Chemical Industry Summary
Publicly traded US commodity chemical producers reported surprisingly good financial results for the recently completed third quarter. Margins in Q3 for the US polyolefin chain decreased sequentially with polymer prices falling more than feedstock costs. However, for Europe, the story was reversed with declining oil and naphtha prices falling faster than olefins and polyolefins prices. Margin expansion in Q3 for Europe was significant and in some cases provided adequate leverage to offset softer conditions in other geographies, depending on individual companies’ regional leverage. Overall, chemical margins and demand are a mixed bag depending on geography, feedstock position, industries served, and the specific chemical chain a producer participates in.
Macroeconomics and Geopolitics
The global economic picture was little changed from last month, with consensus expectations calling for marginal improvement this year over 2014. The US economy continues to outperform most other geographies. In September, US housing starts were at an annualized rate of 1.2 million, up 6.5% sequentially and up 17% from 2014. The preliminary estimate for Q3 GDP was published at 1.5%, down from the final Q2 result of 3.9%. However, US manufacturing has had a mild recovery with the September manufacturing PMI at 54.2, up from 52.2 in August.
In October, the IMF released the semi-annual update of its view of the global economy. Global GDP growth is projected at 3.1%, down from last year’s result of 3.4% growth. However, some observers view this forecast as optimistic and predict that actual growth could come in at a sub-3% number. On the positive side, Europe’s GDP is now expected to grow by 1.9% this year. The PMI index for the Eurozone was reported at 52.3% in October, in mild expansion territory, but little changed from September. Growth in emerging economies is only expected to be 4% after averaging 5.7% in the last five years. China’s GDP growth is forecast at 6.8% in 2015 but is forecasted lower in 2016/2017 at 6.3%/6.0%. Brazil is in a recession with GDP expected to shrink 3% in 2015, and only moderately recover to a range of negative 1.5% to negative 2% in 2016.
Feedstock – Crude Oil
Global crude oil prices have recently softened with WTI in the range of US$41.50 to US$43.00/Bbl and Brent about US$2.00 above this level. Recent trends for US crude have not been supportive with inventories over 10% higher than last year. In the consulting industry, there is a significant diversity of opinion as to when and how much crude oil price improvement will be seen shortly. The NYMEX future contract price for December 2016 has now dropped below US$50.00 per barrel. A major consultant is projecting that it will take until 2025 for crude oil prices to recover to US$70.00/Bbl.
The IEA (International Energy Agency) recently issued a report that has a base case oil price of US$80/Bbl that will be achieved by 2020. This will require an extended period of supply and demand rebalancing, at an assumed average demand growth of 900,000 barrels per year. The same study also suggests a low side case of US$50/Bbl by the end of the decade is possible.
Feedstock – Natural Gas & NGLs
US Henry Hub natural gas prices in November have continued to ease and early in the month briefly dropped to below US$2.00 per million BTUs. November is a “shoulder” month for demand, and prices typically strengthen in the winter months. US ethane prices continue to be flat, continuing to trade at a bit below US$0.20 per gallon. Ahead of the expected start-up of new LPG terminal facilities in December, propane inventories continue at very high levels. Propane prices are low compared to crude and are in the mid-40s, a level first achieved in early September. Margins for ethylene production from propane are near US$0.15/lb., equivalent to ethane cracking, but only at about half of the level enjoyed this summer. For US ethane, over 400,000 barrels per day of ethane are being rejected into gas, mostly in remote areas including the Rocky Mountain States that are too far away to recover Y-grade transportation costs. The current oil-to-gas price ratio has improved to near 20:1 is somewhat supportive for North American producers, but down significantly from the peak of 52:1 seen in mid-2012.
