AMERICAS
Ethylene XXI financing completion is expected by end of April
Negotiations for a financing package for the Ethylene XXI complex planned by Braskem and Grupo Idesa for Coatzacoalcos, Mexico are expected to be making good progress, with final formal closing expected by the end of April.
Ethylene XXI would include a 1,050 KTA ethylene cracker and downstream polyethylene units. A project of that size has been in the works, off and on, in Mexico for more than 15 years but Braskem Idesa’s 2009 agreement with Pemex for a 20-year competitive raw material supply agreement has made it more viable.
Comments: This is a significant project for Braskem and Idesa with a total cost of about USD 4 billion. It comprises a 1,050 KTA ethylene cracker and three manufacturing lines of polyethylene – one 300 KTA LDPE utilizing LBI’s Lupotech T, and two lines of Ineos’ Innovene S (400 KTA and 350 KTA). Paralleling the financial negotiations, the site preparation and FEED (Front-End Engineering and Design) are near completion.
Westlake may drop Georgia Gulf bid
Westlake Chemical may abandon its USD 35/share, or USD 1.3 billion, unsolicited bid if Georgia Gulf does not enter negotiations. Westlake believes their proposal to be a good one — and represents superior value compared to where Georgia Gulf will be trading absent a transaction and on a standalone basis. Westlake has officially not withdrawn its proposal, but at some point may likely do so — if there is no favorable change in approach from Georgia Gulf’s board and management. Westlake is however willing to explore where opportunities exist that would justify increasing their proposed price. Georgia Gulf previously claimed that Westlake’s proposals did not reflect the intrinsic value of the company.
Comments: Comments: As we have commented in the previous issue, this bid was intended to make Westlake a stronger supplier with both size and integration advantages. So far it has been a typical price negotiation stage for merger and acquisition, but it should become clear in the near future. The recent price dip should be a dip from a temporary supply and demand unbalance but not for the long term.
Westlake and Huntsman post solid growth
Plastics-related businesses at Westlake Chemical Corp. and Huntsman Corp. each posted solid growth in 2011. Westlake saw its annual sales total grow 14 percent to more than USD 3.6 billion. The firm also saw profit increase 17 percent to almost USD 260 million. Westlake’s olefins unit – including low-density polyethylene and ethylene feedstock – accounted for about 71 percent of the firm’s sales in 2011, with the remainder coming from its vinyl unit, which includes PVC resin and pipe. Olefins sales grew almost 14 percent, with vinyl sales increasing almost 16 percent. Operating income for Olefins roughly was flat at around USD 460 million, while Vinyl’s operating income swung to USD 4 million after posting an operating loss of more than USD 62 million in 2010.
At Huntsman, polyurethane sales increased 23 percent to more than USD 4.4 billion. The unit’s pretax profit also rocketed almost 50 percent to USD 476 million. PU ranked as the largest of Huntsman’s five operating units in 2011, bringing in almost 40 percent of total sales. Huntsman’s overall sales for 2011 grew 21 percent to more than USD 11.2 billion, with profit mushrooming from USD 32 million in 2010 to USD 254 million last year.
Comments: The financial performance of Westlake in the past two years (or post the 2008 economic downturn) has been on the upswing. The 2010 total revenue of USD 3.17 billion and net income of USD 221 million have recovered to the level of 2007 (revenue of USD 3.19 billion and net income of USD 114.7 million. The bid for Georgia Gulf is indicative of their intent to become an integrated sizable player in PVC – from ethylene to VCM to PVC and pipes and construction products (door and windows etc.). Huntsman has been a specialty chemicals company and had revenues of USD 11 billion with an EBITDA of USD 1.1 billion. Things are looking up for Huntsman too.
Formosa investing USD 1.7 billion to expand the Point Comfort plant
Formosa Plastics Corp. USA is embarking on a USD 1.7 billion expansion of its plastics and petrochemicals site in Point Comfort, Texas. Formosa’s expansion would include a new low-density polyethylene plant with an annual capacity of about 660 million pounds (300 KTA). The expansion also would include a 1.8 billion-pound (816 KTA) capacity olefins cracker and a 1.3 billion pound (300 KTA) capacity propane dehydrogenation unit. The project will create 1,800 construction jobs and 225 long-term positions. The new capacity is expected to start up in 2016.
Comments: Formosa’s latest decision adds to the growing list of announcements made by producers in North America — intending to cash in on the shale gas boom. The newly announced cracker would seek to benefit from the increasingly reliable and low-cost domestic natural gas, and provide ethylene feedstock to existing production units and the new LDPE unit. This will mark the third major expansion by Formosa at the Pont Comfort site.
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.
Dow Chemical loses elastomers patent lawsuit against LG Chem
Dow Chemical has lost the patent lawsuit it filed in 2009 in Seoul, South Korea, against LG Chem. Dow claimed that LG Chem had violated its intellectual property rights on metallocene catalyst technology for producing ethylene-based elastomers.
