ADI Chemical Market Resources Newsletter
May 17, 2010

AMERICAS

PolyOne and Kautex introduce multilayer TPE technology

PolyOne Corp. has introduced technology that allows extrusion blow molders to make co-extruded high-density polyethylene bottles layered with thermoplastic elastomers (TPE).

PolyOne’s GLS Thermoplastic Elastomers unit unveiled the technology, which it co-developed with Kautex Maschinenbau GmbH.

The new process can be used with traditional or recycled HDPE, which could expand the possibilities for designers. Now, within one process, designers can change the feel and grip of their product.

Comments: PolyOne has always looked into innovation as a path forward that would give them a competitive edge over its competitors. Their new technology of being able to co-extrude polyethylene bottles with thermoplastic elastomers would allow it to explore new beverage packaging applications. Consumers in the last decade have had a higher preference for products that exhibit a good feel and appearance, which during those years has led to rapid growth in the thermoplastic elastomers markets. PolyOne has also continuously been gaining a strong foothold in the healthcare segment. The company has been developing resin for this industry for some time now and in addition, in January, the company bought New England Urethane Inc. a firm, which provides high-performance engineered thermoplastic materials for the healthcare markets.

Braskem and Pequiven scale back Venezuela projects

Braskem and Pequiven have reached an agreement to evaluate a new model for planned petrochemical projects in Venezuela. Proposed changes include scaling back the size of polypropylene (PP) and polyethylene (PE) investments, and possible relocation of the projects to western Venezuela, near the Paraguaná peninsula, where Pequiven and its parent PDVSA have existing facilities.

In addition, Pequiven and Braskem also agreed to postpone for one year the 1300 KTA ethylene cracker and units totaling about 1100 KTA in PE production. The initial plan was to build the complex at Jose.

PDVSA has also agreed to supply additional naphtha to Braskem, from the current contract of 640 KTA to approximately 1000 KTA.

Comments: This switch in strategy by the two companies comes in the face of new developments in the global market scenario. To this end, Braskem and Venezuela’s state-owned Pequiven (a subsidiary of PDVSA) signed a memorandum of understanding (MOU) in Brasília, during a meeting between the presidents of Brazil and Venezuela.

Propilsur, which is the polypropylene JV between the two companies, will see changes in location as well as production capacity resulting in a reduction in investment by approximately 60%. In December 2009, PDVSA proposed the Paraguaná Refinery Complex in the state of Falcón to be a revised sourcing location for feedstock, thereby leading to a change in the PP plant location. The capacity of the JV has been scaled down to 300 KTA, eliminating the need for investment in an intermediate propane dehydrogenation unit. Consequently, this has helped reduce the total investment to about USD 500 million from the initial investment target of USD 1 billion. Start-up operations are expected in 2013. Because of these changes and new developments, the future supply of ethane gas and/or other feedstock sources obtained from PDVSA’s refinery complex in Paraguaná was expected to be impacted. As a result, the two partners have agreed to postpone developments related to the Polimerica project, which initially was planned at the Jose Industrial Complex. Braskem and Pequiven envisaged the construction of three polyethylene production units with a combined production capacity of 1100 KTA, integrated with an ethylene production unit with a capacity of 1300 KTA. The two firms invested approximately USD 3 billion in the Polimerica project and expect to start up operations by early 2015.

Chemtura sells additives business for USD 16.2 million

Chemtura Corp. has completed the sale of its PVC Additives business to Galata Chemicals for cash consideration of USD 16.2 million and the assumption by Galata of certain liabilities, including certain pension obligations and environmental liabilities. The transaction will provide all full-time employees of the PVC Additives business with the opportunity to continue in their current positions under new ownership.

Comments: Galata Chemicals is the newly formed JV between Artek Surfin Chemicals and Aterian Investments Partners. Artek Surfin Chemicals is currently one of India’s largest specialty chemical companies. The company produces surfactants, alkyl alkanol amines, textile chemicals, and metal finishing, and caters to other specialty chemical sectors.

Aterian Investment Partners is a private capital firm that invests in businesses across a range of sectors. The principals of Aterian have extensive experience acquiring and building world-class businesses in chemicals and related industrial segments.

The acquisition of Chemtura will allow the company to be a global player and enable it to offer a wider product portfolio. In addition, even though the PVC market has shown little to no growth in North America and Europe, the Asian markets have witnessed higher growth levels. This trend is expected to continue, attributed to the robust development of the Asian region over the next few years.

Eastman opens Tritan co-polyester unit at Kingsport, TN

Eastman Chemical has started up a 30 KTA Tritan co-polyester production unit at its Kingsport, TN complex. The co-polyester is produced without bisphenol A (BPA) and is made from a new monomer.