US Olefins & Polyolefins
US contract ethylene prices in October settled down 0.25c/lb to 28.25c/lb on a net transaction price basis. This is the lowest price for contract ethylene seen since 2003. Current spot prices for ethylene are about US$0.05 cheaper than contract prices, indicating downward pressure for November. On a regional basis, US ethylene is the lowest-priced material globally. Exports of ethylene in the last four months have averaged 90 thousand MTs per month, an unusually high level. The cost position of light-feed crackers currently provides strong, but not record margins. Margins are near US$0.15 per pound, down from near US$0.20 per pound in recent months. For the third quarter, US ethylene production was a quarterly record, close to 15 billion pounds representing 94% of US capacity. This result is up 8% from a year ago due to several industry incremental expansions.
Initial settlements point to November chemical grade propylene prices likely to be up 1.0 cents/lb., close to the 1.5 cents/lb. nomination. This increase will bring chemical-grade propylene to US$0.285 per pound, the lowest contract price since early-2009. Contract propylene prices have fallen 10 of the last 12 months and have dropped a cumulative US$0.455/lb. since November 2014.
For November, US butadiene contract prices were down either 2 cents/lb. or 3cents/lb., depending on seller. Nominal contract pricing in November is US$0.29 per pound.
US polyethylene pricing rolled over in October. For the August/September period, US contract PE prices declined a cumulative US$0.09 per pound. Margins for integrated polyethylene in the US have recently declined as feedstock prices have been relatively flat. Global polymer PE prices appear to be leveling off as global supply and demand have come back into balance following numerous unplanned outages in Asia and Europe over the summer.
In October, US PP prices were have reversed recent trends and were up 2-3 cents/lb. Margins have improved in the last three months with propylene prices down a cumulative 6 cents/lb., but polypropylene prices are flat to up one cent per pound.
European Olefins & Polyolefins
For November, contract ethylene prices in Europe rolled over at the October level of €905 per MT. With declining naphtha, margins should improve in the near term. Including the €160 per MT cumulative decrease seen in August/September, prices are now below the beginning of the year levels. Ethylene margins for European heavy feed crackers have greatly expanded due in part to lower feedstock prices associated with crude oil price softness. Film grade HDPE is currently USUS$1,290 on a spot basis, down US$310 per MT from peak levels early this summer.
European contract polymer grade propylene settled at €710 per MT in October, down €110 per MT from August, identical to the September drop in price. Contract butadiene prices for November settled at€625 per MT, down €45/MT from October. Spot prices for butadiene in Europe peaked in July at nearly US$1,000 per, but are now at a 10-13% discount to contract prices at nearly US$600 per MT.
Asian Olefins & Polyolefins
Spot ethylene prices in Asia are currently near USUS$800 per MT, falling from levels of over US 1,400 per MT seen in July. The naphtha/ethylene spread has eased from peak levels near US$800/MT to currently US$400-450/MT. Regional operating rates and spot prices had benefitted from numerous outages that have now been completed. Asian spot propylene prices have recently fallen to nearly US 600/MT from over USUS$1,000 per MT in July and US 1,400/MT prior to October 2014.
Spot prices for LDPE in Asia are currently close to US$1,200 per MT, down from over US$1,400 this summer. Prices for HDPE are currently near US$1,100 per MT, down US$200 per MT from July levels.
Global Chlor-alkali
The Chlorine Institute reported that effective operating rates for the US chlor-alkali industry were 85.8% in August, down from 90% recorded in July. US producers are pinning hopes of improved caustic prices in Q4 on a high level of planned industry outages.
Several US producers continue to implement Q3 price increases for caustic that are in the range of US$65 to US$70 per short ton for the fourth quarter. While an improving US economy has boosted caustic demand, weak international conditions and exports and the poor aluminum market may prove to be a significant headwind.
The second US chlorine price increase proposal this year, a US$35 per ton increase announced in May, continues to be implemented. The 2015 chlorine price increases are the first in several years. And follow substantial recent new plant expansions. ECU margins for the industry remain near trough levels at nearly US$150 per ton.
