ADI Chemical Market Resources Newsletter
August 9, 2010

AMERICAS

Dow adding polyolefin elastomer capacity

The Dow Chemical Company has announced an increased polyolefin elastomers manufacturing capacity at its production facilities in Freeport, Texas, and Tarragona, Spain. The capacity expansions, in conjunction with SCG-Dow Group’s new world-scale specialty elastomers plant in Thailand, which is currently under construction, will result in a net increase of 550 million pounds (250 KTA), bringing Dow’s dedicated global capacity for polyolefin elastomers to nearly 2 billion pounds (907 KTA).

Comments:The future growth opportunities are in China, Asia, and some in Europe – for new opportunities. Of course, the current markets in U.S. and Europe will provide the base load for world production. The recovery, if speeds up, may even require new additions in the U.S…something very few people are thinking of..,

The new opportunities in China, India, and South East Asia are the targets for every polyolefin producer in the world, mainly those in India, the Middle East, and South East Asia. In addition, capacities that are coming on stream worldwide are also targeting these high-growth regions.

Dow Chemical Company has been the world leader in the development of polyolefins (PE, PP, and EP Rubbers) for the last 3 decades (especially with the reduction in the number of players – like UCC, Mobil, and LyondellBasell, etc.) In the 90s, Dow Chemical Company decided to consolidate its products into Plastomers and elastomers – combining all three in softer applications…

Dow Chemical Company changed their Americas strategy (North America-South America) to Asset Light Market Facing Middle East and Asia starting in 2004.

As a part of the plan, Asia (China) became a prominent market. The emphasis on high-value-added differentiated commodities (to see the definitions – see our Global Specialty Polyolefins Study) provides Dow an edge over other commodity polyolefin suppliers. Dow plans to address the Asian markets with new and innovative elastomeric products.

These new products based on newer metallocene and/or conventional ZN chemistry are currently the realm of Dow and ExxonMobil only. Dow through Affinity® Engage® – Ethylene based and Versify ® – propylene-based, and INFUSE® – OBC.

Dow chose the manufacturing of these products in Thailand as a JV with SCG Chemicals. SCG, in Thailand, is a publicly-traded company and has strategic relationship with Dow for decades. Mr. Andrew Liveris, the current CEO was the country manager for Thailand and solidified the relationships.

SCG (Siam Cement Group) has been one of the most innovative public companies in Thailand. SCG is committed to innovations in polyolefins and is the best suitable partner for Dow. SCG is planning and developing a new R&D center in Thailand and plans on hiring 300 new PhDs in the next few years – indicating their commitment to Innovation.

The plans to develop newer products in Thailand with SCG’s commitment to R&D and innovations will present excellent product and market development opportunities. Thailand, due to its strategic location between Japan and China is an excellent location for developing newer, differentiated products for the Asia region.

Due to the current technology leadership position of Dow, Dow/SCG is guaranteed success in the differentiated products – There are no other players in the world with such a synergy…

Novomer gets funding to commercialize carbon-dioxide feedstocks

A USD 18.4 million federal stimulus award will help technology firm Novomer Inc. to commercialize its line of plastic materials based on renewable carbon dioxide feedstocks. The Department of Energy (DOE) announced the award as part of a total of USD 106 million in American Recovery and Reinvestment Act funding given out to six companies that are converting captured carbon-dioxide emissions into useful products.

The USD 18.4 million awards is the largest single investment in Novomer’s six-year history.

Comments: Novomer, founded by researchers at Cornell University, is a sustainable materials company pursuing the commercialization of a family of high-performance plastics, polymers, and other chemicals from renewable feedstocks such as carbon dioxide. CO2-based degradable plastics have particularly gained ground over the last few years, and have been the subject of research spanning nearly two decades. The usage of CO2 as a raw material for manufacturing polymers helps cut the consumption of conventional raw materials, thereby alleviating our dependence on fossil fuels.

Novomer, in the recent past, has been working on the commercialization of Polypropylene Carbonate (PPC), an important CO2-based resin; late last year, the company began pilot-scale production of PPC on small reactors at Eastman Kodak’s headquarters in Rochester.

PPC essentially heralds a new concept of polyolefin-based polymer that can meet several polyolefin characteristics with selected advantages in the barrier, functionality, clarity, and disposal properties. PPC is a copolymer of carbon dioxide (CO2) and propylene oxide (PO), made by polymerizing the monomers in presence of a catalyst (e.g. zinc glutarate catalyst). One of the main issues hindering commercialization has been the lack of activity & selectivity of the first and second-generation catalysts along with issues related to specific impurities. As a result, the concept of CO2 polymer has remained a unique research curiosity. However, recent technological developments are paving way for commercial interest.

