ADI Chemical Market Resources Newsletter
June 28, 2010

AMERICAS

CMR completes the 16th annual FlexPO international conference in China

Chemical Market Resources Inc. (CMR) successfully concluded its 16th annual international conference event earlier this month. The event, FlexPO 2010, was held at the Novotel hotel in Beijing, Jun 9-11, 2010. This year’s event was co-hosted with China National Chemical Information Center (CNCIC), China’s leading information center with services in periodicals, consulting, conferences, etc. The theme of the conference is “Showcasing Asian Polyolefins and Elastomers Innovations” The strategic alliance of CMR/CNCIC was established to focus on the technology, markets, and trends of China’s polyolefin and elastomer industries.

The program, which included 35 presentations, was supported by several international organizations/firms. The scope of the presentation covered the technology developments and business/market analyses about both China as well as the international community.

The conference was inaugurated by welcome speeches from Mr. Li Zhong, Deputy General Manager, CNCIC followed by Dr. Balaji Singh, President of CMR Inc. This was followed by the plenary session, which included presentations from industry experts regarding markets, trends, opportunities, and the path forward in China’s polyolefin industry. Some of the speakers who addressed these issues included Mr. Sun Weishan, Vice General Secretary of, the China Petroleum and Chemical Industry Association, and Ms. Yu Jiao, Deputy Director of, the Economics & Development Research Institute, SINOPEC (China). Other industry experts from PetroChina detailed the emergence of the Middle East as a major petrochemical player and discussed strategies that would be vital for meeting the challenges. In addition, experts from the Kingdom of Saudi Arabia (KSA) such as Dr. Esam Himdy, President, of Sahara Petrochemical, talked about the downstream Value addition trends in Saudi Arabia.

Following the plenary session, the keynote session included presentations from Dr. Pailin Chuchottaworn, President, IRPC/PTT Group (Thailand), and Mr. Hans VanBrackle, Product Research Manager, ExxonMobil Chemical (USA), who highlighted the importance of sustainable growth in the chemical industry and product innovations in the polyolefins business.

The third session covered the catalyst and process technologies, and industry experts from companies BASF, Albemarle corp., Grace Division, Sud Chemie, etc. discussed catalyst innovations and their associated value addition for customers, and the influence of combined catalysts on PE process properties. Mr. Peter Shepard, VP Business Development, Novomer Inc. (USA) elaborated upon recent advancements in CO2 based polymers. Dr. Franz Langhauser, Director of Technology,

Lummus Novolen Technologies GmbH (Germany) presented the innovation and developments in polypropylene catalysts and products. Mr. Sefok Chan, Regional Licensing Manager, Ineos Technologies (USA) provided insight into recent advances in Ineos Polyolefin Technologies.

The final session on Day 3 focused on product development and polymer characterizations. Dr. Hsien Wang of LAS Associates, Taiwan (former Chief Scientist, ExxonMobil Chemical, USA) elaborated upon the advancements in the world of elastomers. Industry experts from Dow Chemical, detailed the new developments made in specialty packaging applications. Dr. Balaji Singh, President CMR Inc. presented on product development and sustainability of plastics and bioplastics. The conference concluded with a presentation by Dr. Walter Ramirez, VP R&D, Dynasol (Mexico), which focused on new developments in elastomers.

Chemical Market Resources, Inc. extends its sincere gratitude to all those who made FlexPO 2010 a success.

Dow wins patent suit over Nova Chemicals

Dow Chemical Company has been awarded USD 62 million in damages from Nova Chemicals Corporation in a jury trial, involving polyethylene technology.

Dow had filed the suit against Nova in 2005, alleging that Nova was violating patents for a grade of LLDPE used in grocery bags. Dow officials contended that Nova had been importing material violating the patents into the U.S. market since 2003.

Comments:This case is still evolving and Nova is seeking a nonjury trial. The center of this case involves two patents awarded to Dow in 1998. Dow sued Nova for infringement by importing the LLDPE (covered in these two patents for grocery bag packaging applications) to the United States in 2003.