European chlor-alkali operating rates in September were 79.3% of industry capacity, down 2.5% from last year. Industry-wide inventories of caustic in September were 241 thousand MTs, down 3% from a year ago.
AMERICA
Williams to supply propylene to Goradia Capital for polypropylene production
US energy firm Williams Companies has signed a propylene supply agreement with Goradia Capital for the production of polypropylene in Alberta, Canada. Under the agreement, Williams will supply 450KTof propylene out of its planned 525KTdehydrogenation propane (DHP) unit in Redwater on a 25-year term; while NAPP will build a polypropylene (PP) facility using UNIPOL™technology co-located with Williams Alberta DHP plant. Both the PHD. unit and PP facility are expected to commence in 2019.
Comments: Edmonton is one of two Canadian major propane trading hubs in the propane market. It has been suffering from oversupply and high transportation costs and distances to end-user markets, which make Edmonton propane prices greatly discounted relative to USGCsupply. Therefore, converting low-price propane into high-value-added polymer-grade propylene for plastic merges a profitable option for players in this region. Different from Enterprise Products’ investigation into converting and transporting propylene to USGC, Williams sought a partner to build propylene-consuming facilities nearby, synergistically maximizing benefits from depressed Canadian propane prices. Goradia capital is a US privately-held global project developer. Their sole-owned subsidiary, Vinmar International, markets petrochemicals primarily targeting developing regions such as China, India, and Nigeria as export markets. The direct investment in polypropylene facilities with cost-competitive propylene in Alberta is expected to further capitalize on the growing demand for polypropylene driven by developing regions.
Etileno XXI is on schedule to complete in December
Mexico’s Etileno XXI, a mega PE complex developed by Braskem-Idesa and located in southeast Mexico of Veracruz, is close to completion with atargetofDecember 2015 to begin operation. The complex will include a 1050KT ethane cracker, a 300KT LDPE facility, and two HDPE plants with a combined capacity of 750KT.
Comments: The petrochemical market in Mexico has been monopolized by state-owned companies for decades with almost no competition. A lack of investments by state-owned companies such as Pemex has resulted in Mexico in heavy dependence on imported raw materials and petrochemicals. The consumption of polyethylene is about 2,000KT, but Pemex has only 400KT PE production capacity in Mexico. The significant supply/demand imbalance of polyethylene has led to reliance on importing polyethylene, mainly from the US and Canada. The Ethylene XXI project is the first major private investment in the petrochemical sector in more than 20 years. Once the complex is up and running, the PE production will fill the gap in local supply and increase Mexico’s self-sufficiency rate in PE. In 2014, the Mexican government enacted energy reforms. A new law to end Pemex’s 77 years of monopoly in the energy sector and establish a new legal framework for the energy sector. The goal is to attract foreign investors to the country with capital and innovative technologies, which will modernize the energy sector. As a result of energy reform, it is expected to have more private petrochemical investments to fulfill the blank domestic supply of petrochemicals in the future.
Badlands NGLs selects UNIPOLTMtechnologyfor PE facilities
Badlands NGLs LLC has signed a technology licensing agreement with Univation Technologies for the UNIPOLTMPE process used in Badlands’ planned production. Under the agreement, Badlands will install four PE reactors with a total capacity of 2400 KT in two different sites in North Dakota. Each site will produce 1200KT of high-performance polyethylene, including LLDPE and HDPE.