Dow is preparing to appeal the court’s ruling that its claim has no legal basis, and believes that the district court’s decision is improper. Dow stated that before this judgment, its patents were held valid by the Intellectual Property Tribunal of the Korean Intellectual Property Office.
LG Chem counters that it developed the technology on its own in 1999. The Korean firm opened a 90 KTA plant making use of the process in 2008.
EUROPE
Lanxess makes USD 10 million investment in BioAmber
Lanxess AG has made a USD 10 million investment in bio plasticizer maker BioAmber Inc. The investment gives Leverkusen, Germany-based Lanxess a minority stake in BioAmber, which is based in Minneapolis. BioAmber already had planned to build a plasticizer plant adjacent to a Lanxess facility in Sarnia, Ontario, with an opening set for 2013.
Lanxess is a major producer of phthalate-free plasticizers. In October, the firm acquired that field, buying Unitex Chemical Corp. of Greensboro, N.C. Specialty chemical and rubber products made by Lanxess include specialty grades of nylon resin. The firm has annual sales of more than USD 9 billion.
Comments: Comments: Lanxess is one of the major chemical companies that are heavily invested in environmentally friendly products. Recently Lanxess signed a 10-year supply agreement with Gevo for its bio-isobutanol, which it will dehydrate and turn into isobutene, and use in the manufacture of butyl rubber that is mainly consumed in the automotive market. Lanxess move to invest in BioAmber further confirms their commitment to environmentally free products and increases their future product portfolio to include plasticizers that are phthalate-free and bio-plasticizer.
MIDDLE EAST & AFRICA
Qatar Petroleum, Qapco enter agreement for USD 5.5 billion stream cracker petrochemical complex
Qatar Petroleum and Qapco have signed heads of agreement for an 80:20 joint venture, which will produce 1,400 KTA of ethylene, 850 KTA of high-density polyethylene (HDPE), 760 KTA of polypropylene, 430 KTA of linear low-density polyethylene, 125 KTA of pyrolysis gasoline and 83 KTA of butadiene. The project will use feedstock from natural gas plants at Ras Laffan. Qapco is jointly owned by Industries Qatar with an 80% stake and France’s Total (20%). QP and Qapco have been working together for the past few months to plan the development of the project, which will contribute to meeting the continuously growing global demand for various petrochemical products. Ras Laffan has been chosen as the location for the USD 5.5 billion joint venture steam cracker after a detailed feasibility study.
The new facility is the latest in a series of investments to be announced by Dow in Saudi Arabia, the company says. Dow and Saudi Aramco announced last year an agreement to form Sadara Chemical, a joint venture to build and operate a world-scale, fully integrated chemicals complex at Jubail. Upon completion, the JV will be among the world’s largest petrochemical facilities and would represent the largest foreign direct investment in Saudi Arabia’s petrochemical sector. Dow also announced plans to invest in a manufacturing facility for Dow Filmtec reverse osmosis elements in Saudi Arabia.
Comments: Oil and gas constitute over 50% of the GDP of Qatar. Qatar is capitalizing on its huge oil reserve and natural gas reserve to build one of the largest petrochemical industries in the world. With a population of 1.85 million and a land of 4416 square miles, it has a nominal GDP per capita of USD 109,881 – the second largest in the world.
Saudi Arabia approves plans to invest USD 5.6 billion in projects at Jubail Industrial City
Saudi Arabia’s Royal Commission for Jubail and Yanbu has approved for companies to invest SR 21.2 billion (USD 5.6 billion) in projects at Jubail Industrial City.
Al Jubail Petrochemical Co., a joint venture between Saudi Basic Industries Corp. (SABIC) and Exxon Mobil Corp. known as Kemya, got authorization to develop an SR 12 billion (USD 3.2 billion) project to produce ethylene propylene diene monomer, rubber, and carbon black. Saudi International Petrochemical Co. (Sipchem) has received approval to develop an SR 2.8 billion (USD 800 million) venture to produce ethylene vinyl acetate and low-density polyethylene at a capacity of 200 KTA. Approval was given to National Industrialization Co. (Tasnee) to develop an SR 1.4 billion riyal (USD 400 million) project to produce superabsorbent polymers at the capacity of 80 KTA.
Comments: At one time, it was rumored that some of these downstream operations may be dispersed to Yanbu on the west coast of Saudi Arabia. But consideration of the excellent existing infrastructure at Jubail Industrial City probably played a key role in the final decision.
KSA considers hike in feedstock for petrochemical producers
Saudi Arabia could consider a hike in prices for ethane and methane gas used to produce petrochemicals — Saudi Basic Industries Corp. (SABIC) may pay USD 1.25 per million British thermal units for the feedstocks starting in 2013, compared with the current price of 75 cents per million Btu.
Comments: This presumably stems from the anti-dumping concerns raised by European countries as the local cost of ethane is lower than elsewhere.