Peter Shepard, Novomer’s VP of Business Development, presented a paper on the carbon dioxide-based polymer at Flexpo 2011 in Beijing, China on June 10.

Invista evaluating PET unit for possible sale

Invista has begun a review process that could lead to the sale of its North American polymer and resin unit — including its PET business. The company’s 180 KTA PET plant in Spartanburg, S.C., is one of the assets included in the review. Invista’s engineering resins, specialty materials (including polyols), and European polymers and resin businesses are not included in the review.

Invista now becomes the second North American PET maker to state publicly that it’s conducting an asset review. Earlier this year, Eastman Chemical Co. of Kingsport, TN, confirmed it had hired Bank of America, Merrill Lynch as its financial adviser to explore all options, including the potential sale of its PET unit.

Comments: PET has been a fiercely competitive business in the past decade. This primarily stems from its overcapacity situation (capacity grows at about 10% while the demand grows at about 7%). This squeezes the profitability margin and has forced several PET producers (including Eastman, the largest producer) to conduct strategic reviews of their business viability and even consider divestiture. This has been the case with Invista as well. However, capacity growth is expected to decrease in the next 5 years to mitigate the imbalance.

Massachusetts state cuts the use of disposable bags

Early results show the number of disposable plastic and paper bags has dropped significantly in Massachusetts owing to a public-private partnership aimed at discouraging their use at grocery stores.

The Massachusetts Department of Environmental Protection and the Massachusetts Food Association’s (MFA) joint initiative to reduce the distribution of disposable bags has dropped usage by 25 percent since 2007. The MFA represents grocers.

A total of 12 supermarket chains, covering 384 stores, have been tracking annual paper and plastic bag usage and reporting a 25 percent disposable bag distribution reduction. The program started in March 2009. The state and grocers have a goal of reaching at least 33 percent by 2013.

Comments: The results in Massachusetts are encouraging, and the state is setting an example for other regions that are trying to reduce disposable plastic and paper bags.

There are several regions globally that are heading in this direction, with each adopting different methods of enforcement. The methods have varied from the imposition of fees for each plastic bag at grocery stores, as has been the case in Europe, to government legislation that has recently been implemented in places like Mexico City. In addition, states like California have proposed bills such as AB1998 that have called for a total ban on disposable plastic grocery bags. Public awareness is the key issue for progress in this direction.

Berry to close another plant

Berry Plastics Corp. will be closing a plastic sheeting plant in Battleboro, NC. The plant, which is 390,654 square feet in size, has made sheeting for drop cloths, bags, tapes, and other products for 24 years. The plant is expected to close by the end of November. About 241 workers will be laid off from the plant.

In North Carolina, in addition to the Battleboro plant, Berry operates facilities in Ahoskie and Charlotte.

Comments: Berry Plastics is a leading manufacturer of injection-molded plastic packaging, thermoformed products, flexible films, tapes, and coatings. The firm is currently the second largest film and sheet manufacturer in North America, manufacturing a range of products that include open-top and rigid closed-top packaging, polyethylene-based plastic films, industrial tapes, medical specialties, packaging, heat-shrinkable coatings, and specialty laminates.

The closure of Berry’s Battleboro facility has been one among a spate of closures announced by the company recently, confirming our comments and analysis from previous editions. This trend is expected to continue in the U.S. converting industry as major companies look to streamline the overlap in a portfolio created due to recent mergers and acquisitions; Berry recently acquired Pliant Corporation which has created a lot of overlap in the product and process coverage.

These closures are also indicative of the changing times. In the past organizations like Pliant, Linear Films, Huntsman, etc. focused their efforts on innovation. However, the current market situation is bound to impact innovation levels, as survival becomes increasingly important – a trend already witnessed at the polyolefin resin producer level in the U.S.

Palziv is ready to open its first XLPE foam plant in North America

Palziv North America is set to open its first U.S. plant in Louisburg. The factory will produce cross-linked continuous rolls and buns from PEX for packaging, automotive, construction, insulation, toys, orthopedics, and other end markets. Production is targeted to begin in late summer, once all machinery is in place.

Palziv has spent USD 7.8 million to open the facility, which also houses its North American headquarters. The 165,000-square-foot plant sits on 42 acres.

Comments: Palziv is an Israeli firm specializing in the production of cross-linked and closed-cell polyethylene foam and synthetic rubber foams. Foams are light-weighting tough materials useful in packaging, automotive, construction, insulations, toys, and a host of other markets. Due to its hydrophobic nature, it is impervious to mildew, rot, and bacteria.

