ADI Chemical Market Resources Newsletter
August 23, 2010

AMERICAS

P&G to use Braskem’s bioplastic

Procter & Gamble (P&G) will use sugarcane based HDPE made by Braskem in some of its packaging for its Pantene Pro-V®, COVERGIRL® and MaxFactor® brands. Pilot products will be introduced globally over the next two years with first commercial products expected on the shelf in 2011.

The products will carry Braskem’s “I’m Green” seal. Braskem announced that the Brazilian market would see the new bioplastic packaging in Pantene hair treatment products.

Comments: Following in the footsteps of Frito Lay and Coca Cola, P&G’s move to utilize green PE comes as another boost to the bioplastic industry. The rollout date of this bio-based polyethylene has been delayed by about two years, owing to the global economic downturn. Now, Braskem’s “I’m Green” is the first green polyolefin commercially available in the marketplace.

In the preparation process, sugarcane is fermented to ethanol, which is then dehydrated to ethylene before being polymerized into high-density polyethylene. It is 100% recyclable, making it a consumer driven product. This technology is similar to that adopted by Coca Cola, which uses sugarcane based MEG to produce a recently launched line of PET bottles.

Braskem currently has a 200 KTA green polyethylene plant located in Triunfo, in the state of Rio Grande do Sul, which is expected to start operations in September. The facility will consume about 500 million liters/year of ethanol initially purchased from other regions. Though Braskem’s initial emphasis has been on the commercialization of product from its green HDPE plant, the company also intends to focus its efforts on sugarcane based PP and EPDM.

The concept of bio-based sources to manufacture Plastics, on a long-term basis will reflect an advantage only in the cost and not the real environmental issue – as far as the plastic itself is concerned. These plastics will remain “Green” only till the cost advantage can be justified.

For example, Dow’s plans to build sugarcane based “Green PE” fell victim to that, compared to PLA or the newest Propylene – CO2 polymer, GreenPol® which is innovation based on monomer itself and not based on natural source for the traditional monomers, that still remain the same.

Bag ban takes effect in Mexico City

A new law has come into effect in Mexico City giving the authorities the power to impose stiff penalties on business owners who give away free non – biodegradable plastic bags to their customers.

Apart from facing fines of up to USD 118,000, shop owners not complying with the new law could also be given a 36-hour jail term. The law is part of the city’s “Green Plan” aimed to raise awareness of the environment.

The law took effect because none of the amendments that Mexico’s plastics industry has lobbied for since the passing of the Ley de Residuos Sólidos (Solid Wastes Law) in March 2009 have been approved by the city’s Legislative Assembly.

Mexico’s Anipac seeks funding to fight anti-plastics efforts

Mexico’s national plastics industry association Asociación Nacional de Industrias del Plástico (Anipac), has been looking for funding of about USD 11,000 a month through 2011 to finance activities aimed at combating anti-plastics sentiment across the country.

Anipac, this week published details of its pro-plastics strategy for the first time. It includes the distribution of promotional material, such as car window and bumper stickers, videos explaining the advantages of plastics and regular, almost daily, conferences at schools and universities on the same theme.

In the short term, according to Anipac, the lobbying of legislators and government officers at state and national level will continue, especially in states where anti-plastic laws have already been passed or are being considered.

Comments: Mexico’s developing position with regards to Plastics Bag ban, is a testing ground and potential standard for most of the countries. For example, several new concepts in bag usage came out of this discussion: (1) purpose/ time of use – a concept referring to why would you use a plastic bag if its use is limited to 5-6 minutes – store bags, grocery bags, fast food bags (2) Life cycle theory from cradle to grave, (3) CO2 balance, etc.

With so many issues, from now, it is a battle between profits and margins and potential loss of income, not a debate about long-term sustainability…

Profitable six months for LyondellBasell

LyondellBasell (LBI), which recently emerged from Chapter 11 bankruptcy protection, has posted better-than-expected second quarter figures. The company, which reported improved business conditions across most segments, had second-quarter income of USD 203 million compared with a loss of USD 353 million for the same period last year.

Comments:Let the good times roll… After so many negative quarters in a row, the industry is on the path of profitability again.