Nova Chemicals, formed as a part of the Alberta Gas complex in 1988, has always had an overlap with Dow’s polyolefins in terms of technology, people, and product development. Nova Chemicals focused on commodity resins with most technology developments anchored to DuPont’s Sclairtech Technology platform.

LyondellBasell capitalizes on polyolefin’s growth

LyondellBasell is in a good position following its emergence from Chapter 11 bankruptcy. This is mainly the result of significant benefits achieved from the growth in demand for polyolefins.

The company believes that these benefits are the result of restructuring measures that were stressed during Chapter 11. The measures included plant shutdowns and downsizing to the current level of 14,500 employees. This has resulted in fixed costs being decreased by USD 1 billion to USD 3.6 billion currently.

In its restructuring, LyondellBasell has closed four plants in North America and three in Europe, with another in Terni, Italy to shut down by the end of 2010. However, it has also brought on new capacity at three plants in the Middle East and is expanding its plant in Thailand.

A major contribution to the company comes from the low cost of its joint venture plants in the Gulf, which benefit from low feedstock costs. In addition, in European countries, new investment has been continued. For example, the new plant is expected to begin soon in Münchmünster; Germany will start production of HDPE, with a capacity of 320 KTA – replacing a smaller plant that was destroyed by fire in 2005. Meanwhile, the North American plants are mainly maintaining their cost-competitive position as well.

Comments: With the April 2010 emergence from Chapter 11 bankruptcy protection, LyondellBasell is in a position to focus on developing value-added products, increasing global sales, and improving profitability. The outlook is optimistic as the global economy, including petrochemicals, is on the upswing. The JV with the Middle East companies definitely will have the big advantage of low feedstock cost.

The biggest impact of Chapter 11 was felt in LBI’s innovations. This light at the end of the tunnel should provide more opportunities for LyondellBasell to re-focus on more innovations in polyolefins.

Dow completes sale of Styron business -Chris Pappas takes office as new CEO

Dow Chemical has completed the sale of its styrenics unit, Styron, to Bain Capital for USD 1.63 billion. The company had placed Styron up for sale in July 2009 and announced in March that it would sell to Bain. The sale includes Dow’s SB Latex, styrene-butadiene rubber (SBR), polycarbonate (PC), acrylonitrile butadiene styrene/styrene acrylonitrile resins (ABS), expandable polystyrene (EPS), polystyrene (PS) and styrene monomer units. Also included in the sale are several long-term supply, service, and purchase agreements valued at about USD 400 million. The supply of the materials needed to produce resins in Styron will be continued by Dow.

Dow has elected to retain a 7.5% equity position in Styron, which will operate as a stand-alone company. Former Nova Chemicals CEO Chris Pappas has been appointed president and CEO of Styron. Pappas will succeed Mark Remmert, who has served as CEO of Styron since July 2009.

Comments: Polystyrene and Styrenics provide properties that are unique to the family: (1) good melt strength, (2) clarity, (3) impact/HDT properties along with electrical resistance.

These advantages should keep the market safe from competition. The major Achilles’ heel for the Styrenics has always been the cost of Benzene and will continue to be so.

The future strategy should focus on Green Styrenics – ABS, PC/ABS, SBLatex, and other blends and alloys based on natural rubbers and plant-derived materials or blends thereof.

The movement of Green Styrenics will evolve with time to be the next innovation in Styrenics to negate some of the cost-related issues.

EUROPE

BASF starts up a new plant to increase polyisobutene capacity

BASF has started up a new plant for the production of low molecular weight, highly reactive polyisobutene (HR PIB) at Ludwigshafen, Germany, increasing the annual capacity by 25 KTA to 40 KTA. The polymer, Glissopal™, is an important intermediate product for the manufacture of additives for fuels and lubricants. The present increase in capacity is the second significant one within the last two years. In April 2008, BASF increased its annual capacity for Glissopal at its site in Antwerp, Belgium by 25 KTA to 100 KTA.

