ADI Chemical Market Resources Newsletter
July 12, 2010

AMERICAS

Berry Plastics closing Lakeville, Minnesota plant

Berry Plastics Corporation will be closing a film plant in Lakeville, MN, on Aug. 13. Berry will lay off 67 current employees and 28 furloughed workers. Berry announced that the closure resulted from its acquisition of an unnamed company with similar manufacturing capacity.

Comments: Berry Plastics was established as Imperial Plastics in Evansville, Indiana in 1967. The company has grown into a leading manufacturer of injection-molded plastic packaging, thermoformed products, flexible films, and tapes, and coatings. Berry Plastics is currently the second largest film and sheet manufacturer in North America manufacturing a wide range of products that includes open-top and rigid closed-top packaging, polyethylene-based plastic films, industrial tapes, medical specialties, packaging, heat-shrinkable coatings, specialty laminates. The company has more than 60 manufacturing facilities globally.

The closure of the Lakeville facility will be one among several closures to follow, as major companies in the converting industry look to streamline the overlap in the portfolio, created due to mergers and acquisitions Berry has recently acquired Pliant Corporation which had a lot of overlap in the product and process coverage.

These are signs of times. In the past organizations like Pliant, Linear Films, Huntsman, etc. focused their efforts on innovation. The current market situation will impact the innovation levels – as survival becomes increasingly important – a trend we have already witnessed at the polyolefin resin producer level in the U.S.

EUROPE

 Total confirms Methanol-to-Olefins process; Talks begin with potential partners

Total Petrochemicals has successfully started up a methanol-to-olefins (MTO) demonstration plant at its research center in Feluy, Belgium. The company has been producing monomers at the facility for a few weeks and has already produced industrial-quality polypropylene (PP) using propylene from the demonstration facility. The technology has been co-developed with UOP and Hydro.

The €45 million (USD 57 million) MTO demonstration plant combines an olefins cracking process (OCP) that is integrated into the MTO technology. The MTO process, developed by UOP and Hydro, converts methanol into ethylene and propylene as well as heavy olefins. The OCP technology, developed by UOP and Total, uses a catalytic process to convert the heavy olefins into additional ethylene and propylene. The combined effluents are fractionated and purified into polymer-grade ethylene and propylene that can be converted into polyolefins at the nearby polymerization unit.

Comments: This is undoubtedly a significant step in diversifying the feedstock in polyolefin production. Key points of this process include:

1) The integrated MTO/OCP process greatly improves the yield of olefins vs. the MTO alone.

2) The purification process is stringent as high-purity olefins are required for polyolefin production.

3) This process produces much more propylene than ethylene, which is good as the demand for PP grows faster than that for PE. This also helps balance the fact that more ethylene is produced than propylene in the popular naphtha-to-olefins process and the gas-to-olefin process in the Middle East.

It was recently reported that Shenhua in Baotou, Inner Mongolia, China just completed the coal-to-olefin commercial unit and is scheduled to be operational towards the end of this year. It has a yearly methanol capacity of 1800 KTA and a polyolefins production capacity of 600 KTA (PE and PP combined). Dow’s Unipol gas phase reactors will be used. Once operational, this will be the world’s largest coal-to-olefin production site. The other two coal-to-olefin projects, Datang Duolun MTP and Shenhua Ningxia Coal Industrial Group MTP, are also making significant progress toward commercialization.

Indorama to double PET production in Rotterdam

Thailand’s Indorama is set to almost double PET production capacity at a site in Rotterdam, Netherlands to 390 KTA. Indorama Polymers Rotterdam, which owns the site, will be adding a production line with a capacity of 190 KTA. Production will begin in the first quarter of 2012. Indorama acquired the Rotterdam plant, as well as a PET facility in the UK, from Eastman Chemical in 2008. Indorama paid €224 million (USD 283 million) for several PET and PTA assets.

Comments: Indorama has been aggressively pursuing capacity expansion through both acquisition and organic growth. Indorama has also been effective in technology improvements and logistics streamlining. It has achieved a global leadership position in this highly competitive PET business. We will continue monitoring Indorama as we have in the past two years.

Lanxess to increase Butyl Rubber capacity in Belgium

Lanxess is to invest €20 million (USD 25 million) to expand the capacity of its Zwijndrecht, Belgium butyl rubber plant by 14 KTA from the current capacity of about 135 KTA. The expansion will take place during a scheduled turnaround in the third quarter of 2011 with completion expected in the second quarter of 2012.

