Chemical Industry Summary
Consolidation of the global agricultural chemicals sector is continuing as a brisk pace. On September 14, Monsanto accepted Bayer’s takeover bid, valued at US$66 billion. This included a stock price of $128 per share and the assumption of US$10 billion in debt. The final bid follows two previous bids, and reported talks with another potential buyer, BASF. This acquisition is the largest by company based in Germany of an American company. The acquisition will still need to pass regulatory review which some observers think might prove problematic. Other consolidation plays for the top six Ag chemical producers include Chem China’s acquisition of Syngenta, and the Dow Chemical/DuPont merger that is under regulatory review and is expected to be concluded in late 2016. This sector has recently been under pressure from reduced crop prices and lower sector growth.
Macroeconomics and Geopolitics
Americas
The US Bureau of Economic Analysis has published the second estimate of US GDP growth in Q2 of 1.1%, down slightly from the prior estimate of only 1.2%. This follows a revised estimate of Q1 growth of 0.8%, down from the prior estimate of 1.1% growth. For Q3, the Federal Reserve Bank of Atlanta is forecasting US GDP growth of3.3%, down from its prior view of 3.5%.
The US jobs report for August came in at 151,000 jobs added. This result was lower than anticipated and provided support for the delay of the Fed’s interest rate increase that had been widely anticipated for September. The tepid August result followed two strong months of job additions, with 255,000 jobs added in July and 292,000 jobs added in June.
In July, the US manufacturing PMI index eased to 52.0, down from the July level of 52.9, a number that represented an 8-month high. US manufacturing activity reported solid production volumes, but the pace of new hiring eased. In August, US auto sales of light cars and trucks totaled 16.9 million units, down nearly 5% from both the prior month and last year’s number. On a year-to-date basis, US auto sales are up a meager 0.8%.
The US housing market continues to stay on pace with forecasts that have called for a 9% improvement in housing starts in 2016. In July, US housing starts totaled 1.211million on a seasonally-adjusted annual basis, up 5.6% from last year’s result. Single-family housing starts of 770,000 was flat with 2015. In its August forecast, the NAR (National Association of Realtors) forecasted housing starts at an annual rate of 1.214 million for 2016, up 9.2% from last year. For 2017, the NAR forecast has been trimmed to 1.291 starts, up 6.3% from 2016. Average prices for existing home sales in August was $244,100 down about 2% from July, but up 4.3% from last year.
Mexico’s PMI in August of 50.9 was a slight bounce-back from the level of 50.6 in July, a number that represented a 33-month low. Canada’s PMI of 51.1 recorded in August was still in expansion territory, but was the weakest month seen thus far in 2016. New order volumes and production levels are down from an April peak.
Brazil’s manufacturing sector was still strongly in contraction territory, recording a PMI of 45.7 in August. This is the 19thmonth in contraction territory as the Brazilian economy remains in recession. In its April forecast, the IMF expected Brazil’s GPD to fall about 4% in 2016. In August, President Dilma Rousseff was removed from office.
Europe
The European Central Bank has temporarily eased its efforts to implement a broad economic stimulus in light of the Brexit vote. While the shock of the vote of the UK to leave the European Union has worn off, the longer term impact is still unclear, although this action could potentially shave growth. Key economic figures due out in September may influence implementation of a renewed ECB stimulus package. European banks are currently providing negative interest rates on deposits.
The reported August PMI index for the Eurozone was reported at 51.7, down from 52.0 in July. Manufacturing activity in Germany continues to improve with August registering a PMI of 53.6, down slightly from the July result of 54.8. The August PMIs for Netherlands (53.5), Austria (52.1) and Spain (51.0) were in positive territory, but Italy slipped into negative territory (49.8). France’s economy has improved, but is still in modest contraction territory. France’s August PMI was 48.3, similar to the 48.6 result seen in July. Greece’s manufacturing sector remains neutral with a 50.0 PMI reported in August.
Manufacturing activity improvement in Eastern Europe continues to be very sluggish. In August, Russia’s PMI edged up slightly to 50.8 after two months near neutral. For August, the Czech Republic’s growth was 50.1, up incrementally from 49.3 in July. Poland’s PMI improved in August, recording a PMI result of 51.5, extending the current expansion to 23 months.
