AMERICAS
Eastman to acquire Solutia for USD 4.7 billion
Eastman Chemical has reached an agreement to acquire Solutia for about USD 4.7 billion in cash and stock. Eastman expects the purchase to create a leading specialty chemical maker and offer the opportunity to grow its presence in Asia. Solutia shareholders will receive USD 22/share in cash and 0.12 shares of Eastman common stock for each share of Solutia. The deal values Solutia at USD 27.65/share. Eastman is paying a multiple of 9 times Solutia’s 2011 Ebitda. The transaction is expected to close in mid-2012. The move lifts Eastman’s annual revenues to USD 9 billion/year, from USD 7 billion.
Comments: The leading position held by Solutia in polyvinyl butyral (PVB) glass interlayers, high-performance polyester films, and specialty chemicals such as rubber additives, heat-transfer fluids, and aviation hydraulic fluids is expected to add excellent value to Eastman’s specialty products portfolio. At the same time, significant cost savings may be achieved by operation consolidations.
Georgia Gulf rejects Westlake takeover bid
Westlake has increased its bid for Georgia Gulf by 17%, to USD 35/share, or about USD 1.29 billion. Westlake will also pay a portion of the consideration to Georgia Gulf shareholders in Westlake shares. Westlake has also decided against nominating director candidates at Georgia Gulf’s 2012 annual meeting, in furtherance of its desire to engage in friendly negotiations
Westlake privately presented the increased offer to Georgia Gulf, but the latter company, however, has rejected the revised offer. Georgia Gulf has claimed to be ready and willing to enter into substantive good faith discussions, but only if Westlake agrees to enter into a confidentiality agreement and if Westlake is open to increasing the bid price to reflect the Company’s true intrinsic value.
Comments: The exchanges between George Gulf and Westlake appear to be the normal negotiation process before a merger of two corporations. It is a good fit for Westlake in terms of product compatibility and complementarity. When the deal materializes, it will give a significant boost to Westlake, a commodity chemical and Plastics Company which posted a 2010 revenue of USD 3.2 billion. Georgia Gulf, with a 2010 revenue of USD 2.8 billion, is known to be a strong player in color vinyl (VCM, PVC, etc.) and aromatics (cumene, phenol, etc.). It also occupies good markets in vinyl products. Georgia Gulf argues that the stock price should be higher than USD 35 because of Georgia Gulf’s access to low-cost U.S. shale gas, ability to leverage global PVC demand, growing confidence in the U.S. construction market, highly integrated asset, and access to the export market.
Mexichem acquires Wavin to create a global leader in PVC pipe systems
Mexichem has agreed to acquire 100% of Wavin (Zwolle, the Netherlands) for approximately €531 million (USD 704 million). Mexichem intends to make a cash offer of €10.50 (USD 13.9) per Wavin ordinary share. The offer represents a premium of 177% over the closing price of Wavin’s shares on November 18, 2011. The offer is expected to commence in the first quarter of 2012. Mexichem’s proposed acquisition of Wavin would create the global leader in the polyvinyl chloride (PVC) pipe systems market, with total annual sales of about €4 billion (USD 5.3 billion).
Wavin will retain, under the terms of the agreement, separate operating and legal structures as well as its brand. Wavin’s headquarters and its R&D innovation center will remain in the Netherlands. No job losses are expected as a result of the acquisition.
Comments: Mexichem’s decision to acquire Wavin will allow the company to expand into Europe, thereby allowing it to benefit from construction growth in Eastern European countries and higher margin products in Western Europe. Mexichem is currently one of the largest producers of PVC pipes and participates across the whole value chain from the production of raw materials to the production of PVC pipes. The acquisition will give the company an outlet for its PVC resin which is currently being produced in Mexico and South America.