ASIA PACIFIC
DuPont and Yingli Sign USD 100-million deal for photovoltaic materials
DuPont has signed a USD 100-million strategic agreement with Yingli Energy China, a wholly owned subsidiary of Yingli Green Energy, for photovoltaic materials. Yingli will purchase photovoltaic materials including DuPont Solamet photovoltaic metallization pastes used in solar modules, and a protective back sheet for solar modules made with DuPont Tedlar polyvinyl fluoride film. DuPont and Yingli Green Energy announced last month that they will collaborate to advance technology for higher efficiency solar cells, new module manufacturing processes, and innovative component designs.
Comments: Yingli Green Energy is a leading solar energy company and one of the world’s first fully integrated photovoltaic manufacturers. So far over 2 GW of Yingli solar modules have been installed around the world. The 2010 revenue was close to USD 2 billion with a gross profit margin of 33.2%. As one of the fastest growing economies in the world, China is acutely aware of the importance of alternative energy and has been seriously pursuing renewable, clean, and economical (eventually) energy such as solar energy.
Reliance in JV with Sibur for production of butyl rubber in Jamnagar
Reliance Industries has announced a joint venture with Russian petrochemicals giant Sibur for the production of butyl rubber in Jamnagar, Gujarat, with a combined investment of USD 450 million. RIL will hold a 74.9% stake in the JV, while Sibur would own 25.1%.
The JV named Reliance Sibur Elastomers Pvt. Ltd will produce 100 KTA of butyl rubber, a synthetic rubber used extensively in auto and other sectors. The joint venture would invest USD 450 million to construct the manufacturing facility in Jamnagar, which is expected to be commissioned by mid-2014.
The JV would be the first manufacturer of butyl rubber in India and could become the world’s fourth-largest supplier. RIL and Sibur have also signed a technology license agreement facilitating the use by the JV of the Russian company’s proprietary butyl rubber production technology at the new plant. Sibur would develop the basic engineering design for the facility and also train the JV staff at its plant in Russia.
Comments: India’s automotive industry is growing rapidly influencing the growth of the tire market, and close to 84% of the global butyl rubber is used in this application. The global growth for butyl rubber is close to 4.9 % and is expected to continue for the next 5 years. India’s demand for butyl rubber is close to 60 KT and growing at 9%. This growth is expected to continue for the next 5 years. Butyl rubber is crucial for tire production because it is used as the inner liner or tube in passenger car tires, trucks/bus tires, and light truck tires, which keeps the air in and any moisture in that air from getting to the tire’s steel cords. The new plant will meet the future requirement for butyl rubber which currently depends on imports and sustain growth for India’s tire manufacturing industry.
Reliance plans to expand petrochemicals production at the Jamnagar refinery
Reliance Industries Ltd. will expand petrochemical production including ethylene, polypropylene, and propylene at its Jamnagar refinery to profit from selling products used in consumer goods that are more valuable than exported fuels. The expansion will cost about USD 10-12 billion and take three to four years.
Comments: India currently has a large consumer market due to the growing middle-class population that has been growing since the country’s rise in economic growth. With this class, the consumption of dairy products that are made from polypropylene such as snack packaging from BOPP will continue to rise in addition to the growing automotive market which is a major consumer of polypropylene. Reliance’s expansion will allow these markets to continue to grow with the growth of the Indian economy.
Huntsman breaks ground on Asia Pacific tech center
Huntsman Corp. held a groundbreaking ceremony for its new Asia Pacific Technology Center (ATC) in Shanghai’s Minhang Economic & Technological Development Zone, on Feb. 15.
The USD 40-million facility is designed to support the Asia Pacific region’s rapidly growing demand for world-class technology and innovation and will be operational by mid-2013. The new ATC will form an integrated technology and innovation campus together with the existing technology center that was opened in September 2008. The facility will include machine halls, laboratories, and offices and accommodate up to 400 technical experts from different business units. It will complement existing technology centers in The Woodlands, Texas, and Brussels, Belgium, as well as smaller regional centers.
Comments: Subsequent to Dow, ExxonMobil, DuPont, etc., this is another example of a new R&D facility in Shanghai set up by global major chemical companies. Shanghai is probably the most popular city for overseas companies to have technical facilities in China. The USD 40 million is a major investment for an R&D facility. Shanghai has the qualifications of a mild climate, a global transportation hub, excellent living standards, and a good supply of quality graduates from notable universities such as Fudan University, and Jiao Tong University among others.
DSM Engineering Plastics moves HQ to Asia
DSM Engineering Plastics is making progress on the planned move of its headquarters to Singapore. The company announced on Feb. 16 that the move, which was first disclosed in 2010, will be completed this year.
DSM Engineering Plastics has major operations in Evansville, Ind., and Sittard, the Netherlands. In Asia, the company has key facilities in China, Japan, India, and Taiwan, plus research facilities in China.
Comments: Singapore appears to be a good location for DSM Engineering Plastics as it has one of the best infrastructures for polymer production and it is also located at the spot where it conveniently reaches out to all Asian regions: India, Southeast Asia, China, Korea, and Japan. Asia is now the world’s largest growth market.
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