Asia
For August, China’s manufacturing sector showed neutral growth with a PMI index of 50.0. This followed a reported July number of 50.6, the first month in expansion territory since the beginning of 2016. While manufacturing production in August grew, exports weakened. China’s auto production in July was 1.96 million vehicles, up 9% from the same month in 2015. However, on a year-to-date basis, light vehicle sales are up only 2.2%.
Asian polymer prices have been stead with Far East Asian HDPE blow modeling in the range of US$1,150 to US$1,175/MT this summer. Ethylene prices in NEA began the summer near US$1,050/MT and have recently increased to a level of US$1,175 to US$1,200/MT. Spot propylene in SEA has increase US$100/MT since the first of the summer to approximately US$800/MT. Chinese propylene prices have recently risen above US$850/MT, up US$100-125/MT in the same period.
Feedstock – Crude Oil
During September, the global oil prices have continued to be very volatile, reacting to both news flow and release of fundamental production and inventory data. As of September 10th, WTI spot prices were US$44.90 per barrel, down from levels near $48.00 per barrel seen in mid-August. For the week ending September 2, US crude inventories not in the SPR (Strategic Petroleum Reserve) totaled 511.4 million barrels, up 12% from last year, and down 2% from a month ago. US crude production for this same week as estimated by the DOE at 8.46 million barrels per day, down 7% from 2015, and down 12% from the peak production of 9.6 million barrels per day.
For the week ending September 9, Baker Hughes reported oil-directed rigs increased 33 from last month to 414. This brings a two month total to an increase of 63 rigs, representing a significant (near 20%) increase in rigs in the recent period. CMR believes that this has influenced the recent softness in crude pricing. Including gas-directed rigs, the total rig count of 508 is up 25% from the May-2016 low of 404, a number that represented the lowest count since this indicator was started in 1991. The percentage of oil-directed rigs in early August was 81.5%, near the peak that has been seen for this percentage since 2014.
Feedstock – Natural Gas & NGLs
As of mid-September, US natural gas prices have increased and on September 13, topped $3.00 per million BTU for the first time in 2016. On September 2, US underground natural gas volumes of 3,437 billion SCF were 5.4% higher than a year ago. This volume is 82% of underground storage capacity in the lower 48 States and nearly identical to the prior 5-year maximum average at this time of the year. For the week of September 2, there was a net addition to underground storage of 36 BSCF. The last five weeks have seen additions averaging 30BSCF as the peak summer demand give way to the fall injection season.
Enterprise’s new Morgan’s Point, TX ethane export terminal is now operational with the first shipment loaded on September 1. The 265,000 barrel shipment was loaded on the vessel INEOS Intrepid and is destined for the INEOS ethylene facility at Rafnes, Norway. This amount of ethane is relatively small compared to current ethane rejection volumes, but could eventually grow to become a significant balancing factor for the market. CMR believes that the volume of ethane that is currently rejected is approximately 500-600,000 Bpd.
For the week ending September 2, the EIA reports that US propane/propylene inventories were 99.1 million barrels, up 10.3% from last month, and up 3% from a year ago. Inventories are down 7% from the all-time record of 106 million barrels set last November, aided by an increased industry export capacity. Spot prices are currently near US$0.48/gallon, up about US$0.02 per gallon from last month, following the modest increase in crude oil and natural gas prices. Propane tends to follow crude oil pricing that has eased in recent weeks.
US Olefins & Polyolefins
With the recent increase in US natural gas prices to near US$3.00/MM BTU and the incremental improvement in crude oil prices, the important oil-to-gas price ratio has dipped to below 15:1 for the first time in several years. While the ratio is still above the 8:1 economic equivalent level, but the North American advantage is in danger of being reduced. Ethane prices have not yet reflected the increase in gas prices, but longer term, gas pieces will set a floor for ethane.
US contract ethylene prices for August settled up by 2.75cent/lb., resulting in a net transaction price of 29.5cent/lb. This is up 8.25cent/lb.from the January price of 21.25cent/lb.that was at a 13-year low. In September, spot ethylene prices have pushed upwards, recently topping US$0.35per pound. In August, there were an unusual amount of planned and unplanned outages in the US resulting in cracker unavailability near 8.5%. While planned outages appear to light in September, October outages, forecast to be 7.4% of capacity, will continue to support higher prices for ethylene and by extension, polyethylene. Through August and into September, US ethane prices have moved upwards, but have not exceeded $0.20 per gallon reflecting steady natural gas prices and good ethane availability.