Shortly after it was formed in December 2007, the rising cost of feedstock squeezed the margins of LyondellBasell. In late 2008, even though oil prices began to slide, the onset of the global economic crisis resulted in a precipitous drop in the demand for plastics and chemicals – this led to the Chapter 11 filing of LBI in early 2009. With the reorganization plan approved by the court, LyondellBasell eventually emerged out of bankruptcy in April 2010, putting end to a long drawn takeover bid floated by Reliance Industries Limited (India).

The company has gradually begun to tread the path of recovery and has made good progress, assisted in part by an improvement in the economic climate. Another contributing factor could be attributed to the fact that although LBI idled some of its operations, it did not make a concentrated effort to sell its assets during its period of bankruptcy. Overall, LBI has had strong polyolefin technologies both in its internal production as well as JVs, and in its licensing portfolio. 

Dow adds encapsulants to Photo Voltaic portfolio

Dow Chemical will begin producing polyolefin encapsulant films for polycrystalline silicon and thin-film photovoltaic modules in the fourth quarter of 2010. The films are Dow’s first encapsulant offering and provide better module protection and improved electrical performance compared to traditional encapsulants, including those made of EVA (ethylene vinyl acetate). The films will initially be produced at Dow’s Findlay, OH facility and capacity will be increased globally as demand increases.

Comments: One of the major reasons for Global plastics corporations to participate in Solar, Wind, and other alternate energies is not to change their role from chemicals and plastics to energy, but to sell the materials to increase the markets for traditional material.

The High EVA copolymers are in general high value added LDPEs (8% and more – VA content). The price/margin is increasing at a faster rate with the level of EVA. Prior to solar encapsulation, the market opportunities were very limited beyond 20% EVA.

Solar encapsulation market on the other hand, required greater than 30% VA content applied as a liquid film for encapsulation. Most LDPE producers in the world have programs to meet this application. Mitsui and Dow are on the forefront.

Pactiv to be acquired by Reynolds Group

Pactiv Corp. has agreed to be acquired by Reynolds Group Holdings Ltd., in a deal worth about USD 6 billion. Reynolds is to give Pactiv shareholders USD 33.25 in cash per share of Pactiv common stock held. Pactiv’s board has unanimously approved the deal.

Comments: The move to acquire Pactiv marks the largest acquisition by New Zealand based Rank Group Ltd., of which Reynolds is a wholly owned subsidiary. The acquisition of Pactiv Corp., the maker of Hefty trash bags amongst other consumer and foodservice-packaging products, will help Reynolds Packaging expandits group businesses to include product offering in the takeout-food containers and cutlery segments.

The packaging industry is a very technology-driven one, as well as being capital intensive. Volume plays a crucial part in the success of this business, thereby rendering production capacity as critical to a healthy bottom line. Rank Group Ltd has gradually evolved into a global packaging giant through takeovers.The company’s acquisitions over the past decade have included a USD 2.5 billion purchase of Swiss drink-carton maker SIG Holding AG, and the USD 2.7 billion acquisition of Alcoa Inc.’s packaging business.

EUROPE

Schumann/Steier, Inc (SSI) buys Chusei Oil’s PE Wax facility

Schumann/Steier Inc. (SSI) has completed the acquisition of Chusei Oil’s polyethylene wax and custom-processing facility, known as Chusei (USA) Inc. The plant encompasses several stainless-steel reactors, wiped-film evaporators, and forming belts, as well as a spray former and drum flaker.

Now under the name SSI Chusei, the company is currently manufacturing products to supply numerous industries including rubber, paints, polishes, polymers, and plastics. Additionally, the facility is active in custom toll processing for major chemical companies.

Comments: PE waxes are currently manufactured by three major processes:

(1) On-purpose Process – High Pressure and Med/Low Pressure;

(2) Thermal cracking;

(3) Recovery process

Chusei (USA)’s major business lines are divided into two areas – polyethylene waxes and toll manufacturing. Chusei (USA) with its partner Waxtech Polymers produces and markets over 9.1 KTA of polyethylene wax products annually. Chusei-Waxtech Polymers’ polyethylene wax products are hard, possess a high melting point with a low to medium viscosity, and are derived from HDPE resin manufacture.

Schumann/Steier Inc. (formerly Moore and Munger Lubricants, Inc) is one of the foremost wax-marketing firms in the United States. The headquarters of the company is located in Coral Gables (Florida) and has marketing and product support centers in Texas, Louisiana, and California. SSI has gradually evolved to become a leading marketer of refined petroleum products such as base oils, drilling fluids, white oils, and ethanol and biodiesel. The acquisition of Chusei’s assets will strengthen SSI’s position in the polyethylene wax market and will provide additional resources for the toll manufacturing of its proprietary products.

