ADI Chemical Market Resources Newsletter
October 4, 2010

AMERICAS

Braskem plans Polypropylene upgrade

Braskem America will invest USD 40 million in its U.S. polypropylene business through 2011, upgrading facilities’ infrastructure, and integrating business processes with parent company Braskem.

Braskem has allocated more than USD 35 million for upgrading manufacturing assets, and USD 15 million of that will go to the company’s La Porte, Texas site. Modifications at La Porte, TX will expand the capacity of its modern Spheripol™ technology line and idle its slurry technology line. Production of polymers currently made on the slurry line will be transitioned with the La Porte, TX facility and to other company plants in the U.S.

Comments: Braskem, after recently buying Sunoco, entered the North American polypropylene market acquiring 13% of the regional polypropylene production capacity. The demand for polypropylene in North America is expected to show stronger growth with the return of a favorable economic climate and a revival in the North American automotive industry.

Braskem, with this acquisition and other associated investments to expand capacity, has signaled its intent to aggressively market its product, increase market share, and further strengthen its presence in the North American marketplace.

Braskem America has three production facilities located in Texas, Pennsylvania, and West Virginia. The company also has its Technology and Innovation Center in Pittsburgh, PA. Sunoco’s PP plant in La Porte had been the workhorse for a long term in the industry.

Mexico processors ready to boost recycled content

After facing the bag ban, the members of Mexico’s plastics industry association are ready to augment the percentage of recycled materials in plastic bags. At least 10 percent of the content of plastic bags used in Mexico City comes from recycled materials, while some plastic bags are made entirely from recycled pellets.

The city’s Legislative Assembly is scheduled to vote on amendments to the Solid Wastes Law, which, for the past month, has threatened all commercial establishments with heavy fines. The law, which took effect Aug. 18, has resulted in confusion, and penalties have not been strictly enforced.

The amendments proposed by three of the Assembly’s commissions include throwing out an article that “designs, disseminates and applies a program to substitute plastics.” The commissions are also calling, among other things, for the legislators to stipulate that plastic bags sent to landfills should biodegrade after 10 years, a position which would work in favor of Anipac’s pro-recycling arguments.

Comments: The move to encourage grocery stores to switch from plastic bags to those that are biodegradable has not been easy. Many locations have been looking for various ways to enforce compliance with the legislative rule.

Educating the general public to consider/adopt the biodegradable option has been slow, but the awareness has been gradually spreading and information has been getting through. Some locations such as Toronto have started charging up to 5 cents per bag, to discourage consumers from using plastic grocery bags. The move helps governments follow a global trend to divert billions of plastic bags away from landfills.

EUROPE

Solvay plans 800 job cuts as part of a major reorganization

Solvay will cut 800 jobs, almost 5% of its total, as part of a previously announced reorganization designed to save the company €120 million (USD165 million) in annualized costs. The measures are due to take full effect by the end of 2012. The moves follow the divestment of Solvay’s pharmaceuticals business to Abbott Laboratories earlier this year. The job cuts will account for about €65 million (USD 89.3 million) of the intended cost savings.

Solvay intends to create two global business units: specialty polymers and special chemicals. They will be headquartered in Bollate, Italy, and Seoul, respectively. The special chemicals unit will include Solvay’s fluorinated specialties, advanced functional minerals, and molecular solutions.

Comments: In the past 15 years, Solvay has been actively transforming itself into a specialty products company. The 800 people layoff is another measure to further cut costs and maximize the profitability of the company. With a leaner staff, empowering people is inevitable and is the right culture to foster to get the job done. The emphasis on innovation is another element to be instilled in the “new Solvay”. With a clear emphasis on specialty chemicals and specialty polymers, Solvay still has a few large volume low margin “essential” businesses such as vinyl, soda ash, peroxide, and electrochemical. It appears these “essential” businesses can still add good value as “differentiated commodities with an edge” achieved by innovations, smart marketing, and efficient manufacturing practices.

One of the impacts of Global recession Global redistribution of technology and production.

LyondellBasell expands Spherizone polypropylene plant in Italy

LyondellBasell (LBI) plans to extend the production and technology capabilities of its Spherizone process polypropylene plant at Brindisi, Italy. The project will add 50 KTA PP capacity bringing the total to 235 KTA on completion in 2012. The company will upgrade the existing plant to use additional co-monomers, including hexene, to manufacture products with properties required by the pipe, film, and healthcare segments. LyondellBasell recently announced plans to close a 255 KTA PP plant at Terni, Italy by end of this year.