US propylene prices settled up 3.5cent/lb.in August with contract pricing at US$0.36 per pound for chemical grade and US$0.375/lb.for polymer grade. Polypropylene prices also settled up by an identical amount. Propylene availability was impacted by US cracker unavailability. In addition, the Dow PDH unit in Freeport was down the first two weeks of August. This PDH unit has capacity of 750 metric tons(MT)per year, but has experienced intermittent on-stream time issues since its start-up. The initial proposal by producers for US contract propylene prices in September calls for an increase of 7cent/lb., or a 19% increase over August prices. This is roughly in-line with price increases seen in other global regions.
In the month of July, the most recent month that US import/export numbers are available, imports of polypropylene to the US were 21 thousand MT, half the levels seen in the February through May period. Imports to the US earlier in the year responded to exceedingly high domestic prices that have since subsided. In September, US contract butadiene prices have settled up 3.0cent/lb. to US$0.39/lb.
After PE contract prices settled flat again in August, US producers are lining up for a 5cent/lb. Increase in September. The primary rationale for this increase is the globally tight market and firm prices in other geographic areas. In addition, the expected elevated level of cracker unavailability will further tighten inventories in the fall. Producers are also targeting an additional 4cent/lb. increase in October. CMR views that it is unlikely that both of these increases will be implemented.
US exports of PE in June and July were down significantly from the torrid pace seen earlier in the year. Net exports are now up 11% from a year ago, similar to the increase seen in 2015. Year-to-date exports have averaged of 465,000 MT/month, exports are equivalent to 26% of US capacity.
August PVC prices rolled over for the second consecutive month with contract pipe grade at US$0.74 per pound. Key raw materials ethylene and chlorine had flat pricing, not providing any momentum to improve prices.
August also saw flat US polystyrene prices flat again with contract benchmark near US$0.90/lb. Prices for US contract benzene for August are up US$0.15 per gallon to US$2.29/gallon following a similar increase in July.
European Olefins & Polyolefins
or September, the European contract ethylene price rolled over a level of €925/MT. In the last month, spot ethylene prices for NWE are generally flat in the range of €880 to €900/MT. Contract European propylene prices were up €20 per MT in September, at a level of €690/MT, with spot prices moving up approximated €100/MT since the beginning of August to a range of €775 to €790/MT. Similarly, European contact butadiene pricing was up €15/MT to a level of€680/MT. European benzene contract prices for September were down €25/MT to a level of €627/MT, and contract toluene settled at €540/MT, up €60/MT.
Throughout August and September, polyethylene prices in Europe have remained relatively flat. HDPE blow molding grade in NWE is currently €1,200/MT on a spot basis. LLDPE in NW Europe has recently traded near €1,200/MT, up €30 -€35/MT since the beginning of August. Contract prices for butane LLDPE in Germany ay near €1,400/MT, down €130/MT since the first of the summer.
Global Chlor-alkali
The Chlorine Institute reported that effective operating rates for US chlor-alkali in July averaged 87%, up 3% from the 84% level reported for June. In its second quarter release, Olin reported that about half of the announced US$20 per short ton (ST)for caustic was achieved in Q2 and expects most of the remaining increase to be seen in Q3. The company reported that the industry’s chlorine price benchmark was up US$5/ST in July. Olin’s EBITDA guidance for the third quarter is in the range of US$200 million to US$250 million, up over 20% from the second quarter as the cumulative impact of the recent price increases is seen. Traditionally, large chlor-alkali customers benefit from the 60–90-day price protection that the industry has provided, as the realized pricing phases in over an extended period typically lasting about three months.
The Westlake Chemical acquisition of Axiall was concluded on September 1. The acquisition valuation of US$3.8 billion included an all-cash offer of US$33.00 per share. This acquisition creates the third largest global and third largest US producer of chlor-alkali at 3 million ST. It also results in the second largest US producer of PVC at 2 million ST.
As of the publishing date for September POE, Eurochlor has not yet posted chlor-alkali production statistics for July. In June, European chlor-alkali operating rates were 78.8% of industry capacity, and improvement of 3.4% from May. CMR has updated its view on impending European mercury cell capacity shutdowns. CMR understands that 27% percent of mercury capacity will be shut down, representing 7% of total European capacity. A further 530,000 ST are still undecided and could represent a further 16% of mercury cell capacity and 4% of total European capacity. The EC mandated deadline to get out of mercury cell capacity was moved from 2020 to 2017.