MIDDLE-EAST & AFRICA

Mehr PetroKimia plans PDH and PP Plant in Iran

Iran’s Mehr Petro Kimia plans to build a propane dehydrogenation (PDH) and polypropylene plant in the Pars Special Economic Energy Zone in south Iran.

PetroKimia will invest USD 229 million in the plant, which will produce 250 KTA of polypropylene. The company will invest USD 451 million in the PDH project, which will produce 450 KTA of PDH.

PetroKimia expects the plant to be operational by 2012. It also plans to build a 90 KTA acrylonitrile (ACN) plant on the site.

Comments:Propylene is an important base material used in the petrochemical industry, with polypropylene accounting for about 61% of the global propylene consumption market. Polypropylene has been subject to robust growth, which in turn has bolstered demand for propylene.

Since 1990, propane dehydrogenation (PDH) has been providing a growing source of propylene for petrochemical applications. PDH offers opportunities for simple back-integration for propylene derivative producers looking for a secure, economical source of propylene. The key to any PDH project is the propylene-propane price differential. For some of the commercial technologies, this price differential is a minimum of about USD 200/MT to achieve good economics.

Iran, owing to its rich natural gas reserves, enjoys an advantaged feedstock position enabling low-cost production of propane. Given the steady increase in propylene prices, propylene production by the PDH process in Iran would result in high-value addition and a potentially short investment payback period. The PDH unit will use process technology and engineering licensed from Uhde GmbH.

The propane for this project would be sourced from the South Pars gas field. The 250 KTA PP units would be constructed in the adjacency of the PDH site and have licensed LyondellBasell’s process technology.

The planned 90 KTA acrylonitrile unit would be the first such plant in Iran. Iran currently imports around 40 KTA of ACN for local consumption and imports are forecasted to increase two-fold to amount to 120 KTA over the next 4 years.

NatPet starts commercial production at the PP plant

Saudi Joint stock company’s subsidiary National Petrochemical Industrial Company (NatPet) has started commercial production at its propylene and polypropylene plant in Yanbu Industrial City.

NatPet is expected to produce 400 KTA of polypropylene, which is sold under an off-take agreement signed with SABIC and Nobel to market its product in Asia and Turkey.

Comments: NatPet’s polypropylene unit in Yanbu Industrial City is located on the west coast of Saudi Arabia. NatPet will be the first company in the region to be capable of producing a wide range of polypropylene product mixes including homopolymers, Impact & random copolymers, suitable for a wide variety of applications. LyondellBasell’s Spheripol® technology has been licensed for the polypropylene production process.

NatPet’s primary target markets will include Saudi Arabia, Gulf Cooperation Council (GCC), Turkey & other Middle East regions.

NatPet had announced the start of project commissioning last November, which was due to start in early 2008, but technical problems faced by the company at the time forced it to postpone commercial production to 2010.

Qatar Petroleum is part of the JV project to construct an ethane cracker in Algeria

Qatar Petroleum (QP), with a 10% stake, has become part of the partnership between France’s Total and Algeria’s Sonatrach joint venture project to construct an ethane cracker in Arzew, western Algeria. Sonatrach awarded a contract to Total to construct the ethane cracker where Total had a controlling 51% stake and Algeria’s Sonatrach 49%. However, new governmental regulations obliging local partners to control most of any JV project with foreign partners have forced Total to relinquish some of its shares. This situation has affected the development of the USD 5 billion projects which was slated for completion in 2013. Now QP has a 10% stake in the project, Total holds 41% and Sonatrach holds 49% of the project.

The cracker will have the capacity to produce 1,400 KTA ethane and 1,100 KTA ethylene. The produced ethylene will be processed into 410 KTA of mono ethylene glycol, 350 KTA of HDPE, and 450 KTA of LLDPE mainly for export.

Comments: With Qatar claiming 10% of the stake, Algeria’s Sonatrach now has obtained 49% or the controlling stake of the JV. This situation is similar to that in China, where most international JVs require a 51% controlling stake from a Chinese holder.

Africa is rich in oil & gas and is gradually moving towards more value-added products like polyolefins and ethylene glycol.