Comments: Spherizone PP technology is one of the six polyolefin technologies LyondellBasell licenses. Since 2004, more than 3,000 KT of polypropylene have been produced with this technology. It is unique in the sense that two different polymerization conditions are achieved in this single multi-zone reactor; this configuration enables the production of new polymers (such as bimodal PP) with different properties. This technology is gaining more acceptance in those regions which value specialty products.

Spherizone technology from its inception back in the early 2000s has always been on the news front: Organically considered an effective replacement for Spheripol – never materialized in replacing/updating the existing Spheripol plants. No Spherizone commercial unit was built in North America. Most Spherizone licenses were issued in the rest of the world – especially in the Middle East based on. commercial plant trails only Most of the world, including China, embraced Spherizone as a new and improved “Spheripol” This is a credit to the old Montedison technology superiority and leadership – sidetracked by financial debacles faced by Himont, Montell, Basell, Lyondell- Basell – Now in the hands of financial players.

PET duties proposed against Iran, Pakistan

The European Commission has proposed imposing definitive countervailing duties on imports into the European Union of PET exported from Iran, Pakistan, and the United Arab Emirates (UAE). The duties, which compensate EU producers for government subsidies or assistance in the exporting countries – would range from 5.1% to 16.7%. These are marginally lower than provisional duties imposed in June – of 5.1% to 17%.

The proposal sent to the EU Council of Ministers for approval includes the following duties; Iran: €139.70/ton (USD 192/ton), Pakistan: €44.02/ton (USD 60.5/ton), UAE: €42.34/ton (USD 58.2/ton). This would ease administration given the swift fluctuations of prices in global PET markets. The duty covers PET having a viscosity number of 78 ml/g or higher.

Comments: This decision of the European Commission to impose subsidy taxes on PET material shipped from Iran, UAE, and Pakistan result from a year-long probe opened in September 2009. European Commission (EC) is the regulatory arm of the 27-nation European Union (EU). It should be noted that EC can impose provisional anti-subsidy duties for four months and provisional anti-dumping duties for six months. However, the EU’s national governments can turn these measures into “definitive” five-year duties at the same or different rates – a harsh measure. In 2007, the EU renewed for another five years anti-dumping taxes on PET from India, Indonesia, Malaysia, S. Korea, Thailand, and Taiwan. The PET market amounts to a USD 4 billion business in Europe.

Karpatneftekhim readies PE and PVC production

Karpatneftekhim, the Ukrainian petrochemicals offshoot of Russian oil and gas group Lukoil, is expected to re-launch polyethylene production at its site in Kalush, Ukraine after a break of more than two years.

Also, the company is due to launch production of PVC on its newly constructed 300 KTA vinyl polymer plant at Kalush in November. Commercial production is scheduled to begin early in 2011. Around 20 KTA of the plant’s output is due to be consumed by Karpatneftekhim to extrude PVC profiles and other vinyl products on site.

Comments: Ukraine’s Karpatneftekhim originally started commercial operations in the early 1970s and was previously called Zao “LUKOR”. The firm was bought by a Russian oil and gas major in December 2006.

The main products of Karpatneftekhim 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.

Olefins production, however, had been suspended at Kalush since June 2008 due to difficulty in sourcing feedstock, and because of the business’s poor profitability due to the onset of the economic downturn. But market conditions have gradually improved since and the Russian market for PE products has become more attractive; Karpatneftekhim intends to resume the operation of the Kalush cracker and start film-grade polyethylene production this month. Prior to the plant closure two years ago, about 40% of its HDPE output went to the domestic Ukraine market while about 33% was sold in Russia.

In terms of PVC production, the Kalush facility will supply more than half its output to the Ukrainian market which has relied solely on European PVC imports until this year. The plant is expected to export around 40% of its product to Russia, Europe, and Asia.

Bayer MaterialScience opens the latest PU systems plant in Russia

Bayer MaterialScience (BMS) has officially opened its new PU systems house and R&D facility in the Russian city of Noginsk, close to Moscow. The total investment in the project, which will have a systems production capacity of around 20 KTA, is estimated at around €20 million (USD 27.5 million).

BMS has not ruled out the possibility of further expansion in the near future, and the future production capacity of the unit will depend on market demand. BMS expects to see annual growth in the Russian polyurethane market at around 10%-12% a year and intends for its latest investment to help fuel demand for PU products in the Russian marketplace.

Comments: Russia has witnessed an increasing growth in the demand for polyurethane in recent years. The current Russian demand for polyurethane is close to 250 KT and is growing at an annual rate of about 9%. Growth is primarily stemming from the automotive, furniture, and refrigerator industries, owing to improved Russian economic health.