AMERICAS
Braskem introduces a foam-grade HMS-PP
Braskem has introduced new high melt-strength polypropylene (HMS-PP) grade to market. The new HMS-PP grade can be used to produce high performance foams aimed at specialty packaging, automotive and industrial applications. The products will be available in both Americas and Europe.
Comments: Braskem entered into HMS PP production through the acquisition of Dow Chemical’s PP manufacturing facilities in the US and Germany. Convectional PP has linear molecular structure and a narrow processing window resulting from a sharp melting point. The consequences of these characteristics are low melt strength and poor melt extensibility. HMS PP allows production of low-density foams and deep-draw thermoforming applications by overcoming the limitations of conventional PP. Braskem is among the very few HMS PP producers globally, others include Borealis, Japan Polypropylene and Total Petrochemicals.
Indorama Ventures eyes 4Q 2017 to launch Louisiana cracker
Thailand-headquartered Indorama Ventures Ltd (IVL) recently acquires a key environmental permit from TECQ for revamping its Louisiana gas-fed cracker. The company is on track to start up the cracker in 4Q 2017 with scheduled mechanical completion in 3Q 2017. Once the ethylene unit comes into service, the output will feed the production of monoethylene glycol (MEG).
Comments: Indorama Ventures is one of the world’s largest PET producers and initially entered into North America market through acquisition of StarPet. In the recent years, the company has strategically integrated North American production up stream to raw materials for PET, such as MEG and ethylene by acquiring Old World Industries’ EO/EG facility and OxyChem’s idle Louisiana cracker. These movements will help Indorama Venture further extend its polyester value chain and improve its cost structure for polyester production in North America.
Williams Partners’ Louisiana olefins plant up for sale
US midstream company Williams Partners is looking into monetization options for its Geismar olefins production complex in Louisiana, which includes an outright sale or long-term, fee-for-service tolling agreement. The Geismar complex currently has ethylene capacity of 886KTAand propylene capacity of 52KTAafter 2015 expansion. William Partner holds approximately 88.5% of ownership of the complex.
Comments: The potential sale of the Louisiana Olefins unit comes shortly after Williams announced a deal to sell Canadian asset to Inter Pipeline Ltd. Since the potential merge with Energy Transfer Equity LP fell apart, Williams Partner has readjusted its focus and allocate capital back to its core natural gas focused business. The Louisiana cracker with geographic advantages for logistics and feedstock is expected to draw interests from domestic players who are short of ethylene or foreign entities who seek to take advantage of US shale gas production.
NOVA Chemical completes PE1 expansion project
NOVA Chemical has finalized the construction of its 454KTALLDPE facility at Joffre in Alberta, Canada. The PE 1 expansion project will increase NOVA’s PE capacity at Joffre site by 40% to 1,589KTA. Commercial operation is slated to begin in late 2016 or early 2017.
Comments: Canada’s NOVA Chemical is a wholly-owned subsidiary of UAE-based International Petroleum Investment Company (IPIC). NOVA Chemical has manufacturing facilities for polyethylene (PE) at Moore and St. Claire River sites, both are in Ontario, Canada as well as at Joffre site in Alberta, Canada. NOVA Chemicals’ PE production in Alberta leverages on its cost-advantaged feedstock in Alberta and energy-efficient manufacturing facilities. The capacity expansion for LLDPE allows NOVA Chemical to capitalize on the growing demand for LLDPE used in packaging applications. The new volume will be primarily for production of NOVA Pol butene LLDPE resin targeted for flexible film applications. Meanwhile, to cater to health growth and better serve customers’ needs, NOVA Chemical opened a new center for performance applications in Calgary, Alberta that is dedicated to PE resin testing and applications development.
Bolivia’s bidding on PP project attracts 15 firms
Bolivia’s YPFB announced that 15 companies participated in the bid to provide FEED and EPC service for a US$2.2 B propylene and PP complex in Tarjia. These companies include Saipem, GS Engineering, Tecna, Techint Bolivia, Tecnicas Reunidas, Wuhuan Engineering, Sacyr Fluor, Fluor Daniel South America, Kellogg Brown & Root, Tecnimont, A-Evangelista, Samsung Engineering, Odebrecht Bolivia, Odebrecht International and Intecsa. The construction of this C3 project is expected to begin in the 2nd half of 2017 with scheduled completion in 4th quarter of 2021.