Comments: North Dakota is probably the most obvious example of the US shale boom. Oil production in North Dakota from Bakken Formation increased 40-fold from 18,500 bpd in 2007 to 760,000 bpd in 2013. Natural gas in the Bakken formation considers a byproduct associated with the growing oil production. A tremendous increase in gas production has led to 30% of produced natural gas being burned off due to a lack of enough infrastructure for gathering. North Dakota government has set up a goal to reduce natural gas flaring and add more value to natural gas. The Badlands’NGL PE project aligns with the Government’s goal while creating more value for energy resources. The Badlands’ NGLPE project is one of the largest private investments ever in North Dakota’s history. Badlands has recently secured a long-term ethane supply from Bakken Formation with Continental Resources for planned PE production. Badlands NGLs LLC will invest US$4 billion for its first PE facility named Shangri-La and another US$2 billion for its second PE facility in an undefined location in North Dakota. Resulting of the US shale gas boom, a dozen polyethylene projects are being proposed in the United States, most of them will be located on the Gulf Coast where the US petrochemical industry is mainly located to access the Eagle Ford Formation. Bakken Formation, despite being no petrochemical industry nearby, has its geographic advantages over Gulf Coast in terms of distance to polyethylene consumption regions, domestically to Northwest, and internationally to Asia through Seattle Badlands intends to market the majority of the PE products domestically with the feasibility of selling to Asia through the port of Seattle or Vancouver.
INEOS applying for a permit for an LAO unit in Texas
According to Chimie Pharma Hebdo, INEOS Oligomers has applied for Texas Commission on Environmental Quality(TCEQ) permit of building a linear alpha olefins (LAO) facility in Texas. The planned facility will have a production capacity of 350KT of LAO and will be located in INEOS’s Chocolate Bayou site in Alvin, Texas.
Comments: Linear alpha olefins (LAOs) are raw materials for making polyethylene copolymers, polyalphaolefins (PAOs), and synthetic lubricants. North America is a major consuming region. Since 2013, INEOS has been working to expand its LAOsand PAOsproduction capacity through bottlenecking and establishment of new production facilities in response to US federal regulation of lubricant reformulation. The Lubricant Reformulation is expected to be effective in the second half of 2017 and is meant to reduce CO2 emissions and attain better fuel economy. The planned LAOsproduction facility is a part of INEOS’ effort to support the anticipated growth for PAOsmainly due to the upcoming change in the standard of lubricant additives. Major producers of the global PAOs market include INEOS, CPChem, ExxonMobil, and Chemtura. The market segmentation is split into low viscosityPAOs(LV-PAOs) and high viscosityPAOs(HV-PAOs). ExxonMobil and Chemtura lead the high-viscosity segment; while INEOS is dedicated to LV-PAOs production and maintains a leading position in the low-viscosity segment. INEOShas beenstrategitcallyworking to expand its portfolio into HV-PAOs through a 200KT capacity metallocene-based HV-PAOs plant which was announced early this year.
DuPont to consolidate chemical business units
DuPont has announced segment consolidation, involving four of its business units being combined into two. DuPont Packaging & Industrial Polymers business will consolidate with the DuPontPerformance Polymers business; while the DuPont Protection Technologies business will merge DuPont Building Innovations business and will be renamed DuPont Protection Solutions. Both consolidations will take effect in January 2016. The company will continue to have six business segments.
Comments: DuPont currently has six business segments, including Agriculture, Electronics & Communication, Industrial Biosciences, Nutrition & Health, Preformation MaterialsandSafety & Protection. Among these segments, the Agriculture segment accounted for approximately 40% of DuPont’s sales in 2014. There has been a debate about whether the Agriculture division should split out of DuPont. The movements of business consolidations within the Preformation Materials segment and Safety & Protection segment are to improve cost structure while serving customers with a more significant scale of business with stronger science capacities and application development.
ExxonMobil releases new grade of metallocene LLDPE for extrusion coating and lamination
ExxonMobil has introduced a new metallocene linear low-density polyethylene (mLLDPE) grade, Exceed™ 0019XC, for extrusion coating and lamination in packaging applications. The new material offers improved sealing performance by offering a wide sealing range, a board hot tack window, higher toughness of coating over LDPE, and manufacturing feasibility.