Comments: Low molecular weight polyisobutene (Glissopal™) is used as a thickening agent in lubricants applications. The material is commonly used as a replacement for bright stock, mainly in 2 stock engine oils. The material has higher thickening properties. Therefore, a relatively less amount of resin is required to achieve similar formulation properties. Furthermore, the material is also used in increasing the viscosity of transmission oil.

It is expected that, in the next few years, polyisobutene demand will continue to grow, mainly for replacing bright stock. The material demand will get a further boost, with an increasing number of vehicles and industrial usage.

Sibur considers major expansion in butadiene rubber

Sibur is planning an investment of more than RUB 2 million (USD 52 million) to expand production capacity for butadiene-acrylonitrile rubber (NBR) and butadiene.

The project is scheduled to be completed by 2014 and is expected to be centered at Krasnoyarsk synthetic rubbers plant. Sibur expects to increase production of NBR by 56 KTA from 36 KTA. It will also create 40 KTA of new butadiene capacity.

In addition to its Krasnoyarsk plant, the company produces synthetic rubber for the tire industry at its Togliattikauchuk plant. However, this plant’s operating rate is still below the levels achieved before the economic crisis.

Comments: The expansion in butadiene-acrylonitrile rubber (NBR) and butadiene will allow Sibur to meet the growing demand for materials in automotive and industrial applications. These resins are used in applications where high heat resistance and resistance to petroleum oils and aromatic hydrocarbons are essential.

NBR is commonly used in fuel and oil handling hoses, seals, and grommets. NBR has a service temperature range of -40°C to 125°C, an advantage for under-the-hood automotive applications. NBR for industrial applications includes hydraulic hoses, conveyor belting, and seals for various applications.

With the expansion, Sibur will take advantage of domestic consumption and the increased growth in the Eastern and Central European countries. This plant will make Sibur the largest producer of NBR rubber and will be dominant in Eastern Europe, with some market penetration in Western Europe and Asia.

Solvay and Arkema end PVC Joint Ventures in France and Spain

Solvay and Arkema announced that SolVin and Arkema will buy back the minority cross-holdings in their vinyl (vinyl chloride and polyvinyl chloride) production joint ventures in France and Spain. The two joint ventures are VinylFos, in which Arkema has a 79% and SolVin a 21% stake, VinylBerre, a 65%-35% jv between Arkema and SolVin, and Vinilis, a tie-up in which SolVin has 65% and Arkema 35% interest. This will become effective on July 1st, 2010.

After unwinding the joint ventures, SolVin will become the sole shareholder of Vinilis in Spain and Arkema the sole shareholder of VinylFos and VinylBerre in France.

Comments: The PVC business is extremely competitive. The change of ownership presumably would streamline the operations and facilitate better customer services necessary to maintain the competitive edge. Currently, the largest producer of PVC in Europe is Ineos.

DSM settles EPDM Antitrust case for USD 25 Million

DSM, in a civil litigation case, has agreed to pay USD 25 million to an unnamed group of ethylene propylene diene monomer (EPDM) purchasers in the United States. DSM’s USD 25 million settlement is the firm’s response to a class action lawsuit filed by EPDM purchasers against DSM in the U.S. District Court for the District of Connecticut. The class action was initiated in July 2004 and relates to U.S. companies that purchased EPDM from DSM between January 1997 and December 2001.

Comments: This is a sizable judgment. Interestingly, the elastomer industry has been involved in several price-fixing lawsuits in the past decade. In 2004, Goodyear filed a lawsuit against several EPDM producers charging them with a conspiracy of price-fixing. In 2005, DuPont Dow paid USD 84 million to settle a price-fixing case of polychloroprene. In 2007, Chemtura was involved in a USD 21 million settlement in EPDM price-fixing dispute.