The additional capacity will enable it to meet demand from new applications and benefit from the 6%-8% annual global market growth for copolyester. Eastman has enough monomer capacity at Kingsport to produce 60 KTA of Tritan and will decide this year when to add the additional 30 KTA of polymer capacity.

Comments: The Tritan production process is part of Eastman’s Project Reinvest, a plan to invest USD 1.3 billion into the Kingsport manufacturing complex. Within the last year, co-polyester applications and demand have increased significantly in market segments such as medical, infant care, housewares, water bottles, and small appliances.

One of the attributes of the co-polyester product is its ability to be used as a substitute for polycarbonate in certain applications. It possesses comparable impact strength, clarity, and better dishwasher durability than a PC. It is also free of bisphenol-A. Bisphenol-A is known to potentially cause leach in the liquid contained within the bottle, especially when the bottles are worn down, or scratched. Due to this drawback of BPA, some companies are considering the use of polymers free of BPA but possess similar attributes – co-polyester is one such polymer.

The gradual switch to copolyester has facilitated its increased demand, as it provides good performance even in the absence of this chemical in plastics.

Cereplast developing algae-based resins

Cereplast’s plan to develop a new family of algae-based resins is on schedule with the company’s timeline. The properties of hybrid materials that have been developed with algae are now very close to meeting expectations, and Cereplast expects to offer the first grade for commercial use by the end of 2010.

Comments: Algae from a typical photo-bioreactor can be harvested daily and may be treated as biomass, which can be used as bio-fuel or as a raw material source for biopolymer feedstock.

The use of algae as a feedstock for plastics allows us to go a full circle: the very substance (Algae) which can absorb and minimize carbon dioxide and polluting gases from the industrial process can also be turned into sustainable, renewable plastic products and biofuels while reducing our use of fossil fuels. Cereplast algae-based resins represent a breakthrough in industry technology. Currently, Cereplast is using renewable materials such as starches from corn, tapioca, wheat, and potatoes in the manufacture of bio-based resins. Algae-based resins will complement the company’s existing portfolio of compostables and hybrid resins.

BP oil leak in Gulf of Mexico -Updates

BP is set to try an alternative method to cap a well that has gushed millions of gallons of oil into the Gulf of Mexico. The latest effort will involve a tube designed to be inserted into a ruptured pipe, collect oil, and send it to a vessel on the surface. The insertion tube is on the sea floor, and Another Unique Service From Chemical Market Resources, Inc. 560 Blossom Street, Ste C, Houston, TX 77598 USA; Tel: 281-557-3320 Email: POE-SNA@CMRHouTex.Com Copyright © 2010 Page 5/10of Issue 10 – Volume 8 engineers plan to move it into place on May 14. BP has also lowered a smaller containment dome for use if the insertion tube does not stem the flow of oil.

Comments: The oil leak from a rig leased by BP in the Gulf of Mexico has spiraled into a public relations nightmare for the company. BP’s woes started when the Deepwater Horizon drilling rig exploded and sank off the US Gulf coast on April 22. Since then BP has frantically been mobilizing efforts to plug the flow of oil, all of which have been unsuccessful thus far. The latest measure to halt the oil leak comes after the failure of a previous attempt to lower a 98-tonne concrete-and-steel funnel to a depth of 5,000ft (1,500m) on the seabed. This had been BP’s best hope to contain the main leak while it tried to stop it altogether by drilling relief wells nearby. However, a build-up of gas hydrates (crystalline water-based solids resembling ice) inside the device blocked the exit at the top and has since had to be put aside. BP hopes that the smaller containment dome which it intends to use, dubbed the “Top Hat”, might not suffer the same clogging problem.

BP’s efforts come amidst growing concerns that the company has underplayed the volume of oil polluting the gulf. Industry experts believe that the estimate of leaking oil could be around 70,000 barrels a day, a figure more than ten- times in excess of BP’s daily estimate of 5,000 barrels.

Irrespective of the official/accurate estimate, the BP oil leak is now considered the worst disaster of its kind, with potentially more far-reaching ecological consequences than the Exxon Valdez spill, which occurred in Prince William Sound, Alaska, on March 24, 1989.

In a recent congressional hearing, executives of BP, Transocean, and Halliburton were quick to blame each other for the widening environmental catastrophe in the Gulf coast. As a response to these developments, Oil companies now face an immediate tax rise of 1 cent per barrel to help pay for the clean-up in the Gulf of Mexico under proposed legislation rushed out by the US government.