Comments: Exceed™0019XC resin is a Metallocene ethylene-hexene copolymer. It can be used in laminates as a coating layer providing outstanding sealing properties and a broad hot tack window. The grade can be easily processed due to the high melt index in extrusion coating, extrusion lamination, and co-extrusion coating processes. The grade is ideal for coating on different substrates like board and paper (bleached and unbleached), aluminum foil, flexible films, PE-based woven fabrics, and others. The usual operating melt temperature range is 270-310°C. The resin has been found to be effective when used in combination with a tie layer that offers adhesion to a base substrate, such as foil/ethylene acrylic acid (EAA) in drink cartons or lamitubes, to deliver a new solution for performance packaging.
EUROPE
INEOS to import US shale feedstock for UK cracker
British Chemical giant INEOS plans to change feedstock sources at a cracker in Grangemouth, Scotland facility from dwindling North Sea supply to US shale gas. INEOS has an ongoing US$1 billion project to build eight ships that will consistently transfer 40,000 barrels of liquefied shale gas from the US across the Atlantic Ocean to Scotland and Norway
Comments: Like many other European chemical producers, INEOS suffers from tight feedstock availability. The result has caused its Grangemouth cracker to run below 50%utilizationand consequently lose money. The US shale gas boom has rendered natural gas at an extended competitive price range of US$3-4 mm BTU. Many European nations are attempting to develop shale gas, but environmental concerns about hydraulic fracturing have slowed the development. Alternatively, importing US natural gas has emerged as a solution to the tightness of feedstock for many European petrochemical producers. In addition to INEOS’ plans, Borealis has invested US$135 million to upgrade its crackers in Sweden to partially utilize imported natural gas from the United States. SABIC also recently signed an agreement with Texas-based Enterprise Products Partners L.P. to access shale gas, which would be used for the production of olefin derivatives at a U.K. facility.
Italy’s Eni considers potential sales of Versalis
According to a Reuters report, Italian oil giant Eni is considering potential sales of its wholly-own chemical subsidiary Versalis for as much as US$1.1 billion (€1 billion). The company is also looking into options of forming a joint venture to extract value out of Versalis. Barclays is working with Eni to evaluate the potential sale.
Comments: Eni’s current development strategy is to focus on the oil and gas exploration business, along with cut costs programs and differentiating portfolio in the refining and chemical business. Its chemical division Versalis produces intermediate products, polyethylene, styrenics, and elastomers, and is the second-largest manufacturer of an elastomer in Europe. However, Versalis had been in deficit since 2008 due to the combination of declined market demand and increasing competition mainly in a commodity business. The company finally returned to profitability in H1 2015 after cutting commodity capacity and divestment of non-competitive assets. Meanwhile, to make business more competitive, Versalis has strategically refocused on specialty production and formed global alliances to develop high-value-added products. Exploration of the potential sales of Versalis and/or synergetic alliance opportunities will give Eni options to choose from for growth in the future.
SOCAR begins construction of polyolefin facilities
State Oil Company of the Azerbaijan Republic (SOCAR) broke ground on one 180KThigh density polyethylene (HDPE) facility and one polypropylene (PP) plant in Baku, Azerbaijan. Both facilities are expected to be due on-stream by 2018 and earmark Turkey and Western Europe as target markets for production output.
Comments: State Oil Company of Azerbaijan Republic (SOCAR) Polymer is a joint venture formed in 2013 between the state-owned SOCAR and private holding companies -Pasha, Gilan, and Azersun. Currently, Azerbaijan imports PP and HDPE to meet its domestic demand. The start-up of the two new plants will likely put the country in an oversupplied position with respect toPP and HDPE. SOCAR Polymer plans to export approximately 70% of its production to Eastern European and Western Asian countries where demand growth is increasing rapidly. The balance of its production will be sold to domestic consumers.