Comments: Bolivia is a major natural gas exporter in Latin America, mainly to Argentina and Brazil. Both Brazil and Argentina import approximate 50% of its domestic consumption of natural gas from Bolivia. However, Brazil with offshore subsalt fields and Argentina with Vaca Muerta shale are eventually expected to be self-sufficient in natural gas. Facing participated reduction of exporting gas to Argentina and Brazil in long-term, Bolivia has been in partnership with Peru to build one gas pipeline that will help Bolivia open up an opportunity to export natural gas as LNG to Asian-Pacific. Bolivia has an initiative in place to integrate petrochemical industry vertically toward downstream production that can add more value out of natural gas. Several petrochemical projects, such as Yacuiba C3 complex and Gran Chaco C2 complex, are underway in various stages of completion. With start-up of these downstream facilities, these downstream products are expected to focus on export markets in other Latin American nations. The long-term investments would help Bolivia add value to its natural resources and be more independent from international commodity market.
Sasol on track to start up Lake Charles cracker by 2H 2018
Sasol is currently 50% complete with its petrochemical complex in Lake Charles, which includea1,500KTAcracker and six ethylene derivative units. Meanwhile, the total capital expenditure on this project has revised to US$11 B up from the US$8.9 B estimation made in late 2014 due to a significant increase in site and civil costs. The ethylene complex is scheduled to start up in 2018. The ethane cracker, LLDPE, EO, and MEG units are targeted to reach beneficial operation in 2H 2018, while the remaining derivative units are set to commercial operation by 2H 2019.
Comments: The drop in crude oil prices has narrowed the advantage between cracking ethane and naphtha to produce ethylene which led several companies planning to build crackers in North America to reconsider their investment. However, Sasol had completed the FID in 2014 and broke ground on the Lake Charles cracker in March 2015. The complex is scheduled to be one of six grassroots ethylene crackers coming on-stream in 2017/2018 in the Gulf Coast region. Sasol is betting on the long-term availability of cost advantaged ethane feedstock from U.S. shale gas to offset the negative effects of the oil price decline.
EUROPE
Grupa Azoty delays PDH project due to reassessment
Zaklady Chemiczne Police (ZChP), a subsidiary of Poland’s Grupa Azoty, is reevaluating its €420 million propane dehydrogenation (PDH) unit and building associated downstream facilities. The reassessment is scheduled to be finalized by the end of this year. The company has yet to announce a new target date for start-up, but a delay is expected.
Comments: By-product propylene production from naphtha has been declining in Europe as several old plants have been shut down and gas-fed crackers are more cost advantaged for ethylene production. Grupa Azoty, a group formed by the consolidation of Poland’s four largest chemical companies, has built up a diverse portfolio of chemical plants and aims to become one of the leading players in the global market. Around 40% of the PDH plant production is slated for domestic use, to cover Grupa Azoty’s downstream OXO alcohols, acrylic acid, and polypropylene businesses.
Rosneft, ChemChina partner up for a Far East petrochemical project
During G20 Summit in China, Russia’sRosneft and ChemChina have inked a cooperative agreement for Far East petrochemical Company (FERCO) project. The agreement sets out the detailed framework for FERCO project and creation of a 60/40 JV between Rosneft and ChemChina.
Comments: The agreement marks a new and crucial step in the development of FEPCO –one of the largest industrial complexes in Russia. Bringing in ChemChina will enable Rosneft to optimize the project financing and jointly organize the sale of high-margin products of the future complex at the premium APR markets. Rosneft and ChemChina also signed a new one-year oil supply contract, which neither company has provided details on volumes or financing. FEPCO construction project envisages the creation of a modern petrochemical complex in the Far East which will: lay the foundation for the development of the petrochemical cluster; develop infrastructure and related production in the Far Eastern Federal District.
MIDDLE EAST & AFRICA
Sadara Chemical launches 1,500KTAdual-feed cracker
Sadara Chemical Company started up its mixed-feed cracker in Jubail, Saudi Arabia. The ethylene production facility is designed with seven ethane-fed furnaces, two naphtha-fed furnaces, and three cracking furnaces that can switch between ethane and naphtha. The cracker is one of 26 production units located in the Sadara Chemical complex. 14 of these units are scheduled to come on-stream by the end of this year.