EUROPE

Ineos to Issue Bonds to Raise Cash

Ineos will raise funds through a bond issue, despite disturbance in the global money markets. The issue intends to raise cash to refinance existing debt. The company announced plans to issue bonds in March to pay down debt.

Ineos will offer a two-part bond issue, due in 2015. The aggregate principal amount is €740 million (USD 945 million): €440 million (USD 559) million is priced at 9%, and €300 million (USD 381 million) is priced at 9.25%.

Comments:  Ineos recent acquisitions, which were followed by the global economic downturn, have strapped the company with debt to the amount of about USD 9 billion. Thus, in a bid to refinance debt, Ineo’s has chosen to issue bonds in order to increase its current liquidity and indirectly obtain an extension on existing debt.

More recently, the company’s performance has started improving and the overall outlook for Ineos future is looking brighter, which would help the company to obtain the required financing. Ineos has been actively pursuing licensors for its Innovene G/S (for Polyethylene) and Innovene PP (for polypropylene) processes and has obtained technology-licensing contracts for large-scale petrochemical complexes in the emerging markets of Asia despite the difficult economic climate in 2009.

Ineos has also been looking at other avenues to cut costs. The company has adopted a strategy to sell non-core petrochemical business divisions – Ineos recently completed the sales of its Fluorochemicals division to Mexichem and is looking to sell its ChlorVinyls division as well. Ineos has also been actively seeking partnerships with players in the Middle East for JVs or for selling assets. In addition, Ineos has switched its headquarters from the UK to Switzerland, a move that would result in cost savings of USD 599 million by 2014. As a testament to the benefits of the new strategic shift, Ineos witnessed record levels of profitability for the quarter ending March 2010 due to the solid performance of its polyolefins business. 

Sibur subsidiary optimizes PP output, New bagging facility for PP and LDPE materials

With the installation of a new titanium-magnesium catalyzer, Tomskneftekhim, a Sibur Subsidiary, has modernized its PP production and increased the capacity of its line to 130 KTA. This capacity expansion has resulted in a 20 % increase over its previously installed capacity. Additionally, the new catalyzers have helped to improve the PP quality, as well as expand the portfolio range of commercially available grades.

Tomskneftekhim has also started up a new bagging and palletizing facility, where the LDPE produced by its existing 230 KTA line is bagged for export. In the future, the new PP output will be bagged here as well.

Comments: With improved polypropylene, Tomsk will be able to target a wider range of applications, especially when focusing on the growing Russian, Eastern, and Central European markets. The automotive market in these regions has shown tremendous growth, catering to both domestic and export use. The requirement for superior quality raw material as polypropylene is essential with the intense competition the automotive market is facing in the world today, in addition to the stringent specification and qualifying criteria. Given this situation, Tomskneftekhim’s decision to increase capacity is in line with the future direction of the automotive industry.

Lanxess begins construction of the plant in Russia

Lanxess has started work on the construction of its first production facility in Russia. In the future, Lanxess subsidiary Rhein Chemie will produce rubber chemicals in Dzerzhinsk in the Nizhny Novgorod region for the markets in Russia and the CIS. Lanxess supplies the markets in Russia and the CIS countries mainly with high-performance rubber and rubber chemicals for the tire and automotive industry, color pigments for the construction industry, and ion exchange resins for industrial water treatment.

The project is due to be completed at the start of 2011. Lanxess will produce up to 1.5 KT of Rhenogran and Rhenodiv rubber additives and release agents at the new plant. These products are used primarily to manufacture car tires and technical rubber products such as hoses and seals.

Comments: Lanxess in recent years, has been aggressively expanding global production capacities of their synthetic rubber that finds application in automotive market segments such as tires, increasingly consumed by companies in the Asian region. Lanxess is looking to benefit by strengthening its local presence in regions of high automotive production growth, and Russia is no exception. The Russian automotive industry is expected to grow by over 20% over the next few years, with production volumes totaling 1.5 million units in 2009.

MIDDLE EAST & AFRICA

NPC petrochemical division to get privatized, majority stake could be provided to international investors

Iran is restarting the privatization process of its National Petrochemical Company (NPC). NPC’s production assets are planned to be placed into a single entity, to be sold in part or as a whole to domestic as well as international markets.

Iran may consider selling a majority stake to international investors- Companies from USA and Europe will find it difficult to participate because of political pressure. However, the acquisition would interest petrochemical players looking to build a presence in the Middle East to benefit from access to cheap feedstocks and materials.

Comments: The government of Iran has been pushing for the privatization of its petroleum industry since 1989, and it has been a major national objective included in its five-year plans. The petroleum industry is a primary area of focus of the government’s efforts due to Iran’s richness in natural resources.