Q2 Earnings reports –Chemical majors back in the black!

Dow Chemical Company returns to profit

Dow Chemical reported a second-quarter net income of USD 651 million compared to a loss of USD 344 million in the year-ago period. Sales jumped 20%, to USD 13.6 billion helped by a 7% rise in volumes, and a 19% rise in selling prices.

Exxon earnings are up 85 percent

ExxonMobil has announced second-quarter earnings, excluding special items, of USD 7.56 billion, up 85 percent from the second quarter of last year, reflecting higher crude oil realizations, improved downstream margins, and strong chemical results.

Shell’s Chemical business returns to profit

Shell’s chemicals business swung to a profit in the second quarter of 2010, reporting earnings of USD 390 million on a current cost of supplies (CCS) basis, compared with a USD 18-million CCS loss in the same period of 2009.

Westlake’s improved earnings on higher margins and higher selling prices

Westlake Chemical reported a second-quarter net income of USD 59.6 million, up 252% from the year-ago period. Sales rose 42%, to USD 818.4 million on higher average selling prices for all major products.

Eastman Chemical reveals historic Q2

Eastman reported a quarterly net income of USD 148 million, compared with a net income of USD 65 million for the same quarter last year. Revenue rose to USD 1.7 billion from USD 1.3 billion.

Arkema’s second-quarter earnings jump on improved volumes

Arkema’s second-quarter earnings rose on improved economic conditions and the impact of the purchase of Dow’s acrylic assets. Arkema reported a net income of €119 million (USD 157 million), compared to a € 114 million (USD million) loss in the year-ago period. Sales jumped 38%, to €1.6 billion (USD 2.1 billion).

Sabic second-quarter profit is down on the first quarter to lower prices and higher costs

Sabic’s net income in the second quarter was SR5.02 billion (USD 1.34 billion), 177% up on the same period in 2009 but lower than the first quarter’s net income of SR5.43 billion (USD 1.44 billion).

DSM profits rise on improved business conditions

DSM reported a second-quarter net income of €149 million (USD 197 million) compared to earnings of €10 million (USD 13.2 million) in the year-ago period. Sales rose 23%, to €2.4 billion (USD 3.1 billion).

AkzoNobel’s Q2 figures beat market expectations

Akzo Nobel’s Q2 net profit rose 76% as a result of cost-cutting measures and improved sales – €273 million (USD 360 million), up from €155 million (USD 205 million) for the same quarter last year. Revenue rose 13% to €3.9 billion (USD 5.1 billion) from €3.5 billion (USD 4.7 billion).

Reliance Industries Limited’s profit rises

RIL’s net profit in the three months through June 30 rose 32% to 48.51 billion rupees (USD 1.04 billion) from 36.66 billion rupees a year ago (USD 0.78 billion).

Lanxess reports huge increase in profits; raises earnings Forecast; scales back cost-cutting Plans

Lanxess’ sales were up 48% at €1.83 billion (USD 2.4 billion) and net profit soared to €131 million (USD 173 million) from €17 million (USD 22.4 million) in the second quarter of 2009.

Huntsman’s profits rise on higher volumes and selling prices

Huntsman posted a net income of USD 75 million, compared to a USD 66 million loss excluding special items. Earnings were USD 114 million compared to USD 406 million in the year-ago period including special items. Second-quarter 2009 earnings include a USD 531-million gain related to Huntsman’s terminated merger and related litigation with Apollo Management.

Ineos reports higher Q2 Ebitda on Strong Demand

Ineos Group Holdings reported a historical cost Ebitda (HC Ebitda) for the second quarter of 2010 of €478 million (USD 616.5 million), compared to €352 million (USD 465 million) in the second quarter of 2009.

Ube swings to profit

Ube Industries reported a net profit of ¥1.7 billion (USD 20 million) for its fiscal first quarter ended June 30, compared with a net loss of about ¥3.2 billion (USD 37.4 billion) in the corresponding period of the previous fiscal year, on sales up 16.5%, to about ¥140 billion (USD 1.64 billion).

Mitsubishi swings to profit

Mitsubishi Chemical reported a net profit of ¥24.5 billion (USD 285 million) for its fiscal first quarter that ended June 30, compared with a net loss of about ¥17 billion (USD 199 million) in the corresponding period of the previous fiscal year, on sales up 41%, to ¥776 billion (USD 9 billion).

Kuraray records huge rise in profits

Kuraray has reported a net profit of ¥5.7 billion (USD 66 million) for its first quarter ended June 30, compared with a net profit of ¥138 million (USD 1.6 million) in the year-ago period. Sales increased 20%, to ¥87.7 billion (USD 1.02 billion).