Comments: Sarada Chemical Company is a US$20 B joint venture between Dow Chemical and Saudi Aramco in which Dow Chemical provides proprietary technology and market network while Saudi Aramco offers feedstock and expertise in mega project. Saudi Aramco is known as the world’s the most valuable company with the largest oil production on daily basis. The heavyweight has been making an effort to integrate vertically toward to downstream petrochemical production since its JV with Sumitomo, Petro Rabign established in 2005. Besides the Sadara project, Aramco has the PetroRabigh Phase II project scheduled to commence in 2017 as well as a 50:50 JV Arlanxeo formed with German synthetic rubber producer Lanxess. These projects will help Aramco diversify into a downstream portfolio and solidify its market position both at home and aboard against SABIC and other foreign rivals.
Saudi Aramco, ChemChina, NICDP sign MoU to explore opportunities in Saudi Arabia
Saudi Aramco, ChemChina, and National Industrial Clusters Development Program (NICDP) inked a memorandum of understanding that encourage opportunity exploration in both energy and chemical sector within Saudi Arabia. The cooperative agreement allows ChemChina and NICDP to study the development of manufacturing facilities for photovoltaic (PV) value chain, specialty chemicals and automotive tires using local raw materials. The agreement also calls for other potential developments, including non-tire synthetic rubber and engineering plastics.
Comments: The cooperation agreement signed between ChemChina, NICDP and Saudi Aramco covers a broad range of industrial sectors including downstream, chemicals, rubber, R&D and photovoltaic value chain development. The agreement includes the feasibility of using Saudi Aramco’s crude oil grades as feedstock for ChemChina’s refineries on a long-term sales agreement that will start in 2017. The companies will assess cooperation in exchanging oil products from ChemChina’s refineries and subsidiaries with Saudi Aramco and its subsidiaries. The cooperation offers extraordinary potential and provides unique business and strategic opportunities for ChemChina which is implementing President Xi’s “One Belt One Road” Initiative and its supply side structural reforms.
ASIA PACIFIC
China’s Zhejiang Rongsheng to set up refinery-petrochemical complex
Chinese private chemical Zhejiang Rongsheng plan to invest US$24 billion for a refinery/ petrochemical complex to be built on Zhoushan Island, Zhejiang in two phases. The first phase is due to start up in 2018, while the second phase is scheduled to be operational in 2020. The mega petrochemical is planned to have refinery capacity of 400,000 Bpd and will produce various downstream products, including ethylene, propylene, aromatics, butadiene, and other associated derivatives.
Comments: Zhoushan is the archipelago outside of Zhejiang with a geographic advantage of being on international shipping routes and has long been considered a suitable location for petrochemical development. Sinopec initially proposed in 2006 a petrochemical project to be built at Zhoushan but later abandoned it due to strong opposition from local community. Despite oil refining overcapacity in China, Chinese private petrochemical players see the current situation as growth opportunities with China opening up crude oil import since 2015. Zhejiang Rongsheng is one of several private firms that propose mega refinery projects in the past two years. Zhejiang Rongsheng’s project benefited from its geographic location that could sell oil products to domestic market or even more importantly abroad to neighbor nations, such as Japan, South Korea and Taiwan. Except to refinery segment, this mega project also focuses on the development of downstream value-chains, especially for ethylene and propylene. Under initial planning, ethylene derivatives to be produced include EO/EG, LLDPE/HDPE, EVA, styrene monomer and 1-hexene, while propylene derivatives include acrylonitrile, acetone/phenol, biphenol-A, MMA and PP.
Prime Evolue Singapore starts up metallocene LLDPE unit
Prime Evolue Singapore, a joint venture of Prime Polymer Co., Ltd., and Mitsui & Co., has begun commercial operation at its 300KTAmetallocene LLDPE facility at Jurong Island in Singapore. The production output will be marketed under the tradename of EvolueTM and target to cater to Asian growing demand for mLLDPE used in liquid and powder packages. The new facility will bring Prime Polymer’s EvolueTM capacity to 550KTA globally.
Comments: Prime Evolue Singapore is a joint venture between Japan’s Mitsui Chemicals and Prime Polymer. Prime Evolue Singapore produces metallocene LLDPE on Mitsui’s Evolue™ technology platform. The company sees Singapore as a strategic location to expand market presence in Asia. mLLDPE has been successfully adopted in various film uses due to superior properties. Film applications are the largest application segment for mLLDPE with an estimated share of over 90% of total mLLDPE demand. Film end-uses include food packaging, non-food packaging and non-packaging.
