylene averaged near US$0.48/lb., up US$0.20/lb.from December. Although there continue to be minor supply-side issues, February spot prices have stabilized in the mid-40’s area. February propylene contract nominations by producers are up 6-7cents/lb., but customers are pushing for a lower settlement.
The US contract butadiene price settlement was split in February with four settlements in the range of up 26cents/lb.to up 31cents/lb.The weighted average benchmark contract price contract price of near 93cents/lb.is over three times the level of 29cents/lb.seen last March.
CMR forecasts that US ethylene cash margins for US light crackers will be US$0.144/lb.in Q1, up about 1cents/lb.from Q4 based on higher ethylene pricing, higher feedstock cost, and stronger co-product contributions.
In January, US contract PE prices rolled over, following decreases of 2cents/lb.in December and 3cents/lb.in November. However, the proposed 5cents/lb.increase for PE in February looks attainable based on firm international demand and low producer inventories.
US exports of PE in December of 434 thousand MT were up 16% from November, reflecting the end of the fall turnaround season. On a YTD basis, net exports in 2017 were up 2.3% from a year ago. Total US PE export volumes of 5.3 million MT were up 3.8% over 2016. Gross PE exports represented from the US represented 26% of industry capacity in 2016.
US polypropylene exports in December were 120,000 MT, up 44% from November, and up 40% over the full-year 2016 average. from a year ago. Imports of 14 thousand MT, down 26% from November. Net exports of PP in 2016 were nearly flat with 2015 at near 11,000 MT per month.
Contract prices for US PVC in January rolled over, with benchmark contract near 74cents/lb.For February, the current proposal is for a price increase of 4cents/lb. However, flat raw materials will likely support a portion of this increase.
European Olefins & Polyolefins
For February, European the contract ethylene price €1,020 of settled up €35/MT. Since the first of the year, spot prices for ethylene in NWE have firmed about €75/MT to the area of €950/MT. Contract European propylene prices were up €45 per MT for February, identical to the January increase, at a level of €815/MT. Since the first of the year, spot propylene prices for NWE have increased by approximately €125/MT, and are currently near €800/MT.
European contact butadiene prices for February were again up strongly, this time by €540/MT from January to €1,400/MT. This is the highest level since early 2013. European spot butadiene prices have shot up €500/MT since mid-January to a level near €2,500/MT.
The European benzene contract price for February is up €177/MT to a €983/MT. This increase was similar to the 175/MT increase seen in January.
Polyethylene prices in Europe have recently increased. Prices for HDPE injection molding grade for NWE averaged €1,225/MT, up €75/MT from January and thus far in February have been in a range of €1,240/MT to €1,260/MT.
Asia Olefins & Polyolefins
Asian commodity chemical prices are influenced by increasing feedstock pricing that has helped offset improved availability and inventories. Thus far in February, Far East Asian HDPE blow modeling prices have recently increased slightly, to a level of near US$1,130 to 1,150/MT. Spot ethylene prices in SEA are currently near US$1,100/MT, up about US$100/MT since early December and are relatively stable in recent weeks.
In the last month, spot propylene and butadiene pricing in SEA has accelerated significantly. Since the beginning of December, propylene prices are up nearly US$250/MT to a level of US$900-950/MT. Current injection molding PP in SEA is near US$1,100/ MT, up US$100/MT since the beginning of December. Thus, the spread for PP has shrunk from US$300/MT to closer to US$150/MT. Chinese propylene prices have remained volatile, recently trading in a range of US$800/MT to US$950/MT.
Since the beginning of December, Asian butadiene spot prices have doubled and now stand at near US$3,000/MT.
Global Chlor-alkali
The US Chlorine Institute reported that US chlorine production in December was 1.05 million short tons, up 3% from November. The industry operated at an average operating rate near 90% of effective capacity, a relatively frim number for late in the year. For the entire year 2016, US chlorine production averaged 83% of effective capacity. The year 2016 has seen a gradual improvement in caustic prices in part due to improving rates and also due to higher export prices and lower availability of material from international sourcing. Caustic prices improved for seven consecutive months in 2016, and producers have announced a US$40/ST in January. Lower availability of caustic in the international export market has heled push up prices and support domestic price initiatives, and producers expect that a majority of the Q1 initiative will be successful.