MIDDLE EAST & AFRICA

Cabot opens masterbatch plant in Dubai

Cabot Corp. has opened its black masterbatch manufacturing facility in the Jebel Ali Free Zone, Dubai. The plant has an initial production capacity of 25 KTA with a provision to expand to 75 KTA. Production is scheduled to begin in August 2010.

Comments: Cabot has been producing masterbatches since 1961. The company is currently a global leader in the production of masterbatches and specialty compounds for the plastics industry. The company currently has production facilities in the UK, Belgium, Italy, and Hong Kong. Cabot’s masterbatch is used in polyolefin for a number of functions that includes dilution (distribution and even mixing) compatibility and dispersion.

Cabot’s move to open a masterbatch plant in Dubai will allow it to take advantage of the growing demand for polyolefins in the region. In addition, it will be a consistent supplier to Western European countries.

In recent years, the Middle East has become a major producer of polyolefins and downstream compounds, currently producing approximately one-fifth of the world’s polyethylene and polypropylene Most of the polyolefins compounds are used in infrastructure for water supply, electricity, and telecommunications projects. 

ASIA-PACIFIC

Lanxess to build compounding plant in India

Reliance to build Polybutadiene Rubber and Polyester Filament yarn plants in India

Reliance Industries Limited (RIL) has announced its intentions to build a polybutadiene rubber plant at Baroda (India) and a 360 KTA polyester filament yarn plant at Silvassa (India). Further details remain to be disclosed.

Comments: India’s automotive industry is currently growing at over 9% with the production of over 2.6 million units in 2009. With the current growth and production rate, the region will continuously require raw materials to sustain this growth. Tire treads are commonly made from polybutadiene rubber. The current capacity addition will further ensure the supply of PBR. Other applications include belts, hoses, gaskets, and other automobile parts. Polybutadiene provides an advantage over other elastomers by virtue of its resistance to cold temperatures.

Teijin continues Polyester fiber business restructuring

Teijin aims to expand its polyester fiber business on a sustainable basis for more consistent profitability and a stronger presence in markets worldwide. In August 2009, Teijin completed the restructuring of its polyester fibers business to create an optimal global production and sales configuration, and to initiate legitimate reforms in loss-making businesses. Moreover, it will aid in creating new business models that will facilitate stable profitability.

Teijin, for greater cost competitiveness, will consider working with foreign OEM companies for yarn and raw staple fiber production. In addition, it will also work with external product teams in China and the Association of Southeast Asian Nations (ASEAN) for textile production. Teijin also intends to strengthen its partnership with its N.I. Teijin Shoji (Osaka) sales subsidiary, for expanded product delivery.

The previously announced shifting of production of polyester filament and staple fiber from Matsuyama, Japan to Teijin’s facilities in Bangkok, Thailand will be completed by March 2011, to strengthen cost competitiveness.

Comments: Teijin is a Japanese conglomerate with a strong presence in the fibers business (aramid fibers, carbon fibers, and polyester fibers). Teijin is teaming up with foreign OEM firms to strengthen its foreign sales. Meanwhile, it is focusing on new and sustainable product development such as biomaterial, recycling, functional fibers, and eco-materials (e.g. Eco Circle – a closed-loop polyester recycling system). These actions are a multi-faceted approach to sustaining a competitive edge in this highly competitive industry.

 Taiwan to sign economic cooperation framework agreement with China by June end

The Taiwanese government has set a target of June 30 to sign an economic cooperation framework agreement (ECFA) with China. The ECFA remains unchanged, but a few differences remain to be resolved.

In the third formal round of ECFA talks that ended in, China agreed to Taiwan’s proposed list of 500 items of preferential tariff treatment under the ECFA, while China listed some 200-odd items that were accepted by Taiwan. Post discussions, the number of products on Taiwan’s list is likely to be increased to 510, while the Chinese list could rise to 260 or 270. Leading petrochemical companies in Taiwan have stepped up lobbying to include three major products PE, PVC, and PP on the early harvest list, a move strongly resisted by Chinese negotiators.