Indorama to acquire Old World’s chemical assets for USD795 Million
Indorama Ventures will acquire the chemical assets of Old World Industries, including its production facility located at Clear Lake, TX, for USD 795 million. Old World will retain its consumer products division, including Peak antifreeze. As part of the purchase agreement, Old World will enter into a long-term glycol supply contract with Indorama for its antifreeze production in the U.S.
Old World operates the largest single ethylene oxide (EO)/ethylene glycol (EG) production facility in the U.S. with an EO capacity of 435 KTA. Indorama signed a definitive purchase agreement on February 6. The acquisition is expected to close in the first quarter of 2012. Old World produces and sells EO and derivative products – purified ethylene oxide (PEO), mono ethylene glycol (MEG), diethylene glycol (DEG), and trimethylene glycol (TEG). The facility is located within a large petrochemical hub in Clear Lake, TX.
Comments: This is another example of the downstream acquisitions and expansions galvanized by the recent surge in the abundance of shale gas which contains ethane and can be cracked to ethylene. The availability of shale gas in the USA not only has triggered the new constructions and expansions of crackers but has also led to the activities (acquisitions or expansions] of chemicals derivatized from ethylene. MEG is a major derivative of ethylene and is used in antifreeze and also a component of PET with wide applications in fiber/textile, rigid packaging, and film.
Dow Chemical, LBI earnings slump on customer destocking, soft demand
Dow Chemical reported a net loss of USD 20 million (2 cts/share) in the fourth quarter compared with earnings of USD 426 million (37 cts/share) in the year-ago period. Excluding one-time charges, the company posted earnings of USD 289 million (25 cts/share).
LyondellBasell Q4 earnings swing to loss on destocking
LyondellBasell has reported a fourth-quarter net loss of USD 218 million compared with a profit of USD 766 million in the year-ago quarter, on sales up 11%, to USD 11.4 billion. The company reported a loss of 38 cts/share, about 36 cts/share below the consensus of analyst estimates. LyondellBasell expects overall first-quarter economic activity to remain slow in Europe and Asia.
Sabic reports lower fourth-quarter profits, expect 2013 to be better
Sabic reported a 10% drop in net profit in the fourth quarter of 2011 to SR5.24 billion (USD 1.4 billion) on 15% higher sales at SR47 billion (USD 12.5 billion). Sabic is hopeful that the economic and business climate will improve in 2012, and that 2013 will be significantly better. Sabic’s sales for the full year were 26% higher at SR190 billion (USD 50.7 billion).
Comments: LBI, Dow, and Sabic are all major producers of polyolefins and petrochemicals. This is a dip in the otherwise nicely climbing growth curve that started in 2010 for the entire industry. In situations like this (destocking, economic slowdowns in Europe and Asia, and the nature of cyclicality of the commodity business, etc.), costs control and financial discipline are the two measures quickly reinforced by these companies to harness the decline of profit and try to steer back to the nicer balance sheets
Green solvents firm hires former Nova Exec
Switchable Solutions, a green solvents start-up, has hired Eric Kelusky, a former Nova Chemicals technology executive. Kelusky, formerly v.p./technology at Nova, will serve as the firm’s chief technology officer. The firm is developing a solvent system for use in bitumen extraction in oil sands and polystyrene recycling and expects to complete pilot tests for both applications this year. Tests of the plastic recycling application will occur at a 1 million lb/year demonstration facility in Ontario, while tests of the oil sands application will proceed first in an indoor pilot lab, and later in fields in Alberta.
The solvent, based on a switchable hydrophilicity system, works by adding or removing carbon dioxide (CO2) to make the solvent attracted to or repelled by water. The main advantage of the system is that it does not require a distillation process to be used in industrial or resource-related settings.
Switchable’s investors include Fielding Chemical Technologies, a solvent recovery firm, and Fallingrook Management, an investment firm. The company has not set an exact target for the full commercialization of its solvent system, though it expects small amounts of revenue from the polystyrene recycling business to materialize by the end of 2012. The company is not aiming to sell solvents, but rather to license its system to other firms.