Eurochlor reported chlorine production numbers for December 2016, with production of 815,527 MT, flat with last year. Operating rates were reported at 82.8%. European chlorine Production for the entire year of 2016 of 9.38 million MT was 2.1% below last year and represented an overall 80% industry operating rate. At the end of the year, caustic stocks were reported to be only 195,000 MT, 18% below last year, and at their lowest level in over 10 years. Inventories are beginning to reflect permanent shutdowns and conversions associated with the phase out of mercury cell technology units. CMR believes that during 2016 and 2017, 31% percent of European mercury cell capacity will be shut down, representing 8% of total European capacity. This will push operating rates up and likely will necessitate caustic imports.
AMERICAS
ExxonMobil’s Baytown cracker to be completed by 2H 2017
According to ExxonMobil’s 4Q 2016 earning call, ExxonMobil is on schedule to start-up its 1,500KTA gas-fed cracker in Baytown, Texas by the 2nd half of 2017.
Comments: In the wake of companies delaying investment decisions due to low crude oil prices and diminishing advantage of low-cost NGLs in the US, ExxonMobil remains and foresees the demand for ethylene to grow by 4% annually for the next decade. ExxonMobil has strategically invested into capacity expansion of ethylene and polyethylene along the U.S. Gulf Coast to take advantage of internal cost-advantaged feedstock and provides cost-effective options for export to Asia.
Enterprise to set up on-purpose isobutylene facility in Texas
Enterprise considers building a 425KTAisobutylene unit via isobutane dehydrogenation (iBDH) unit in Mont Belvieu, Texas, with scheduled start-up in 4Q 2019.
Comments: Similar to US propylene market, the US C4 olefins market has experienced supply tightness due to the increasing usage of light feedstock (ethane) for steam crackers. With the development of this iBDH unit, Enterprise will be able to secure feedstock for its existing C4 downstream production units, such as MTBE and isooctane. More importantly, Enterprise can extend its butane value-chain toward higher-value products. Enterprise also has a 750KTAPDH unit in Texas that is expected to start-up in the 2nd quarter of 2017. For the past few years, the firm has strategically invested into on-purpose olefins (propylene and isobutylene) production in the United States for growth opportunities with the leverage from its extensive midstream networks.
EUROPE
JSR’s S-SBR JV to start up in 2018
Japan-based JSR Corporation is on track to launch its solution styrene-butadiene rubber (s-SBR) plant in Tiszaujvaros, Hungary in 2018. The s-SBR project is a 51/49 joint venture between JSR Corporation and Hungarian MOL Group with a total investment of US$335 million. The s-SBR facility will secure its feedstock from MOL’s butadiene recovery unit nearby.
Comments: JSR Corporation has benefited from MOL Group’s existing infrastructure in Tiszaújvárosand its emergence as a vertically-integrated company with access to both Eastern European and West European markets. While the global tire market is currently oversupplied, there have been significant investments into Eastern Europe tire plants over the past few years by Korean and Indian manufacturers. The venture allows MOL group to further diversify its product offering into higher-value materials using JSR’s s-SBR production technology.
Borealis selects UOP’s technology for Belgium PDH unit
Borealis has announced the decision to license Honeywell UOP’s C3 Olefin technology for its 740KTA propane dehydrogenation (PDH) unit to be located in Kallo, Belgium. The final investment decision is expected to be made in 2018with the PDH unit targeting to come on-stream in 2021 if the project moves forward.
Comments: The propylene market has tightened in Europe over the past two years, as stream crackers have increased the share of light feedstock, resulting in less propylene as a process co-product. The growing deficit has been supplied by imports from the Middle East. Grupa Azoty in Poland and several producers in Russia have responded with planned world-scale propylene projects. Grupa Azoty is investing in a 400KT PDH unit due on-stream in 2019, of which roughly 250KT will be available for the export market. Russian producers are facing financing delays inbuilding downstream derivative plants, making them unlikely to contribute propylene to Western Europe this decade. Borealis has recently focused on enhancing its European propylene business, with a 30KT propylene upgrade of its Porvoo cracker in Finland (scheduled for completion by end of 2017) and now the much larger potential PDH investment.