The new Bayer PU plant will enable it to meet Russia’s future demand as this growth is expected to continue over the next 5 years. The move for Bayer MaterialScience to set up a PU system house will allow Bayer to facilitate this growth and provide technical service to local consumers.

ASIA-PACIFIC

CNPC and Rosneft build a refinery and petrochemicals complex at Tianjin

BASF to establish polyurethanes system house in Tianjin

Lanxess–TSRC breaks ground on NBR plant

Lanxess–TSRC Chemical Industrial, a 50:50 joint venture between German specialty chemicals group Lanxess AG and TSRC Corporation, has broken ground for the construction of a nitrile rubber (NBR) plant in Nantong, northwest of Shanghai. The plant, with an investment of USD 50 million, will occupy an area of around 40,000 square meters. It is scheduled to start production in the first half year of 2012 with an initial annual capacity of 30 KT.

Comments: Nitrile rubber (NBR) has been growing rapidly in China due to an expansion in industries such as construction, automotive, and footwear. China today is the world’s largest consumer of Nitrile rubber with major end-use markets encompassing hoses, seals, and gloves. NBR is especially crucial for certain applications in the automotive industry due to its higher resistance to oil and heat than conventional rubbers. The growth in this sector will follow trends in the automotive industry, which has seen a steep ascent over the last few years. Nitrile rubber demand’s a higher price due to its superior performance properties; NBR products have better resistance to abrasion, ozone, UV light, hot air, and long-term aging. These properties allow its usage in a wide range of applications such as seals, hoses for hydraulics and pneumatics, rubber gloves, elastic threads, as well as blankets for print cylinders and rolls. Lanxess and TSRC’s decision to build a plant in China will enable it to meet the growing regional demand for Nitrile rubber.

PTT Asahi Chemical resumes construction of Acrylonitrile and MMA plants in Map Ta Phut

PTT Asahi Chemical, a joint venture between Asahi Kasei Chemical, PTT, and Marubeni, has resumed construction of its previously announced acrylonitrile (AN) and methyl methacrylate (MMA) plants at the Map Ta Phut industrial estate in Rayong province, Thailand, following the cancellation of the suspension order by a Thailand court. The 200 KTA AN plant and the 70 KTA MMA plant, which were originally expected to start up by the end of 2010, are now scheduled to begin operation in mid-2011.

Comments: This comes as good news for PTT Asahi Chemical. Map Ta Phut industrial estate is the largest petrochemical/chemical complex in Thailand. Last year, when the Thai Supreme Court halted several project ventures citing non-compliance with environmental and health regulations, the companies under suspension stood to lose significant revenue. There has been a significant effort by chemical companies to improve the process and achieve compliance.

Keyuan Petrochemicals commences construction of the first SBS facility in Ningbo

Keyuan Petrochemicals, Inc. has commenced construction of its first Styrene-Butadiene-Styrene production facility in Ningbo, Zhejiang Province, which will be adjacent to its current production facility. The new SBS facility is expected to add 70 KTA to Keyuan’s production capacity by end-2011, with an estimated cost of USD 17.5 million in capital expenditures.

Civil engineering is expected to commence from September 2010 to March 2011, followed by equipment installation from April 2011 to September 2011. The last phase comprising trial runs is scheduled for October 2011 through November 2011.

Comments: Keyuan Petrochemicals currently has a product slate that includes BTX aromatics, propylene and propylene derivatives, styrene, Liquefied Petroleum Gas (LPG), MTBE & other chemicals.

China’s major SBS players include Lee Chang Yung, Sinopec Baling, Sinopec Beijing, Dushanzi Petrochemical, and Maoming Petrochemical. The cumulative capacity of all SBS producers is about 510 KTA. SBS is the major copolymer used in China amongst the three major types of SB Copolymers i.e. Styrene Butadiene Styrene (SBS), Styrene Isoprene Styrene (SIS), and Styrene Ethylene Butadiene Styrene (SEBS), and accounts for around 90% of the total SBC demand in China.

The main application of the SB copolymer is in footwear. Producers in China typically cater to China’s large converting industry. The remaining market is export-oriented, with target markets mainly including North America and Europe.

RIL plans INR 400 billion in petrochemical investment

Reliance Industries plans to invest INR 400 billion (USD 9 billion) in petrochemicals by 2014 to expand the world’s biggest refining complex at Jamnagar, Gujarat. INR 160 billion (USD 3.6 billion) has been earmarked to set up a cracker unit as part of a proposed petrochemicals project in Jamnagar. The cracker will produce ethylene, propylene, low-density polyethylene, and mono-ethylene glycol. INR 150 billion (USD 3.4 billion) will be invested in a coke gasification plant that will fuel power plants in the complex. It plans to spend INR 68.5 billion (USD 1.9 billion) on a plant to produce paraxylene, and a unit to manufacture butyl rubber.