MIDDLE EAST & AFRICA
Sadaf Petrochemicals breaks ground on synthetic rubber facility
Iran’s Sadaf Petrochemical Co. has started construction of a US$289 million emulsion styrene butadiene rubber (ESBR) production plant and targets an aggressive completion within 29 months. The facility will produce 136KT of ESBR with five grades of products for plastics and tires but can change the product mix to fit downstream demand as needed. Pars and Jam Petrochemical will supply 26KTof styrene, 84KTof butadieneand25KTof aromatic oils raw material for the production
Comments: This new synthetic rubber plant would have a production line of 136KTandthe capability to make finished products in five categories. Two of the products are to be used in the production of tires while the rest is targeted for the plastic industry. The synthetic rubber plant will be the first in Iran. The company also claims the product to be environmentally friendly with hazardous substances being scrapped off in the production process. Much of the synthetic rubber produced in Iran will go to domestic demand and the surplus will be exported to eastern Asia, especially China where there is high demand. The company is expected to export 50KT of ESBR to China. Synthetic rubber production will also revolutionize the downstream petrochemical sector in the region, especially the target markets of tires, plastics, and shoes.
ASIA PACIFIC
Samsung to sell chemical assets to Lotte Chemical
South Korea’s multi-industrial conglomerate Samsung Group will sell its chemical operations to Lotte Chemical, formerly known as Honam Petrochemical, for over USD$2.63 a billion. The acquisition will involve the transfer of all of Samsung’s stakes in Samsung BP and Samsung Fine Chemical as well as the spin-off of Samsung SDI’s chemical unit.
Comments: Samsung has recently adjusted its development strategy to focus on businesses where Samsung holds competitive positions as Electronics. Early this year, Samsung completed the spin-off of all stakes in Samsung TOTAL and Samsung General Chemical to Hanwha. Shortly after the transaction between Samsung and Hanwha, Samsung Fine Chemical realigned the lithium-ion battery material business to Samsung’s Li-ion battery division Samsung SDI. The asset transferred within Samsung Group was to prepare for the saletoLotte Chemicals. With a series of transactions with other South Korean Conglomerates, Samsung has completely exited the chemical industry as planned. Hanwha, in turn, becomes the largest petrochemical company by sales value and the dominant EVA producer in South Korea; while Lotte Chemical further expands its petrochemicals product portfolio into fine chemicals and biobased chemicals.
Vietnam targets 2017 to launch Nghi Sob complex
Vietnam’s Nghi Sob refinery and petrochemical complex joint venture among Vietnam’s state-owned PetroVietnam, Kuwait Petroleum International, Idemitsu Kosan, and Mitsui Chemical. It is 60% complete and is set to start in 2017. The complex investment value ofUS$9 billion will process 200,000 bpd of crude oil and include a 370KTpolypropylene facility, a 680KTparaxylene unit, and a 200KTbenzene unit.
Comments: Due to growing demand for petrochemicals and geographic advantage for export coupled with several FTAs (Free Tade Agreements) with ASEAN, Russia CustomandAsia-Pacific region led by the US, Vietnam has become an attractive destination for petrochemical projects targeting domestic and export markets. Excluding theNghi Sob project, there are another four petrochemical complexes expected to come on stream gradually by 2020 as follows:
The US$4.6 billion Long Son complex will produce 450KTof PP, 400KTof HDPEand400KTof LLDPEis scheduled for start-up in mid-2019. Long Son is being developed jointly by PetroVietnam, Thai-based SCG, and Qatar Petroleum.
The US$3.2 billion Vung Ro complex has an 8,000KTof refinery and a 900KTPP unit with an expected start-up in 2018.
The US$2 billion Nam Van Phong refinery complex joint venture between Vietnam’s Petrolimex and Japan’s JX Nippon. It is expected to have a 10,000KTcrude oil capacity and has a feasibility study currently underway.