Comments: Eric Kelusky spent most of his time in polyolefins. Recently, Dow has won one of its long-time battles against Nova in Surpass® grades. The court determined that Nova’s Surpass® grades violated the patents of Dow and will pay Dow USD 78 million for damages.
Eric’s departure leaves Nova with no Chief Technology officer. Nova has moved to commodity resins with no innovations in the last fifteen years. The development of Nova’s Advanced Sclairtech process was essentially an improvement of DuPont’s Sclairtech, which has been abandoned.
Nova is now counting on shale gas and the keystone pipeline for its future.
Bag-ban updates
Seattle passes ban on single-use plastic carryout bags
Seattle has become the third largest city in the United States to ban single-use plastic carryout bags. The nine-member city council passed the ban unanimously on Dec. 19. It is scheduled to go into effect on July 1.
This is the second time the city has attempted to regulate the use of plastic carryout bags. The 20-cent fee Seattle council placed on plastic bags in 2008 was overturned before it went into effect by an August 2009 voter referendum.
N. Ireland proposes bag tax in 2013
The Northern Ireland Executive has revealed plans to bring in a 5 pence tax on single-use plastic bags next year.
The proposals now have to go before the full Northern Ireland assembly before they can become law. If accepted by the assembly, there have been proposals to double up the levy to 10 pence in 2014. There will be no charge for multi-use bags in 2013, although they will cost 10 pence the following year.
Comments: CMR Inc. has been monitoring the developments on plastic bag bans in major countries/cities around the world. The longstanding problem with used plastic bags is their collection and reprocessing. Since neither the bag manufacturers nor resin producers and/or retailers take that responsibility, the government steps in to assess a fee/tax for disposal.
The statement of bag bans constantly sparks the ongoing debate about the benefits of taxation and a ban on plastic bags, as opposed to the development of more efficient recycling operations. More recently, in a groundbreaking development, Mexico’s pro-recycling plastics industry has overcome bag ban proponents in the Mexican capital –- Mexico rejected the introduced bag bans and has embraced the plastic industry’s plan to boost recycling initiatives. The government has thus reacted to a major consumer and environmental issue by allowing the industry to resolve the problem, without direct government interference.
San Francisco, San Jose, and Washington D.C. are some of the other major U.S. cities that have also imposed a tax or ban on plastic bags.
EUROPE
Lanxess expanding in India and Brazil
The western Indian state of Gujarat is fast emerging as the next major auto hub. Lanxess AG is tapping into the market with local production, opening an engineering plastics compounding plant in Jhagadia on Jan. 31. Lanxess invested around €10 million (USD 13.5 million) in the Jhagadia facility, which has an annual capacity of 44 million pounds. The Indian plant will cater to carmakers like Volkswagen, Ford, and Tata Motors, all of whom have already committed to major investments in Gujarat. The plant will target customers in the Asia Pacific market. Applications include door handles, intake manifolds, cylinder heads, underhood and interior parts. The Jhagadia plant is the second for Lanxess in the region, after a facility in Wuxi, China.
The company also revealed plans to build a compounding plant in Brazil, which it expects to set up by 2013. Lanxess intends to set up the plant around the auto hub in Brazil – although Lanzess declined to identify the location. Lanxess plans to invest USD 20 million in that project.
Comments: Lanxess decision to establish a compounding facility will set the precedent for future growth in India. The company has long experience in compounded products for automotive applications and has in recent years been aggressively marketing and expanding its capacity. Lanxess recently announced establishing a 20KT Duration and Pocan production facility in Gastonia North Carolina and doubling their polybutylene terephthalate (PBT) in Hamm-Uentrop, Germany. Lanxess aims to take advantage of the recent trend in producing lighter automotive parts. In addition to Duration being light, the material has high mechanical strength, stiffness, and tensile stress with High heat and chemical resistance.