Comments: Driven by robust growth in China and India’s automotive industry, Butyl rubber’s global demand has been increasing rapidly and has reached the levels recorded in the last quarter of 2007 – just before the onset of the global economic crisis. To benefit from the current economic situation, Lanxess has been aggressively increasing its presence in the butyl rubber market, demonstrated by its recently announced capacity installation in Singapore, which is expected to come on-stream in 2013. To gradually prepare itself for the buildup in Asian demand, Lanxess has selected Europe as a strategic location to expand its capacity. This additional capacity will mainly cater to the Asian market.

Lanxess currently has butyl production facilities both in North America (Sarnia, Canada) and Europe (Zwijndrecht, Belgium) with no production plants in Asia. Lanxess currently exports its Butyl rubber from these regions to meet its Asian demand. Butyl rubber is most commonly used in (1) Tire Inner Liners (2) Tire Inner Tubes (3) Pharmaceutical Closures (4) Protective Clothing and (5) Chewing Gum.

Polimeri PS sale to Total approved

The European Commission has approved the proposed sale of Polimeri’s polystyrene business to Total Petrochemicals (Feluy, Belgium). Following an inquiry, the Commission concluded that there were no major competition concerns and approved the deal without conditions – the commission decided that though both parties produced polystyrene, the transaction would only lead to a relatively small overlap while there would still be several competitors.

Comments: Total decided to acquire the PS facility in Feluy, Belgium, after Polimeri announced plans to shut it down in March earlier this year.Total’s decision to assume ownership of the Feluy plant has been guided by concern about the social impact of Polimeri’s decision.

Polimeri’s strategy to sell its Belgian PS facility comes amidst a difficult time for polystyrene in Europe. European polystyrene producers have been suffering from poor margins over the last few years, which have inevitably led to permanent closures of PS plants. Dow closed its polystyrene unit in Bilbao, Spain in 2009, and BASF announced the closure of its plant at the Ludwigshafen site reducing BASF’s capacity by 80 KT. Polystyrene has been facing stiff competition from polypropylene and of late, consumers have been looking to PET as an alternative replacement material as well. These new trends, coupled with consumers’ need for recyclability have resulted in a steady decline in polystyrene demand. Additionally, polystyrene has been facing high feedstock costs due to the soaring price of benzene thus further making the material unattractive.

Total Petrochemicals currently operates four polystyrene plants in Europe – two in Spain, one in France, and one in the UK. Its latest acquisition will ensure continuity in the supply of polystyrene grades for some of its customers, as the recent closures have led to a shortage of certain grades of Polystyrene.

MIDDLE-EAST & AFRICA

Borouge brings second petrochemical complex online

Borouge has begun commissioning its Borouge 2 petrochemical complex at Ruwais, Abu Dhabi. The Abu Dhabi National Oil Co. (ADNOC) has begun supplying ethane to the 1500 KTA ethylene plant, which will, in turn, be supplied to the 540 KTA Borstar™ process polyethylene unit, due to start production in early July. The next unit in the sequence of commissioning will be the olefins conversion unit. This unit will produce 752 KTA of propylene, which together with 50 KTA of propylene delivered from ADNOC’s refinery, will be used to feed the two Borstar polypropylene units with a combined capacity of 800 KTA.

The whole complex will be up and running by the end of November. Borouge will triple its polyolefins capacity to 2000 KTA when Borouge 2 becomes fully operational.

Comments: The Borouge projects (2 and 3) were set up to primarily target Asian markets, especially China and India. Borouge has set up its marketing operation in Singapore and has been actively engaged in full-swing marketing activities in the past two years. It has respectable technologies (Borstar) and a good customer base and business experiences from Borealis. However, the key advantage is the significantly lower-cost feedstock derived from natural gas. In either PE or PP, the monomer cost constitutes more than 70% of the cost of the respective polymer.

Borouge signs USD 2.6 billion contracts for Borouge 3

Borouge has signed contracts valued at USD 2.6 billion to build a previously announced Borouge 3 complex at Ruwais, Abu Dhabi. The company formally signed the three major contracts awarded earlier for engineering, procurement, and construction at the Sheikh Khalifa Energy Complex in Abu Dhabi.

The first contract worth USD 1.25 billion was awarded for the construction of two Borstar™enhanced polyethylene (PE) and two Borstar™enhanced polypropylene (PP) units, while the second contract worth USD 400 million would involve the construction of a 350 KTA low-density polyethylene (LDPE) unit. These were signed with a joint venture consortium comprising Maire Tecnimont and Samsung Engineering, on a lump sum turnkey basis. The combined capacity of the new PE units will be 1080 KTA, while that of the new PP units will amount to 960 KTA. A third contract worth USD 935 million for the utilities and offsites was signed with Hyundai.