Negotiations are underway, but the final decision on the list will be made by the Chinese counterparts, akin to the Taiwanese government having the final word on Chinese products to be allowed into Taiwan with preferential tariff rates.

Comments: At the time of this writing, 539 Taiwan-made products and 267 China-made products will be included in the first ECFA signing in Chongqing, one of the four provincial-level direct-controlled municipalities in China. In terms of volume plastics, only Taiwan-produced polypropylene has been included while polyethylene, ABS, and PVC are not. However, they may be added to the second meeting at the end of the year. Overall, the ECFA entails the steps to reduce and eventually eliminate import tax for specified items and is a win-win situation for both China and Taiwan.

In addition to the economic impact, ECFA also has a significant political consequence. This is a huge official move towards collaboration between the two governments, separated not only by the Taiwan Strait but also by incompatible political ideologies for more than 60 years.

Lummus Technology awarded licensing and engineering contract for methanol-to-olefins unit

Lummus Technology has been awarded a licensing and engineering contract by Chinese company Ning Bo Heyuan Chemical Company Ltd. to provide services to Ning Bo’s DMTO methanol-to-olefins recovery unit, and an Olefins Conversion Technology (OCT) unit. The DMTO unit is expected to produce 600 KTA of ethylene and propylene, and some lower-value n-butylenes, which together with ethylene will be used to produce 90 KTA of propylene in the OCT unit.

Comments: The recent economic situation has witnessed a significant rise in the price of crude oil and natural gas. This rise has led to a quest for cheaper alternative feedstocks. Alternatives being investigated currently include organic compounds such as ethanol, bio-based feedstock, stranded natural gas, and in certain areas, coal. Coal has gained popularity as a feedstock specifically in China, due to government incentives and the country’s need for self-sustenance.

The new MTO/ MTP capacities in China are an attempt to decrease China’s reliance on imported oil and utilize the readily available resource – coal. Around 65-75% of total propylene in Asia is produced by naphtha crackers, 25-35% by FCC, and less than 10% by metathesis plants.

Reliance and Pioneer Natural Resources form Eagle Ford Shale Joint Venture

Reliance Industries Reliance Eagleford Upstream subsidiary has executed definitive agreements to enter into a joint venture with Pioneer Natural Resource, under which Reliance will acquire a 45% stake in Pioneer’s Eagle Ford Shale acreage position.

Pioneer and its current partner in Eagle Ford- Newpek – will transfer 45% of their stakes in the Eagle Ford to Reliance. Following the transactions, Pioneer, Reliance, and Newpek will own 46%, 45%, and 9% of the joint venture stakes, respectively.

Reliance will pay USD 1.315 billion for its implied share of 118,000 net acres, and this will include combined upfront cash payments of USD 263 million.

Comments: Of late, RIL has become more aggressive to take advantage of the economic crisis around the globe. In addition, during the last few years, RIL has consecutively discovered gas wells in the KG-D6 (Krishna-Godavari basin, Bay of Bengal) making the company significantly revenue cash rich.

This joint venture with Pioneer follows Reliance’s USD 1.7-billion joint venture with Atlas Energy (Moon Township, PA) in April, to develop the company’s Marcellus Shale gas operations.

Reliance has already invested in shale gas resources through ownership of about 40% of its interests in the Atlas Shale acreage position. This acquisition comes as the reinforcement of the company’s commitment to invest globally, especially in gas exploration.

Shale gas has been produced for more than 100 years in the Appalachian Basin and the Illinois Basin of the United States; the wells were often marginally economical. Higher natural gas prices in recent years and advances in hydraulic fracturing and horizontal completions have made investing in shale gas wells a more profitable venture lately. Typically, the exploration of shale gas tends to cost more than gas from conventional wells. However, this is often offset by the low risk of shale gas wells.

 

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