Lukoil to invest in Ukraine’s Karpatneftekhim
Russia’s Lukoil plans to invest more than €45 million (USD 60 million) this year in the expansion of its Ukrainian petrochemical asset Karpatneftekhim — Ukraine’s largest producer of petrochemical products. The majority of funds are expected to be allocated for the launch of the production of PVC window profiles, as well as the modernization of the production facilities of the plant.
In addition, Karpatneftekhim also plans to start the design of facilities for the production of emulsion PVC with a capacity of about 30 KTA. Last year, the total volume of investments in the expansion of Karpatneftekhim amounted to €25 million (USD 33 million), a significant part of which was allocated to the launch of PVC production with a capacity of 300 KTA.
Comments: Ukraine’s Karpatneftekhim originally started commercial operations in the early 1970s and was previously called Zao “LUKOR”. The firm was bought by the Russian oil and gas major in December 2006.
The main products of Karpatneftekhim (manufactured at its Kalush facility) include vinyl chloride, caustic soda, and polyethylene, while the primary feedstocks comprise diesel fuel, supplied from the Nizhny Novgorod refinery, and sodium chloride. The capacity of ethylene production is about 250 KTA. The company’s HDPE facility has a capacity of about 100 KTA and is based on Unipol® technology. Between 2001 and 2003, the production capacities of olefins and polyethylene were rebuilt and modernized.
The total demand for PVC in Ukraine amounted to about 125 KT. Karpatneftekhim’s Kalush facility supplies more than half its output to the Ukrainian market — which has relied solely on PVC imports until 2010 primarily from the U.S. and the EU countries.
ASIA PACIFIC
Samsung Total selects LyondellBasell’s Polyolefin Process Technology
LyondellBasell has licensed its Lupotech T polyolefin process technology to Samsung Total Petrochemicals. The technology will be deployed in a new plant in Daesan, South Korea. The plant will have an annual production capacity of 200 KTA of ethyl vinyl acetate (EVA) and low-density polyethylene (LDPE) polymers and is expected to start operations in 2013. Samsung Total Petrochemicals has chosen LyondellBasell’s technology as it has greater potential to produce high-quality EVA and LDPE copolymers.
Comments: Lupotec T is known to provide a good ethylene conversion rate, rapid start-up, and low production and investment costs. It has been widely licensed across the world with an excellent reliability record. LBI, the largest polyolefin producer in the world and also the largest polyolefin technology licensor in the world, has been relentless in pursuing licensing opportunities in all its six technology licenses they offer. It has a combined license of about 250.
UCC, Dow feel campaign heat, move Supreme Court for speedy adjudication of Centre’s additional relief plea
Feeling the heat of an adverse global campaign in support of additional compensation to Bhopal gas tragedy victims, Dow Chemicals and its wholly-owned subsidiary have rushed to the Supreme Court requesting it to expeditiously decide the Centre’s plea for an additional INR 78.4 billion (USD 1.6 billion) payment from them.
Both Dow and UCC had replied to the Centre’s curative petition seeking revision of the 1989 settlement of USD 470 million, saying the SC had no jurisdiction over the two firms that have neither any business dealings in India nor own any assets in the country. Dow Chemicals has also declined to share its wholly-owned subsidiary Union Carbide Corporation’s alleged past additional liability towards compensating the 1984 Bhopal tragedy victims.
Comments: 1984 Bhopal tragedy was before Dow acquired UCC. Dow has moved ahead with the operations and re-designed its operations to developing the Human element. Dow/UCC accident does not consider the Bhopal event anything to do with Human Element.
Siam Cement and Partners sign JV deal for USD 4.5-Billion project in Vietnam
Siam Cement and it’s Vietnamese and Qatari partners have signed a joint venture agreement for a previously announced petrochemical complex in Vietnam. The partners will invest USD 4.5 billion in the project, following a final investment decision, which is expected next year.