Comments: This investment will quadruple Borouge’s production capacity to more than 4500 KTA by 2013, making it the largest integrated polyolefins site in the world.

The whole world, especially China and its neighboring countries that heavily export polyolefins to China, has been acutely aware of the upcoming fierce competition Borouge would bring. It is predicted that the impact will be more pronounced on the PE market than on PP. The analyses and strategies were discussed in several presentations at the Flexpo 2010 in Beijing.

Qatofin’s LLDPE plant to attain full capacity in H1-2011

Qatofin’s 450 KTA linear low-density polyethylene plant will reach full capacity by the early part of 2011. Current operating rates are pegged at 80% capacity and are expected to remain at the same level until the end of 2010. The required ethylene feedstock will be supplied through a 133 km (83 miles) pipeline from Ras Laffan Olefins Company (RLOC) to Qatofin and Q Chem II. RLOC is the world’s largest single ethylene cracker with 1300 KTA ethylene capacity.

Comments: Qatofin is a joint venture involving Qatar Petrochemical Company (Qapco) (63%), Total Petrochemicals of France (36%), and Qatar Petroleum (1%).  Like most Middle East producers, the new productions will be primarily for export. The sales of LLDPE will be boosted by the extensive sales, marketing, and distribution networks of Qapco and Total Petrochemicals.

BASF Confirms Plastic Additives Plans in the Mideast

BASF is evaluating investment options for a plastic additives plant in the Mideast. The company is at the same time discontinuing plans for a joint venture with Astra Polymer Compounding to produce customer-specific antioxidant blends in the Mideast region. These plans were based on an agreement between Astra and Ciba Specialty Chemicals. BASF acquired Ciba last year. The termination of the joint venture plans will have no impact on the existing tolling agreement between Astra and BASF to produce customer-specific antioxidant blends for the region.

Comments: BASF is a leading producer of additives and pigments for plastics, including ultraviolet light stabilizers, antioxidants and process stabilizers, organic and inorganic pigments, effect pigments, and other additives.

The polyolefins capacities in the Middle East have been increasing rapidly in recent years. However, the regional capacity addition for additives has not been increasing at a similar rate. As most of the polyolefins are blended with additives before processing, there is a need for more players in the domestic additive market. BASF, after it acquires Ciba, is the global leader in the plastic additives business. To maintain its leadership position, the investment in a wholly-owned facility in the Middle East is aligned with the company’s growth strategy.

Development of Iran’s oil, gas, and petrochemical sectors hampered by UN and US sanctions

An additional blow has been dealt to the oil, gas, and petrochemical sector in Iran with a fresh round of United Nations and US sanctions. This will hamper Iran’s ability to further develop these sectors. The UN approved a fourth round of sanctions on Iran in H1-June, including restrictions on financial transactions, a tighter arms embargo, and authority to seize cargo suspected of being used for Iranian nuclear or missile programs. In H2-June, the US Congress voted for yet-more sanctions by which banks, insurers, energy firms, and others potentially ran the risk of being barred from conducting business with the United States, if they were to engage in trade with Iran.

Dubai, an important third-port route for getting Iranian goods into markets, is also reducing its links with Iran. Tougher sanctions mean trade finance is even harder to obtain when dealing with Iran, forcing the country to seek more difficult and innovative ways to bypass the sanctions or demand cash upfront.

Comments: These additional sanctions come at a crucial juncture in the development of Iran’s petrochemical industry; right after the Iranian government recently announced plans of privatizing its refineries and petrochemical units. Iran’s government has been seeking to speed up the sale of state assets in a bid to encourage private investment and boost the economy. However, the existing political climate owing to Tehran’s disputed nuclear policy has dissuaded vital investment from key petrochemical players in Western Europe and the U.S.

However, after the recently concluded round of fresh U.N and U.S. sanctions, with trade further slowing down, Iran will have fewer investment resources to fund oil, gas, and petrochemicals growth. This could potentially augur well for global supply and demand balances – Iran has witnessed five large-scale ethylene cracker start-ups since 2005, each with an average delay of 18-24 months. The average utilization rates in the first two years of production have been in the modest range of 50-60%. Though the Iranian petrochemical sector undoubtedly holds great potential by virtue of its proximity to high-growth regions and inherent feedstock advantage, the country’s previous sanctions regime has also made it extremely difficult for the country to get the necessary technology and expertise required to better utilize its abundant resources.