The US$22 billion Nhon Hoi refinery complex will have a processing capacity of 20000KT crude oil and is scheduled to start up in 2018. Vietnam is heavily reliant on imported petrochemical products, such as refining petroleum and plastics, to meet domestic demand because of a huge shortage of local petrochemical supply. According to Vietnam Plastics Association, Vietnam imported 3,400KT of plastics with the majority being, PP, and PVC. These projects can significantly help Vietnam fill the gap in domestic petrochemical supply while making the country become a net exporter of refining petroleum products.
Mitsui Chemicals to launchShanghai compounds facility
Mitsui Chemicals has started manufacturing its high-performance elastomers at the new compound facility in Shanghai with a capacity of 11KT. Products available from this production site include TPE Milastomer™ and tie-layer resin Admer™, strategically aiming to capture on growing automotive industry.
Comments: Mitsui Chemicals sells its Milastomer™ line of products into automotive end-use applications such as window frames, automotive interiors, under-the-hood, and others. The company markets tie-layer resins under the trade name ADMER®. ADMER®tie-layer resins are based on LLDPE, LDPE, HDPE, and PP. Mitsui is one of the largest producers of tie-layer resins and has production sites in Japan, Germany, Netherlands, Thailandandrecently China. Mitsui has been the pioneer in developing automotive gas tank applications for tie-layer resins. The majority of the tie-layer resin for autogas tanks is consumed in Europe and Asia. The Chinese automotive industry is among the fastest growing globally and several polymer manufacturers have begun operations in China over the past decade to cater to this rapidly growing market. The new chemicals compounding facility will strengthen Mitsui’s regional presence and expand the company’s operations in the functional polymeric compounds business in Asia.
Soft Packaging Group to launch propylene/PP complex
Chinese BOPP film producer China Soft Packaging Group has completed 1st phase of construction of the propylene/polypropylene project in Fujian, China. The complex worth US$2.36 billion will produce 160KT of propylene and 160KT of PP which is being built in two phases. The 1st phase will include two 40KTof PP facilities and an 80KTof dehydrogenation of propane (DHP) unit is due to be operational by the end of 2015. The 2nd phase of construction is scheduled to come on-stream by 2017. An LNG port with 5,000 KT of propane/propylene storage tanks will also be built as part of the complex.
Comments: China Soft Packaging Group and Gettle Group are leaders in the Chinese BOPP film industry. The Chinese BOPP film industry has expanded dramatically in the past few years, now featuring over 80 BOPP manufacturers with approximately 5,000 KT in total capacity. However, overcapacity due to rapid expansion has caused a significant reduction in margins. Margins were in the range ofUS$60-80/ton before 2012 and now are approximately US$15/ton. Small production lines or producers with no modern equipment installed are facing shutdown or bankruptcy. To keep competitiveness, the choices are to integrate vertically into feedstock production or develop specialty films. China Soft Packaging Group has strategically been integrating into feedstock production to secure feedstock availability and to improve production cost structure. Gettle is relying on imported PP as raw material and will most likely focus on the development of high-value-added specialty films to support its margins.
COAL-TO-CHEMICAL
China’s first coal-based LDPE facility in trial production
Chinese Shenhua Yulin Energy has been in a test run of a 300KTA low-density polyethylene (LDPE) facility in Yulin, Shaanxi province, using coal-based ethylene. The company is the country’s coal-to-LDPE maker with vertical integration all the way from coal to ethylene to PE.
Comments: China has been strategically developing the coal-to-chemical industry since 2005 when the 11th Five Plan came into effect. The development is to leverage its abundant coal resource to overcome the national disadvantage of lacking crude oil. With many coal producers participating, the Chinese coal-to-chemical industry mainly focuses on fuels and commodity chemicals. However, the profitability of selling coal-based commodities, such as methanol and ethylene, has been erased by a big plunge in crude price over the past year. The raising environmental concerns focused on pollution caused by coal-to-chemical processes have put the Chinese coal-to-chemical industry in a severe situation. The Chinese government has been working to address these public concerns while encouraging coal-to-chemical producers to further integrate into high-value-added downstream production. Shenhua Yulin Energy has developed its vertically-integrated coal-to-chemical production base in Shanxi since 2005 with support from the provincial government in the hope to leverage abundant coal resources in Shanxi. With this LDPE plant ready to come on-stream, Shenhua Yulin Energy now has two coal-based methanol facilities, a 600 KTA methanol-to-olefin (MTO) unit, a 600 KTA MTO separation unit, a 300 KTA PP plant, and a 300 KTA LDPE plant. It is expected to see more Chinese coal-to-chemical players integrating into downstream production with high-value addition in the future.