The agreement follows the signing of a framework agreement, announced to the stock exchange in November 2009, and an investment agreement in January this year. Commercial operations at the complex are expected four to five years after the groundbreaking ceremony and the signing of financing agreements.
The project will be Vietnam’s first integrated petrochemical complex. Siam Cement holds a 28% stake in the venture, down from the original 53% share. Thai Plastics and Chemical holds another 18%. The other partners are QPI Vietnam, a subsidiary of Qatar Petroleum International, PetroVietnam, and Vinachem.
The complex will be located on Long Son Island, in Ba Ria-Vung Tau province of southern Vietnam, adjacent to Vietnam’s future refinery. It will be in close proximity to the primary southern Vietnamese market, some 100 km southeast of Ho Chi Minh City. The project will be based on a flexible cracker designed to produce 1,400 KTA of olefins. It will use ethane, propane, and naphtha feedstocks. The complex will also produce polyethylene, polypropylene, and vinyl chloride monomer with the bulk of the output expected to be consumed domestically — surplus will be sold in the ASEAN region.
Comments: This will be Vietnam’s first integrated petrochemical complex using the flexible feed. Vietnam, the world’s 13th most populous nation with a population of about 90 million, is a significant market for chemicals and plastics consumption. Since 1986, the country has made major changes, moving from a “planned economy” to a “market economy” except for major national projects. The progress in agricultural and industrial developments is pronounced and will continue so at an accelerated rate as the infrastructure is now in place. In addition, Taiwan and China are beginning to invest more in Vietnam for plastics converting businesses to take advantage of the lower labor costs in Vietnam. The overall economic prospect is bright. Per World Bank prediction, the GDP growth for 2012 will be 6.1% but CPI will increase by 10.5%.
SCG (Siam Cement Group) is the most innovative petrochemical group in Asia.
Honam firms up plans for petrochemicals complex in Indonesia
Honam Petrochemical has firmed up plans to invest in a petrochemical complex in Indonesia. The company announced in March last year that it was planning to expand in South East Asia, which would include investing in a manufacturing complex in Indonesia. It did not give details at the time, however. Honam has recently signed a memorandum of understanding with Krakatau Steel, an Indonesian state-owned steel producer, which would provide land at Cilegon for the new complex. Honam plans to invest up to USD 5 billion to build the complex. Construction could start in the first quarter of 2013 with completion in 2016.
Honam’s Cilegon project is expected to include an olefins plant with a capacity for 1,000 KTA of ethylene and 550 KTA of propylene. Downstream units would produce 600 KTA of polyethylene (PE), 600 KTA of polypropylene, and 700 KTA of mono-ethylene glycol. A 140 KTA butadiene plant is also planned. Part of the naphtha feedstock will need to be imported. Honam plans to prioritize the domestic market supplying about 80% of the output to local consumers.
Comments: With a population of 240 million, Indonesia is the 4th most populous country in the world and would be a huge domestic market for chemicals and plastics consumption. In 2010, Honam’s decision to acquire Malaysia’s Titan Chemicals is a vital step in the South Korean major’s strategy to strengthen its competitiveness in the petrochemicals business and enhance its overseas presence. Titan’s two crackers were small and the expansions and/or new petrochemical complex in the region were strategic possibilities by Honam at the time of purchase.
Nippon Shokubai to expand Superabsorbent Polymers plant in China
Nippon Shokubai has approved the Nisshoku Chemical Industry’s (NCI) investment plan for the expansion of NCI’s superabsorbent polymers plant at Zhangjiagang. A new superabsorbent polymer plant with a production capacity of 30 KTA will be built as a part of the investment plan. The capacity of the existing plant is 30 KTA. Mechanical completion of the new plant is expected in March 2014, and commercial operation will begin in July 2014. The total capacity of NCI’s production site after the expansion will be 60 KTA. The investment amount is expected to be approximately USD 56 million.