MIDDLE EAST & AFRICA
Iran in talks with Uhde about licensing PDH process
Germany-based Uhde has reportedly been in conversation with Iran about licensing propane dehydrogenation (PDH) for Salman Farsi Petrochemical complex. The PDH unit in Salman Farsi Petrochemical complex is tentatively designed to produce 450KTAof propylene with target completion in the year2020.
Comments: Salman Farsi Petrochemical complex is being built at MahshahrPetrochemical Special Economic Zone (PETZONE). PETZONE is the backbone of Iranian petrochemical industry, accounting for 43% of petrochemical production nationwide. According to an official statement press released, there was 16,900KTA of idle capacity in the zone in 2014. As a result, reactivating idle production capacity has been one of main targets of PETZONE. Iran has historically been in a short position for propylene which drive the strong interests in building on-purpose propylene unit to feed its downstream polypropylene (PP) facilities. When complete, the Salman Farsi PDH unit will provide a portion of propylene output to Rejal PP plant for the 60KTA to 220KTA capacity expansion. There are another two PDH units –Mehr Petrochemical and Kharg Petrochemical –under construction and several others in the planning stages. Those on-purpose propylene projects are Iran’s moves to enhance its C3 value chain with the leverage of cost-advantaged natural gas.
Versalis, Sonatrach sign MoU for petrochemical project in Algeria
Italy’s Versalis and Algeria’s Sonatrach have inked a Memorandum of Understanding (MoU) for executing a joint feasibility study for an integrated petrochemical project in Algeria. The feasibility study follows the cooperation agreement signed by the two entities last November, aiming at enhancing vertical integration toward value-added products.
Comments: Algeria is the second largest oil producing country and the largest producer of natural gas in Africa. Algeria heavily relies on its oil and gas sector for national economy but lacks downstream production capability. Algeria’s oil and gas sector contributes about one-third of its GDP and two-third of its total export. Algeria has long attempted to diversify the oil-dependent economy. The oil downturn since 2014 has hit Algeria’s economy very hard and has been forced government to speed up its diversification plan through vertical integration toward refinery and downstream petrochemical production. State-ran Sonatrach plans to set up three refineries that will add a total of 15,000KTAin refining capacity in Algeria by 2025. Sonatrach is also teaming up with French-based Total for building a world-scale petrochemical complex.
ASIA PACIFIC
Saudi Aramco opts out from Malaysia RAPID project
Saudi Aramco has decided to pull out of the Refining and Petrochemical Integrated Development (RAPID), which is led by Petronas. The RAPID projectcurrentlyis55% complete and targets to start up in 2019.
Comments: Refinery and Petrochemicals Integrated Development (RAPID) aims at building a world-scale integrated refinery and petrochemical complex, as part of Malaysia’s national effort to establish a new area for economic growth. The proposed refinery will have a capacity of about 300,000 barrels per day. The refinery will supply naphtha and liquid petroleum gas feedstock for the RAPID petrochemical complex, as well as produce gasoline and diesel that meet European specifications. The petrochemical units, on the other hand, will enhance the value of the olefinic streams coming from the RAPID steam cracker by producing various merchant grades petrochemicals products such as polyethylene, polypropylene, synthetic rubbers and other petrochemicals products. Due to crude oil price slump, Petronas announced in early 2016 spending cuts up to US$11.3 billion toward 2020. Later in 2016 it was reportedly in talks with Saudi Aramco for a potential JV partnership on RAPID project mainly for financial purposes. However, Saudi Aramco’s decision to shelve the potential cooperation is due to the concern over insufficient investment return, coupled with Petronas’ struggle with oil price slump. Petronas is expected to reevaluate other projects that currently under planning due to the setback, such as Canada LNG project, while seeking other foreign entities for partnership on RAPID.