Formosa, Idemitsu Kosan to build a C5 resin plant in Taiwan
Taiwan’s Formosa Petrochemical partners up with Idemitsu Kosan for a hydrogenated hydrocarbon resin (HHCR) facility in Yunlin, Taiwan. The HHCR facility will be jointly owned by both companies and has production capacity of 25KTAwith scheduled start-up in1H 2019.
Comments: The HHCR project between Formosa and Idemitsu Kosan has been discussed since 2012. The two entities officially formed a 50/50 JV for this C5 derivative project in early 2016. The demand for HHCR used in hygiene applications in China and ASEAN nations has grown at healthy pace recently and the trend is expected to continue. The JV HHCR facility is set to capitalize on the market opportunity with Formosa providing feedstock through its newly-built C5 stream facility and Idemitsu Kosan offering production expertise and a selling network. With the HHCR plant scheduled to start up in 2019, Idemitsu will be able to produce 35KTAof HHCR, which is anticipated to expand Indemitsu’s global market share for HHCR to 6%. For the counterpart of this project, Formosa Plastic has strategically invested into specialty material markets with the geographic advantage of being close to consumption destinations. In addition to HHCR project along with its associated C5 separation unit, Formosa recently began commercial production of high EVA in Ningbo, China, aimed at solar encapsulants application and has a HSBC facility with Kraton Corporation underway.
JG Summit to build PE facility
Philippines’ JG Summit Petrochemical Corp plans to build a polyethylene facility as part of US$600 million expansion set over the next three years in Philippines. The company has yet to announce the full project details.
Comments: JG Summit Holdings had to import ethylene for its polyethylene and polypropylene plants until the company’s first naphtha cracker started up in late 2014. The favorable oil price environment and steady ethylene production from the plant has improved the company’ profitability and led to a feasibility study for a potential expansion. Production of both olefins and polyolefins are in excess of domestic demand and are partially exported. The polypropylene expansion and new polyethylene plant will further increase export revenue, although it is hard to see an advantaged cost position for a relatively small naphtha cracker in 2020 when the plant comes on-stream. The new aromatics and butadiene extraction facilities will result in the first production of those derivatives in the Philippines.
BIO-BASED
Neste partners with IKEA for biobased polymers
IKEA and Finland-headquartered Neste have agreed to jointly promote the development and production of renewable, bio-based polymers. The companies also invite others in supply chain to join the initiative. IKEA and Neste target to produce the first proof-of-concept in 2017 and expect to extend their partnership in the future toward innovative technologies and other opportunities.
Comments: IKEA has partnered with Neste to build toward its long-term goal of having their plastic home furnishing products made of renewable or recycled material. Nestle is a leading producer of renewable diesel and other fuels using its proprietary NEXBTL technology, a hydrotreatment process that can convert feedstock such as vegetable oils and industrial waste into isoparaffinic hydrocarbon oils with low sulphur and aromatic content. Nestle has also made inroads into feedstocks for the chemical industry, with current offerings of renewable naphtha, propane, and Iso alkane and R&D in progress in bioplastics.
COAL-TO-CHEMICAL
SABIC, SNCG ink MoU for coal-to-chemical complex
SABIC and China’s government-back Shenhua Ningxia Coal Industry Group Co. Ltd. (SNCG) has signed a MoU for their announced JV green-field chemical complex in Ningxia province, China. The total investment is estimated to be RMB 22.9B. The planned project will have a 700KTAcoal-to-olefin facility and associated facilities for production of derivatives, including low density polyethylene (LDPE), ethylene-vinyl acetate (EVA)and ultra-high molecular weight polyethylene (UHMW-PE).
Comments: Under the 13th five-year plan, development of high value-added products and diversified product portfolio are two of many goals set for coal-to-chemical industry by 2020. Shenhua Ningxia Coal Industry Group (SNCG) is one of the largest coal-to-chemical producers in China and produces methanol, dimethyl ether and polyoxymethylene (POM). The partnership with SABIC is expected to help SNCG expand the downstream portfolio toward differentiated products, such as EVA and UHMW-PE, to align with the Nation’s development strategy. On the flip side, SABIC is strategically seeking opportunities to explore new markets and diversify feedstock through this cooperation. With Saudi Arabia being a critical strategic partner for China’s “One Belt One Road” plan, the two nations have looked into new investment opportunities for one another, and more cooperative partnerships are expected be seen for the next five years.