ASIA-PACIFIC

Lummus awarded a contract to build the world’s largest propylene plant

Indorama allots USD 2 billion in investment

Indorama Ventures Plc (IVL) has budgeted USD 2 billion for new investment programs through 2014, including an acquisition of a polyester producer in China expected to be completed in the second half of the year. The company is targeting 20% revenue growth this year through acquisitions to help support the expansion of its client base. Funds for acquisitions will come from the company’s cash flow and bank loans.

IVL is looking at growth options in North America, Europe, and Asia. The company recently announced its first plant in Africa, a plant in Nigeria with a production capacity of 75 KTA, and is expecting to begin commercial operations in the third quarter of 2011. IVL’s AlphaPet project in the United States, a PET recycling plant with a capacity of 36 KTA, will begin operations in the fourth quarter of 2011.

Comments: The global economic recovery has lent an impetus to Indorama’s plans of becoming a global leader, which it has sought to achieve by utilizing strategic acquisitions and plant expansions. The company has gradually evolved to become one of the world’s largest vertically integrated polyester and PET chain producers – Indorama now has the capacity, state-of-the-art technology, and an established reputation as a world-class supplier.

Indorama’s recent investments include the acquisition of the Eastman chemicals plant in Kingston (TN), Rotterdam (Netherlands), and Workington (United Kingdom). Other significant developments include the start-up of a PET plant in Decatur, Alabama along with the acquisition of stakes in Thailand’s major petrochemical businesses.

GPCA protests Indian dumping duties on PP from Oman and Saudi Arabia

The Gulf Petrochemicals and Chemicals Association (GPCA) has sent a formal letter to Indian embassies in the Gulf Cooperation Council (GCC) countries, protesting India’s antidumping duties on imports of polypropylene from Oman and Saudi Arabia. The GPCA has claimed that India would start a trade war if it endorsed a proposal to slap a fresh round of import duties on Gulf polypropylene producers.

India’s Ministry of Industry and Commerce had previously concluded that the low costs of feedstock in the Gulf gave it’s petrochemical producers an unfair cost advantage. The ministry imposed PP antidumping duties on Oman and Saudi Arabia, as well as Singapore in July 2009 following a complaint filed by Reliance Industries and supported by Haldia Petrochemicals. The duties amount to USD 977.67 per metric ton.

The 140-member GPCA has accused India of throwing up new barriers against trade and of breaching World Trade Organization (WTO) rules.

Comments: India’s polypropylene needs are currently estimated at 1,500 KTA, only a fraction of which is currently met by the Persian Gulf-based producers. Last year, India (along with China) imposed tariffs on polypropylene imported from Saudi Arabia and Oman. The tariff was imposed by the Indian government claiming PP producers from the two regions dumped unfairly subsidized, cut-price produce in the Indian market. The duties were eventually lifted in January 2010.

The EU, China, and India have raised tariffs on petrochemicals imports, in some cases by as much as 400 per cent as a protectionist measure to support their domestic industries. The Gulf Cooperation Council (GCC) nations export 50 percent of their output to Asia and 10 per cent to Europe. The petrochemical industries based in the Gulf exported more than 20,000 KT of their products in 2009.

DuPont enters pre-compounding joint venture in China

DuPont Co. and a subsidiary of China National Chemical Corp. are forming a 50/50 joint venture to make and market fluoroelastomer gums and pre-compounds in China.

The venture between DuPont and Chenguang Chemical Research Institute will include a pre-compounding plant to be built in Shanghai. The facility is expected to begin operating in the second half of 2011, pending the completion of definitive agreements and securing appropriate government approvals.

Comments: Fluroelastomers are specialty elastomers having significant demand in application markets such as automotive, hydraulic fluids, adhesives, aerospace, electrical appliances, and the chemicals industry. Fluoroelastomers provide high-value addition owing to excellent thermal stability and overall Back to HeadlinesBack Headlineschemical compatibility. DuPont fluoroelastomers are sold under the trade name Viton®.

In China, DuPont currently has a joint venture with Sinopec to produce ethylene vinyl acetate as well as Pioneer Hi-Bred International to provide corn hybrids to Chinese farmers. The company has added to its market reach in this region, with its partnership with China Blue Star i.e. Chenguang Chemical Research Institute.