Specialty and distribution platforms boost PolyOne’s income

PolyOne reported a second-quarter net income of USD 45.7 million, compared with a loss of USD 1.9 million from the year-ago period.

Comments: Recovery is on its way.

EUROPE

Ineos sells PVC film business

Ineos is selling its global polyvinyl chloride film business to Bilcare AG, a subsidiary of Bilcare Ltd., for €100 million (USD 130.3 million). The business has sales of about €240 million/year (USD 313 million/year), employs 1,300 people, and has plants in Germany, Italy, India, and North America. The transaction is being carried out through Bilcare’s German subsidiary and is expected to be completed at the end of August, subject to necessary regulatory filings and approvals.

Comments: The latest divesture by Ineos is in keeping with the company’s corporate vision to focus in entirety on its petrochemicals business. Ineos, in the recent past, has been pushing to sell its non-core business units. This strategic shift has arisen as a consequence of the company adopting new strategies to reduce debt and stabilize its finances.

The film business has been one of Ineos’s last remaining non-core assets. The company recently completed the divestment of its Fluorochemicals division to Mexichem (Mexico City) for USD 350 million and also folded its Chlorvinyls subsidiary in the UK.

Evonik buys BYK PU additives business

Evonik Industries AG has added the range of polyurethane foam stabilizers supplied by BYK-Chemie GmbH of Wesel, Germany, to its portfolio. The deal includes BYK’s existing business contacts and expertise in the manufacture of products sold under the Silbyk® tradename, but no assets or personnel. Financial details of the acquisition are yet to be released.

Comments: Formerly known as Degussa, Evonik Industries AG is a producer of specialty chemicals. It manufactures chemicals for the automotive, pharmaceuticals, cosmetic, plastic, and rubber industries. The polyurethane additives business division of Evonik is one of the leading global suppliers of additives for the manufacturing of different types of polyurethane foam. The main application markets include automotive interiors, furniture, bedding foam, spray foam (construction), and insulation for home appliances, footwear, etc.

In addition to polyurethane foam stabilizers, Evonik’s polyurethane-related portfolio includes metal and amine catalysts, release agents, colorants, antioxidants, antistatic agents, and other performance additives that lend unique physical properties to the final foam products.

BYK Additives & Instruments is a supplier of additives for coatings, inks, plastics, adhesives, sealants, and paper surfaces. It supplies PU foam additives ranging from anti-fogging to blowing agents and heat stabilizers. This acquisition will further strengthen Evonik’s market position in the PU foam Additives business.

MIDDLE-EAST & AFRICA

 PIC to invest USD 10 billion to expand petrochemicals and polyolefins business

Kuwait’s Petrochemical Industries Co. (PIC) plans to invest USD 10 billion over the next four years in domestic and overseas projects in a bid to expand operations. Construction of its’ third mixed-feed olefins facility with 1400 KTA ethylene capacity is being planned at an investment outlay of USD 5 billion. The facility will have downstream facilities such as ethylene glycol, polyethylene, and polypropylene, depending on the mix of feed, and is expected to be operational in 2016.

PIC’s share in a proposed USD 10 billion refinery and petrochemical complex in China’s Guangdong province is also part of the company’s projects. The project, in which PIC partners China Petroleum & Chemical Corp, awaits approval from the Chinese government by the end of the year and is expected to be operational in 2015.

The company is also seeking growth in areas where there would be an opportunity for feedstock, possibly in Yemen, Algeria, Libya, or Asia.

Comments: The addition of this third ethylene unit of 1,400 KTA capacity to the current Olefin I and Olefin II (total capacity of 1,650 KTA) will elevate PIC to the level of a major ethylene producer in the region. The majority of the downstream products such as polyethylene, ethylene glycol, derivatives, etc. will be exported to China and other Asian markets where its neighbors Saudi Arabia and Qatar also participate in. The concern is that Kuwait’s ethylene is obtained mostly from naphtha cracking, which would potentially cost more than the natural gas-based ethylene produced in Saudi Arabia and Qatar.

ASIA-PACIFIC

 Hanwha Chemical acquires Chinese photovoltaics firm

Japan’s JSP expands PP production

JSP Ltd., the manufacturer of the expanded polypropylene ARPRO® material, is expanding in Asia with a new manufacturing site in Chennai, India, and additional production capacity at its site in Guangdong, China.

The expansion in China will bring Tokyo-based JSP’s total capacity in the country to 14 KTA. JSP has two production sites in China that manufacture ARPRO® for automotive applications such as impact protection, interior components, seating, and acoustic insulation. The material is also used for IT products and electrical appliances.