 India’s SAPL to proceed with USD 170 million Egypt PET projects

India’s South Asia Petrochem (SAPL) will proceed with a plan to build a new polyethylene terephthalate (PET) resin plant in Egypt for USD 170 million. The company has decided to construct a bigger plant at the approved site at Port Said in northeastern Egypt, with the start-up date still set in March 2012.

The plant would have a 1.2 KT /day capacity, a third bigger than the original plan for a unit that could produce 0.9 KT/day of PET resins.

Comments: This PET project has finally been granted the go-ahead after over 3 years of delays and deliberations. In January 2007, the Egyptian Petrochemicals Holding Company (EChem1) and South Asian Petrochem (SAPL) agreed to create a JV to produce PET resins in Egypt and thereby established the Egyptian Indian Polyester Company. Under the proposed terms of the agreement, SAPL and its partners obtained 70% of the venture, while the remaining stake was picked up by E-Chem and its associated partners.

However, in July 2008 SAPL indicated that it was preparing to abandon its involvement in the project if the pending approvals were not received by end-2008. Although Egypt’s Industrial Development Authority (IDA) granted provisional approval with environment clearance and approvals for gas and electricity connections, the land lease agreement remained to be signed after clearance from the Ministry of Defense. The project has been finally approved after the differences between Egypt’s ministries of petroleum and transport were resolved and a new piece of land has been allotted for the project on a freehold basis.

As part of the JV, the Egyptian Indian Polyester Company will produce 420 KTA of PET. Egypt had been favored as a location for PET production by SAPL owing to its position as a net importer of PET bottle chips and its strategic location, which provides access to important consumer markets in North Africa, Europe, and the Middle East.

SAPL is India’s second-largest manufacturer of PET; EChem is a state-owned company assigned the task of managing and marketing Egypt’s emerging petrochemicals industry.

ASIA-PACIFIC

Indian Government plans policy to boost R&D activities for the petrochemical sector

 China-Taiwan pact to boost petrochemical trade

An Economic Cooperation Framework Agreement (ECFA) and an agreement on intellectual property protection are likely to be signed on June 29, during the fifth round of talks between China’s Association for Relations across the Taiwan Straits (ARATS) and Taiwan’s Straits Exchange Foundation (SEF) at Chongqing, China. During the recent negotiations, mainland China agreed to reduce duties on 539 commodity items imported from Taiwan. The products include chemicals, farm produce, machinery, auto parts, electronic products, and medical appliances, and the products accounted for about 16.1% of China’s total imports from Taiwan in 2009.

Taiwan has also agreed to reduce duties on 267 items of products imported from China. Tariffs in mainland China and Taiwan will fall from the current 15% to 10% in the first year, to 5% in the second year, and to zero in the third year.

Comments: The signing of ECFA is recognized as the most important economic agreement between Taiwan and China. It has been considered a win-win by both governments but Taiwan perhaps will benefit more due to its export trade surplus. One recent survey in Taiwan indicates 60% of the people in Taiwan are in favor of ECFA.

Siam cement and partners plan to fund a petrochemical plant in Vietnam

Siam Cement has increased investments in petrochemical plants in Thailand and Vietnam. Siam Cement, Qatar Petroleum, and the Vietnamese government have recently entered a partnership to build a 1400 KTA petrochemical complex in the southern province of Ba Ria Vung Tau.

Comments: To offset a slowdown in domestic sales of cement, ceramic tiles, and other building materials in Thailand and Vietnam, Siam Cement has increased its investments in petrochemical plants. Regional demand for petrochemicals has surged as economic growth in China and the rest of Asia has spurred the sales of cars, electrical appliances, and other consumer products.

The plan to build Vietnam’s biggest petrochemical complex was originally announced in March 2008 at an investment outlay of USD 4 billion. The construction of the complex was however put on hold when the credit crunch impaired several capacity expansion projects throughout the chemical industry during the global economic slowdown.

Dynasol to invest in China

Dynasol expects to decide on a proposal to build a manufacturing facility in China in late 2010. The Chinese expansion is seen as key to the company’s strategy to focus on premium markets, including asphalt modification and polymer modification. Dynasol is yet to disclose further details.

Comments: Dynasol currently has a styrene-butadiene-styrene (SBS) capacity of about 110 KTA at its plant in Altamira, Mexico, and 120 KTA at its facility in Santander, Spain. The company also has a 30 KTA hydrogenation facility for producing styrene-ethylene-butylene-styrene (SEBS) at the Santander site.

 

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