China is an important fluoroelastomers market with healthy consumption growth expected over the next five years. Chinese manufacturers in collaboration with DuPont’s production technology will enable this market to have a profitable and cost-competitive supply-demand scenario within the region. China National Chemical is currently the major regional producer of fluoroelastomers.

Sinopec signs deal for MTO Project

Sinopec has signed an agreement with the municipal government of Hebi, China to jointly develop a coal-based methanol-to-olefins (MTO) project in Henan Province, China. Sinopec and the government intend to establish a joint venture by the end of this quarter and complete a feasibility study and environmental impact assessment by year-end.

The project’s first phase would involve an Rmb17-billion (USD 2.5 billion) investment and the complex would have a total capacity to produce 1,800 KTA.

Comments: This new project emphasizes the importance that the Chinese government is placing on utilizing the country’s large coal reserves to reduce its heavy dependence on imported olefins and further propel economic growth. The main driver behind the coal-based projects is to reduce China’s dependence on imported oil and plastic products.

The Hebi project is also part of Sinopec’s broader strategy to enlarge its production output in a bid to compete with PetroChina Co., Ltd., the largest oil producer in China. Sinopec is also planning coal-based chemicals projects in Shanxi Province and Gansu Province.

Earlier this month, a coal-to-olefins gasification unit owned by China Shenhua Coal to Liquid and Chemical Co. Ltd (Beijing) began operations at Baotou, China. The unit, based on GE’s technology, is one of the world’s largest, with a 600 KTA capacity of polyethylene and polypropylene from 1,800 KTA of Methanol.

MTO technology is more important to China than most other regions due to the coal utilization needs to compete effectively against Global energy resources.

Nippon Shokubai to build Superabsorbents plant in Indonesia

Nippon Shokubai’s Indonesian subsidiary, Nippon Shokubai Indonesia, will build 30 KTA superabsorbent polymers (SAP) plant at its Cilegon, Indonesia manufacturing site. The company will invest USD 35 million in the new plant, which should begin commercial operation in March 2013. Nippon Shokubai Indonesia operates a 60 KTA acrylic acid plant at the site, which will supply feedstock to the SAP facility.

Nippon Shokubai is already building a 60 KTA SAP plant at its Himeji, Japan complex, which is scheduled for completion this fall. Nippon Shokubai’s combined SAP capacity will rise to 500 KTA upon the completion of the two facilities.

Comments: Super Absorbent Polymers (SAP) are one of the major components in hygiene products like diapers due to their excellent water retention properties. Nippon Shokubai currently accounts for nearly 20% of the global capacity. The company has SAP production plants located in Chattanooga (Tennessee), Antwerp (Belgium), Himeji (Japan), and China with capacities of 60 KTA, 60 KTA, 260 KTA, and 30 KTA respectively to amount to a cumulative global capacity of 410 KT.

Nippon Shokubai is one of the largest producers of super absorbent polymers along with BASF and Evonik Industries and is vertically integrated with the production of acrylic acid. It is the largest licensor of acrylic acid production technology and accounts for nearly 30% of all licensed technology capacities.

The demand for SAP is growing especially in developing regions like South America and South East Asia. Asia currently accounts for 27 % of the overall demand for super-absorbent polymers. Diaper applications constitute the largest application market within this region.

Sipchem commissions VAM plant

Saudi International Petrochemical Co. (Sipchem) has started up its vinyl acetate monomer (VAM) plant by affiliate International Vinyl Acetate Co., at Jubail, Saudi Arabia. The plant is designed to produce 330 KTA of VAM. Sipchem started up its associated 345 KTA carbon monoxide and 450 KTA acetic acid plants at Jubail in June.

Comments: Sipchem produces methanol from natural gas and benefits from Saudi Arabia’s gas subsidies. With the new complex, the company will now be able to convert part of its methanol output into acetyl products. VAM production is the first step to adding value to its acetyls complex, which came on-stream in June. The complex’s production structure will allow Sipchem to further strengthen economies of scale and improve its overall capacity utilization. The next phase of development will be an integrated olefins and derivatives complex that will consist of a 1,300 KTA cracker unit to produce ethylene and propylene, which will subsequently be used to produce about 800 KTA of polymers.

By venturing into downstream products, Sipchem will be able to achieve full vertical integration that will allow the company to move towards more value-added products, offering stable margins and enhanced earnings potential.

Sipchem is one of the pioneers in Saudi Arabia for value-added product development.

 

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