The expansion work is planned for completion by December 2011.

Comments: JSP has had a lot of success in the last few years with its expanded polypropylene (EPP) foam in a number of applications. Owing to its properties, EPP-engineered foam products are highly durable, lightweight, and recyclable. This material has excellent energy absorption and high strength properties and has also been used in packaging due to its cushioning properties.

EPP has found application in automotive parts such as energy-absorbing bumper cores and interior parts. EPP’s success in the automotive market is not surprising as the industry is always looking for products that contribute to weight saving, along with the benefits of recyclability. In addition, automotive manufacturers have gradually been increasing the parts that are made from polypropylene.

JSP has plants globally with production in North America, Europe, and several Asian countries including Japan. JSP’s decision to increase capacities in India and China comes as no surprise as these regions have shown the highest growth in automotive production.

Mitsui Chemicals, Teijin to merge PET operations

Mitsui Chemicals Inc. and Teijin Ltd. will integrate their PET production and sales around April 2011, in an effort to cut costs and compete with cheap imports.

Two firms plan to establish a joint venture that will take over the PET production at a Mitsui Chemicals plant in Waki, Yamaguchi prefecture. Teijin’s PET operation in Shunan in the same prefecture in West Japan will cease production.

Comments: Mitsui has the largest share of the Japanese PET market, while Teijin currently occupies the third spot. To combat the lower-priced imports primarily from other Asian nations, this initiative is Mitsui’s strategy to protect its home turf. In this new venture, Mitsui will own 80% with Teijin representing the remaining 20%. Considerable operation streamlining is expected as a bid to reduce costs and improve overall efficiencies.

Ube to expand Butadiene Rubber production capacity

Ube Industries is investing ¥1.4 billion (USD 16 million) to expand its facilities for manufacturing butadiene rubber (BR) at the company’s Chiba Petrochemical Factory in Ichihara, Japan. The expansion will add 15 KTA of BR capacity, increasing the plant’s total capacity to 110 KTA. The expansion is expected to be completed by August 2012. The move is in response to the growing demand for BR in the Asian region including in China and Japan.

Uber plans to add another 22 KTA of BR capacity in China to be brought online in late 2011. The company is also considering plans for a second expansion phase, which will add another 15 KTA of BR production capacity in China, to be brought online in August 2013.

Comments: The move for Ube to expand Butadiene rubber capacity will allow it to meet the growth of the tire industry in the region. The automotive industry has been growing rapidly in Asia, especially in China. China is currently the largest producer of tires in the world. In 2009, Chinese automotive production exceeded 13 million units, and became the world’s largest auto-producing country. China currently has 50 cars per 1000 people, whereas the ratio in developed countries is 600 to 800. The Chinese automotive market is expected to grow at an annual rate of 20% for the next few years. In addition, the replacement tire market is about twice the OEM market, indicating faster growth for the tire industry.

Gail India enters strategic partnership with BCPL

Gas Authority of India Limited (GAIL) has signed an agreement to market all of the petrochemical products produced by Brahmaputra Cracker and Polymer Ltd. (BCPL) at Lepetkata in the state of Assam, India.

The petrochemical complex, which is under construction, is expected to be commissioned in 2012. GAIL will market 220 KTA of HDPE and LLDPE, and 60 KTA of PP.

Comments: BCPL is a joint venture in which GAIL has a 70% stake, while the remaining 30% is shared equally among Oil India Limited (New Delhi), Numaligarh Refinery (Guwahati, India), and the Assam state government. BCPL is implementing the Assam Gas Cracker Project 1 to set up an integrated Petrochemical Complex at an investment outlay of INR 54.6 billion (USD 1.18 billion). An estimated 500 plastic processing industries are projected to develop in the northeastern region of India after this project becomes operational.

In addition to the polyolefin production facilities, the petrochemical complex will house an ethylene cracker unit, and integrated off-site/utilities plants. The complex has been configured with a capacity of 220 KTA of ethylene and 60 KTA of propylene, utilizing natural gas and naphtha as feedstock. The feedstock supplies will be provided by OIL and NRL, with the individual firms supplying about 6 MMSCMD of natural gas and 160 KTA of naphtha respectively. Ineos will be providing its Innovene G® technology for the swing LLDPE/HDPE swing unit, while Lummus Technologies will be the technology licensor for the PP unit.

The Assam Gas Cracker Project was initially proposed in 1997 as an undertaking of Reliance Assam Petrochemicals Limited (RAPL), a joint venture company involving the Assam Industrial Development Corporation and Reliance Industries Limited. However, the project was shelved at the time, due to the non-availability of sufficient feedstock.

 

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