However, privatization is a complicated process, and its implementation cannot be expected to occur as an overnight effort. It has been recognized that privatization would not only allow improvements in technology, but would also accelerate the development, strengthening, and globalization of the Iranian petrochemical industry. The macroeconomic impact of privatization in developing and transitioning economies has been well elaborated by the International Monetary Fund (IMF).

All the major chemical players will be interested in owning a stake in Iran’s petrochemical industry. This is mainly due to increasing demands for chemicals and polymers in Asia, Eastern Europe, and the Middle East. In addition, Iran will also provide a very competitive position due to the advantages available of conventional feedstocks.

In essence, proximity to high-growth regions and the inherent feedstock advantage offered by Iran would make the Iranian Investment attractive to all major players in the petrochemical Industry. To what extent the political pressure can keep companies negating the lucrative investment would depend on several options. To name a few would be an interested company’s existing investment in the Middle East and the company’s vision towards long-term growth and sustainability.

ASIA-PACIFIC

Shell opens Singapore petrochemicals complex

Lanxess and TSRC to Form Nitrile Rubber JV in China

Lanxess will form a 50:50 joint venture with TSRC Corp. to build a plant in Nantong (China) that will produce nitrile rubber (NBR). The two companies will jointly invest a total of USD 50 million to build the plant, which will have an initial capacity of 30 KTA, intended to serve the rapidly growing Chinese market. The JV, named Lanxess-TSRC (Nantong) Chemical Industrial Co., will begin the construction of the plant in September 2010 and production is expected to start in the first half of 2012.

The JV will serve Chinese customers with NBR produced at Lanxess’ La Wantzenau site until the Nantong plant starts up. Clearance for the JV from the relevant anti-trust authorities is expected by the end of July 2010.

Comments: Lanxess’ move to form a joint venture with TSRC is a good opportunity for the company to increase its exposure in the region. Both companies have long experience in the synthetic rubber industry, which will help them penetrate the fast-growing Chinese markets. Lanxess is already an established player in the Nitrile rubber market thereby bringing technical expertise to the table, while TSRC is well established locally within the region to market their product.

Lanxess to start up butyl rubber plant

Lanxess has broken ground on the previously announced new butyl rubber plant at Jurong Island, Singapore. The 100 KTA plant, with an investment of about €400 million (USD 575 million), is expected to begin production in the first quarter of 2013.

Comments: Lanxess currently has butyl production facilities both in North America (Sarnia, Canada) and Europe (Zwijndrecht, Belgium) with no production plants in Asia. Lanxess currently would need to export its Butyl rubber from these regions to meet its Asian demand. The company’s decision to locate its plant in Singapore will give it a central location to serve a wider Asian region and the rapidly growing local automotive industry. 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.

OPAL to Award HDPE Contract in India

ONGC Petro-Additions (Opal) is about to select one of three bidding consortia to build a previously announced high-density polyethylene (HDPE) plant at Dahej, India. The 340 KTA dedicated HDPE plant will form part of a USD 3 billion plus petrochemical complex, due to come on stream in December 2012.

Comments: India’s Oil and Natural Gas Corporation (ONGC) owns a 26% stake in the ONGC Petro Addition (OPAL) petrochemical project. Other investors in the multi-billion-dollar petrochemical complex at Dahej include Gail, Gujarat State Petroleum Corporation (GSPC) while Ineos, Mitsubishi Chemical, and Mitsui Chemicals have been tipped as potential bidders for a 10% stake in the Dahej complex. Petronet LNG is also hoping to acquire a 5% stake in the project. About 25% of the equity is expected to come under public ownership through an initial public offering (IPO), slated for late 2010 or early 2011.

The three bidding consortia likely to obtain a contract for building the above-mentioned dedicated HDPE unit include the pairing of either Technip and Ineos, Samsung Engineering & Mitsui Chemicals, or Daelim Industrial with CP Chem. The HDPE technologies proposed are those of Ineos, Mitsui Chemicals, and CP Chem respectively.

As part of the complex, Opal has already selected Ineos’s Innovene G process for two 360 KTA swing polyethylene units producing linear low-density polyethylene and high-density polyethylene, and the Innovene PP process for a 340 KTA polypropylene plant. The complex will also house an ethylene capacity of about 1100 KTA.

In 2009, India was a net importer of HDPE & LLDPE (roughly 350 KTA – i.e. 18% of domestic consumption) and thus, additional capacity can be easily absorbed. In the next five years, the domestic consumption of LL/HDPE is expected to grow at nearly 11% AAGR. The market is mainly oriented towards commodity grades and hence, gas phase processes might just offer the best economics.

 

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