Various supporting and ancillary projects would cost INR 40 billion (USD 900 million). They include a fifth crude distillation unit (CDU) that would utilize crude from Cairn India Ltd’s Mangala oil field in Rajasthan state (India). A CDU is a front-end process in the refinery to separate crude oil into products such as naphtha, kerosene, and light gas oil, among others. This is the first time that RIL executives have specified the investment in the petrochemical projects in Jamnagar as part of an expansion drive called J3, which denotes the third phase of expansion of the complex.

Comments: Reliance is one of the fastest-growing organizations – via acquisitions and mergers. Reliance through their impeccable record established shareholder confidence with their ability to raise capital and expand projects – and succeed. In addition, during the last few years, RIL has consecutively discovered gas wells in KGD6 (Krishna-Godavari basin, Bay of Bengal) making the company significantly cash rich. This USD 9 billion expansion is a strategy adopted to secure feedstock needs for India’s growing demand for polyolefins and PET Fibers.

Borouge establishes a marketing and sales company in Beijing

Borouge has established a new marketing and sales company in Beijing, China. Through the new company, Borouge will be better positioned to serve its customers in the region with plastics solutions from its manufacturing plants in Abu Dhabi, and Shanghai, China.

Borouge is currently building a compounding plant at Nansha, in Guangzhou, China, which will be the company’s second compounding plant in the country. Construction of the Nansha plant is expected to be completed by mid-2012, and it will produce up to 105 KTA of compounded polypropylene resins.

Comments: China has become a market of key importance for Borouge. Borouge, which is a joint venture between the Abu Dhabi National Oil Company (ADNOC) and Borealis, inaugurated its first 50 KTA polyolefins compounding plant in Shanghai in late April. This plant has been opened to supply compounded polyolefin resins to the rapidly growing Chinese automotive and household appliance industries.

Borouge’s ongoing investments in the region have indicated the company’s commitment to establishing a closer-knit supply chain in the Chinese plastics industry. To this end, the company recently launched logistics hubs in Shanghai and Guangzhou, and a research and development center in Shanghai Borealis’s excellent business experience will be beneficial in implementing Borouge’s growth strategy in the Asian region.

Borouge currently has four offices in China, in the cities of Beijing, Shanghai, Guangzhou, and Hong Kong.

British-Pakistani JV to build polyethylene plant in Karachi

Trans Polymers Ltd. – a British and Pakistani joint venture is in the process of finalizing plans to build a 350 KTA PE plant near Port Qasim in Karachi, Pakistan, for USD 701 million. The project promoters are Trans Polymers (UK) Limited, a private UK investment company comprising British, Pakistani, GCC, EU, and Malaysian investors, and its Pakistani subsidiary, Trans Polymers Ltd.

The promoters also have an offtake agreement in place with Ravago of Belgium to import a portion of the production. The proposed project has received approval from the government of Pakistan, which has granted various foreign investment incentives as well as favorable tariff concessions. Construction, commissioning, and warranty testing of the plant are estimated to take 34 months and commercial production is expected by the fourth quarter of 2013.

Comments: The proposed PE plant will mark an important landmark in Pakistan’s polyethylene landscape. The production of PE and other polymers such as polypropylene planned in a subsequent phase of the project will go some way to fulfill the growing demand for plastics in Pakistan. Currently, there are no PE plants in the country as a result of which Pakistan imports all of its PE and its PP requirements as well. Thus, once the proposed project gets off the ground, it will save valuable hard currency for the country and provide employment opportunities across the supply chain. The Trans Polymers Project will comprise three phases, of which the PE plant will be the first phase of the development of a major polymer complex in Pakistan comprising polyethylene, naphtha, and polypropylene. Ineos Technology will be the supplier of the license and technology.

Pakistan’s polyethylene demand is about 270 KTA and is projected to grow at about 7 % over the next few years. Pakistan’s imports of PE and other polymers cost the country over USD 1 billion in 2009. When the proposed new facility starts commercial production, demand for PE is projected at about 570 KTA, which will effectively guarantee the plant a sustainable domestic market with excess capacity for exports. The consumption of PE and PP currently in Pakistan per capita per population is about 1 kg (2.2 lbs), which is very low compared with 3kg (6.6 lbs) for neighboring India and 7 kg (15.4 lbs) for China. The global average is about 10 kg (22 lbs), while that of industrialized western economies is around 30-40 kg (88 lbs).

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