Pakistan to build its first naphtha cracker complex
Pakistan sets to build naphtha cracker complex (NCC project) with a total investment of US$6-8 billion for over next six years. The NCC project, with feasibility study currently underway, will be integrated with high value-added downstream units, such as polypropylene (PP), polyethylene (PE), ethylene glycol (MEG), and para-xylene (PX). Currently, there is no hard timetable for NCC project being completed. According to Pakistan Chemical Manufacturer’s Association (PCMA), the complex might take 5-6 years to complete, if it moves forward.
Comments: Pakistan is currently importing 100% of its naphtha for production of chemicals. If this project goes as planned, the Pakistan Chemical Manufacturing Association (PCMA) hopes to reduce the burden on naphtha imports, have a secure supply of feedstock and boost the downstream chemicals industry in the country. China and Pakistan have been cooperating with each other on various projects including roadways, railways, agriculture and science and technology under the China Pakistan Economic Corridor (CPEC). Pakistan might take assistance from China on this project as well considering the latter’s history in building several successful petrochemical projects.
Indonesia’s Chandra Asri licenses PE technologies from Univation
Chandra Asri Petrochemical (CAP) has selected Univation Technologies’ UNIPOL™PE Process and XCAT™metallocene PE technology for its 400KTApolyethylene unit at its integrated naphtha complex in Cilegon, Indonesia. With these PE technology license, the PE facility will have capability to produce a wide range of PE resins, including HDPE, LDPEand metallocene LLDPE.
Comments: Chandra Asri is one of the two polyethylene producers in Indonesia and the country’s largest integrated petrochemical company. Indonesia has a relatively well-established plastics converting industry especially for film, followed by roto molding, pipe and monofilament markets. Most of the film manufactured in Indonesia is supplied to domestic markets indicating high domestic demand. Indonesia’s current polyethylene capacity is not sufficient in supplying the country’s demand and was found to have a dependency on imported resins. Chandra Asri’s new polyethylene plant would increase the country’s self-sufficiency as well as strengthen the company’s position in the ASEAN region as a polyethylene producer.
South Korea’s SK to acquired Dow’s EAA business
Dow chemical sells its ethylene acrylic acid (EAA) business to SK Innovation for US$370 million. Under the deal, SK Innovation will take over Dow Chemical’s EAA business in USA and Spain.
Comments: SK Global Chemical Co., LTD., a subsidiary of SK Innovation, acquires Dow’s EAA business as part of the ongoing regulatory approval process for the proposed Dow and DuPont merger transaction. Dow is a leading producer of EAA copolymers, which it markets under the PRIMACOR™ brand as part of Dow’s Packaging and Specialty Plastics business. The divestiture agreement includes production assets located in Freeport, Texas, and Tarragona, Spain, along with associated intellectual property and product trademarks. Under terms of the purchase agreement, SK Global Chemical will honor certain customer and supplier contracts and other agreements. The acquisition of Dow’s EAA business is part of strategic growth plan from SK Innovation. In January,SK Innovation had announced an investment up to US$2.5 billion in chemicals, oil exploration and battery businesses to spur growth. The long-term aim of the company is to be a leader in high value-added chemicals for emerging markets including China. Ethylene acrylic acid is mainly used as an adhesive for wrapping products such as aluminum foil.
South Korea’s Hyosung to build PDH/PP complex in Vietnam
Hyosung has proposed a petrochemical project that comprises liquefied petroleum gas (LPG) storage tank, a propane dehydrogenation (PDH) unit, and two polypropylene facilities, to be built at the Cai Mep Industrial Zone in Ba Ria-Vung Tau province, Vietnam. The project with a total investment of US$1.2 billion is planned to carry out in two phases. The first phase will include LPG storage tank and one PP production plant, while the second phase will set up aPDH unit and the other PP facility. The details on capacity and project timetable have yet been disclosed.