Comments: Superabsorbent polymers are a crucial component in the manufacturing of diapers, adult incontinence, or feminine hygiene products. The material was introduced into the manufacturing of diapers in 1982 and since then the market has grown rapidly. China until recently was reluctant to switch to the diaper market. Traditionally Chinese consumers have been using cloth diapers called kaidangku, open-crotch pants. With the growth in the economy and increasing middle-class population having larger disposable income, the growth in the diapers market has been rapid and suppliers have been trying to keep up with the demand. Nippon Shokubai plan to increase the SAP capacity is in line with the current situation meeting their raw material requirements.
IndianOil advances Paradip Cracker, to double Investments
IndianOil is expected to double investments in its petrochemicals business by spending an additional USD 5 billion over the next few years. The company has so far spent about USD 4 billion. The investments will include a new cracker, which the company has been contemplating for a number of years. It will be based at Paradip on the east coast of India, where the company is building a 15,000 KTA refinery. The cracker, currently in feasibility study phase, will be designed to produce 1,100 KTA of ethylene, using naphtha and FCC offgases as feedstocks. Completion is expected in about 2017-18. IndianOil has not yet configured the downstream slate of products that are likely to include polyolefins, glycols, and specialties, such as ethylene propylene diene-monomer (EPDM). The EPDM rubber would add to the styrene butadiene rubber (SBR), being built at Panipat. The capacity of the SBR unit will be raised from 120 KTA to 200 KTA.
The Paradip cracker will form the second phase of petchems development at the site. IndianOil has already received board approval for a previously announced polypropylene (PP) complex there and it is moving into a detailed feasibility study phase. The complex will include two PP lines each designed to produce 350 KTA using Spheripol technology. Completion is expected in 2015. However, a previously announced para-xylene project at Paradip has been put on hold.
Comments: India’s growth in the petrochemical industry has been growing rapidly in the past few years due to the automotive industry and construction industries. The Indian growing middle-class population has put pressure on the petrochemical industry due to their need for consumer goods made from plastic. India is currently far behind the rest of the world in plastic usage. The per capita consumption of plastic is 4 kg in India, whereas the per capita consumption is around 20 kg for the whole world. Indian oil’s decision to expand its business will allow the petrochemical industry to meet future demand for raw materials such as polyolefin and EPDM which are commonly consumed in automotive and construction markets.
Honam to add a new 300 KTA PP line at Yeosu
Honam Petrochemical Corporation is adding a new 300 KTA polypropylene (PP) line at Yeosu. With this, the Korean PP capacity of Honam, which merged with Titan in 2010, will touch 1,200 KTA. Honam operates PP plants at two locations in South Korea — one is in Daesan which has two lines, with a capacity of 500 KTA, and the other in Yeosu which too has two production lines, with a capacity of 400 KTA. Honam also operates PP plants in Malaysia with a production capacity of 480 KTA.
The erection of the new PP line will be over by February 2012 and commercial production is expected to commence in early April.
Comments: The current polypropylene demand in Korea and China has been growing with the growth of the region’s economy and is driven by the automotive, appliance, and construction markets. This trend is expected to continue for the next 5 years promising future growth for this material. Honam like most Korean companies targets China for their products in addition to local consumption. The demand for polypropylene in China is currently at 16,000 KT and growing close to 6%. The country imports 1/3rd of the PP requirement to meet the demand.
Siam Cement Ups PVC
Siam Cement Group’s SCG Chemicals subsidiary will acquire an additional 23.67% stake in polyvinyl chloride (PVC) producer Thai Plastic and Chemicals for baht 6.21 billion (USD 195 million). The deal will increase SCG Chemicals’ stake in TPC to 69.31%. SCG Chemicals will buy 18.44% of TPC from CPB Equity Co. and 5.23% from individual shareholder Yos Euarchukiati. The transaction is due to be completed by the end of this month, after which SCG Chemicals will make a tender offer for the rest of TPC.