SHALE GAS DEVELOPMENT
Laos eyes shale gas for economic development
The Southeast Asian country of Laos plans to search for shale gas in coal reserves across the nation to boost economic development. The country will use shale gas, if discovered, for the generation of electricity for export to proximity countries such as Thailand and Cambodia.
Comments: Laos is the poorest country in Southeast Asia with an economy heavily reliant on agriculture. For the past five years, Laos delivered an average GDP growth rate of 7.6% and has been raising its role in supplying electricity to Vietnam, Thailand, and China. Many countries involved in shale gas development, such as China, Argentina, and Poland, hope to find a for domestic consumption. Laos is in an attempt to utilize shale gas, if discovered, along with its geographic advantage in the Southeast Asia subcontinent to become an energy hub for ASEAN, further boosting electricity generation for export in exchange for economic growth.
BIOBASED
HEXPOL TPE introduces biobased TPE compounds
Swedish thermoplastic elastomer producer HEXPOL TPE has to launch a new product family called Dryflex Green which contains biobased raw material from renewable resources such as plants and crops. Due to non-disclosure agreements with partners, HEXPOL TPE does not disclose any details on exact raw material sources. The product range performs comparable mechanical and physical properties as fossil-based TPE does and can be produced by traditional technologies such as extrusion and injection molding.
Comments: Hexpol TPE group has rapidly grown into a leading supplier of thermoplastic elastomers since it combined the ELASTO businesses in Sweden, and UKandChina, then with German-based Muller Kunststoffe. The company’s products target the full portfolio of applications including consumer, medical, automotive, electronics, construction, industrial, footwear, toys, and caps &closures. Dryflex Green compounds are designed to match the performance of HEXPOL’s traditional styrene Dryflex compounds despite a high percentage of renewable material. So far, companies have been unable to overcome the direct relationship between the percentage of biobased content and hardness of the resulting TPE, since biobased materials only replace the polyolefin matrix and not the softer styrenic component. Teknor Apex is the only current commercial producer to offer a softer biobased TPE (30 Shore A) than Dryflex Green(50-90 Shore A) but with a biobased content of only 30%.
COAL-TO-CHEMICAL
Grupa Azoty to build Poland’s first coal-to-chemical plant
Poland state-ran chemical producer Grupa Azoty plans to set up a US$648 million coal gasification facility that will convert coal into syngas and ammonia. The project currently is under feasibility study and still subject to a final investment decision in Q1 2016. If the project materializes, the facility will be located in Kędzierzyn Koźle and have a coal processing capacity of up to 1,000KT.
Comments: With 19.1 billion tons of coal reserves, Poland has been taking coal as a strategic fuel for economic development while keeping the nation independent from Russia’s oil and gas. Currently, 90% of Poland’selectricity is generated from coal-fired power plants, of which 70% are over 30 years old. EU’s 2030 climate and energy framework requires EU countries to reduce greenhouse gases emission by 40% by 2030. Poland, being a member of the EU, has started working to upgrade existing facilities for better efficiency and increase electricity production from non-coal sources such as solar energy. The proposed coal gasification plant by Grupa Azoty with the design of zero-emission is in line with the government’s energy strategy. If realized, the project can add more value to the coal industry while reducing the risk and costs associated with importing gas from Russia.