Comments: Vietnam has become a popular destination for petrochemical projects targeting the fast-growing Southeastern Asia market because of its strategic location on the Indochina Peninsula and several FTAs (Free Trade Agreements) with ASEAN and other Asia-Pacific Nations. Vietnam’s polypropylene market largely import-dependent with annual deficit of over 900KTA and is expected to continue to rely on imports for a significant percent of its demand until new local PP capacity comes on-stream. Apart from Hyosung’s PDH/PP project, there are three other PP plants planned by Long Son Petrochemical (450KTA), Nghi Son Refinery (370KT) and Vung Ro Petroleum (900KT) underway at various stages. Once completed, Hyosung’s PP plant is expected to help Vietnam reduce dependence on PP imports and strategically set Vietnam as production hub aimed at fast-growing ASEAN nations.
Reliance, Sibur to set up a synthetic rubber unit in India
Reliance-Saber Elastomers, a JV between Reliance and suburb, plans to build a 60KTA halogenated butyl rubber plant at Reliance’s existing production hub in Jamnagar, India. The planned halogenated butyl rubber facility will consume butyl rubber (BR) produced from its own 120KTABR unit, currently under construction with scheduled start-up in 2018.
Comments: The intended Reliance-Sabir joint venture will be the first butyl rubber halogenation unit in Southeast Asia with a capacity of 60KTA. Reliance-Sibur Elastomers Private Limited (RSEPL) is a joint venture of which Reliance owns 74.9% and Sibur owns 25.1%. India is expected to see a quantum jump in tire production, with Indian and major international tire companies gearing up to make estimated capital investments of US$2.24 billion. The halogenated butyl rubber demand is expected to grow at a rapid pace of 8-10% CAGR over the next few years. The demand is driven by increasing customer preference for tubeless tires in India and neighboring countries, and significant investments in the manufacture of pharmaceutical closures and tank inner liners. Halogenated butyl rubber is a key ingredient for manufacturing the inner liner of tubeless tire. With the Indian automobile trend aligning with global trends, penetration of tubeless tires is expected to accelerate in the Indian market, resulting in an increased demand for halogenated butyl rubber.
China approves Huating Coal Group’s revised environmental permit for PP project
China’s Gasun province government has granted Huating Coal Group revised environmental permits for its methanol-to-olefin (MTO) complex. Huating Coal’s project originally had 200KTA polypropylene (PP)in the design package, but later added production units of ethylene, propane as well as reduce PP capacity to 160KTAduring construction.
Comments: Huating Coal Group, established in 2004, is a state-controlled coal major located in coal-rich Gasun province, aiming to modernize coal production in China. The firm has strategically integrated vertically to coal-fired power generation as well as coal-to-chemical production in response to China’s National Five-Year plans. The MTO complex utilizes China’s own proprietary FMTP process, a MTO process developed by Tsinghua University with high selectivity to propylene. With a majority of MTO projects licensed by foreign giants, Tsinghua University’s FMTP, along with Sinopec’s S-MTO, are one of few MTO technologies developed domestically. The development of China’s own proprietary MTO processes is a part of efforts to support coal-to-chemical industry. With a majority of China PP capacity located in its East territory, Huating Coal’s PP project is expected to fill the supply gap in West China and support production activities of plastic converters in this area.
BIOBASED
AkzoNobel, Itaconix partner up for bio-based polymers
AkzoNobel and Itaconix have signed a cooperation agreement for the production of biobased polymers. Under the agreement, Itaconix will contribute its proprietary technology that turns itaconic acid into biopolymers, while AkzoNobel will be responsible for the commercialization of the biopolymers.
Comments: This agreement is in line with Akzo Nobel’s recent initiative to foster innovation and sustainable growth in chemicals. Itaconix will provide Akzo Nobel with a proprietary polymerization technology to convert biobased itaconic acid obtained from sugars through fermentation into polymers. The polymers initially found success in consumer detergent products as a replacement for phosphates, which were banned in laundry and dishwasher detergents. They have since found use in other cleaning, industrial, surface coating and agricultural applications. Itaconix has also recently signed a global supply and joint marketing agreement with Croda to market and sell Itaconix’s ZINADOR line of odor removal additives.