Comments: Thailand is one of the fastest growing economies in the Asia Pacific region with a well-established petrochemical complex and Thai plastics is Southeast Asia’s largest polyvinyl chloride (PVC) producer with a current PVC capacity of 530 KT. Thai plastics has been active in marketing and expanding its production in the region. The company has a stake in PVC vina, their PVC plant in Vietnam. The country has one of the highest GDP growths with a mandate of establishing downstream industry. SCG’s move will give them the future advantage of marketing their full product portfolio in the region. SCG in addition had already announced in 2010 their investment plans to build a petrochemical complex along with TPC and PetroVietnam.
India to create new PCPIR at Cuddalore
The Indian Ministry of Chemicals and Fertilizers will shortly present a proposal for the creation of a Petroleum, Chemicals, and Petrochemicals Investment Region (PCPIR) near Cuddalore, Tamil Nadu. The Cuddalore PCPIR proposal has reached a stage where it could be presented to the cabinet for approval — and after the approval, the Indian Government would sanction the project.
The Cuddalore PCPIR, spread over 250 sq. km (98 sq. miles), will become a chemical and petrochemical hub. It has already attracted many investment inquiries. The anchor tenant at the Cuddalore PCPIR would be Nagarjuna Oil, which is building a 6,000 KTA oil refinery at the site.
Comments: To bolster investment in the country’s chemical and petrochemical sector and promote the country as an important hub for both domestic and international investors alike, the Indian government has facilitated the establishment of a transparent investment-friendly policy regime under which integrated petroleum, chemicals & petrochemical investment regions (PCPIRs) may be set up. A PCPIR would comprise a specifically delineated investment region with an area of around 250 square kilometers, planned for the establishment of manufacturing facilities for domestic and export-led production. The PCPIRs would reap the benefits of cost, networking, and greater efficiency by using common infrastructure and support services.
At present, the only operational PCPIR in India is in the state of Gujarat. The government meanwhile, has given its approvals for PCPIRs in three other states – Haldia in West Bengal; Paradip, Orissa; and Visakhapatnam, Andhra Pradesh.
Sumitomo to build Second SSBR Plant in Singapore; breaks ground on the first Plant
Sumitomo Chemical is planning to build an additional solution-polymerized styrene-butadiene rubber (SSBR) manufacturing plant in Singapore. The second plant is expected to have a production capacity of about 40 KTA. The company has not yet made a final decision on the capacity of the second plant.
Sumitomo also held a groundbreaking ceremony on February 6, for its previously announced SSBR plant at Jurong Island, Singapore. The investment involved in building the first SSBR plant is about ¥10 billion (USD 130 million). The company first announced plans to build the plant in November 2010. Sumitomo’s first SSBR plant in the Merbau area of Jurong Island will produce 40 KTA of SSBR mainly for high-performance and fuel-efficient tires. The plant is being constructed by Sumitomo’s wholly-owned subsidiary Sumitomo Chemical Asia. Construction of the plant is expected to be completed in June 2013, and commercial operation is expected to begin in the fourth quarter of 2013.
Comments: Sumitomo Chemical has decided to construct the new plant in Singapore owing to its geographic advantage in supplying the growing Asian markets as well as a secured stable supply of the raw material butadiene, which is likely in tight supply. In addition, this location provides easy access to existing businesses of the Sumitomo Chemical Group in Singapore that can be leveraged effectively.
Currently, the Asian region (including Japan and China) accounts for nearly 56% of the total global demand for solution SBR. Major producers in this region include Kumho Petrochemical (South Korea), Asahi Kasei (Japan), and Sinopec. Solution SBR is primarily used in tire tread applications, accounting for about 70-80% of the demand. Another major end-use segment, with significant markets in India, Taiwan, and China, is footwear applications – wherein SSBR is used in making shoe soles. Other applications of SSBR include adhesives and sealants, High Impact Polystyrene (HIPS), as well as Acrylonitrile Butadiene Styrene (ABS) impact modification.
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