My Turn – Dr. Balaji B. Singh – The year for Specialty Polyolefins SPO-FlexPO2008, June 25-27, 2008 Houston/Galveston, TX

Comments: The start of the New Year heralds a new race for Specialty and value-added polyolefins.

Chemical Market Resources focused on technology and value-added polyolefins since 1990 and has conducted over 40 multiclient studies on various specialty polyolefins.

Carmel Olefins Acquires PP Capacity

Carmel Olefins (Haifa, Israel), a 50-50 joint venture of Israel Petrochemical Enterprises and Oil Refineries (ORL; Haifa), and Israel Petrochemical Enterprises (IPE), has agreed to acquire a 49% stake in Domo’s (Gent-Zwijnaarde, Belgium) 180,000-m.t./year polypropylene (PP) plant at Rozenburg, the Netherlands. Terms were not disclosed. The plant generates annual sales of about 176 million Euros.

Comments: Carmel Olefins Ltd. (Carmel) is Israel’s sole manufacturer of petrochemical products that are used as raw materials for the plastics industry. Carmel manufactures standard and special grades of Polypropylene (PP) as well as a broad range of Low-Density Polyethylene (LDPE) grades.

The company has a 165 KT LDPE and 450 KT PP capacity. Carmel has 240 KT of ethylene, and 135 KT of propylene capacity. The metathesis plant supplies 180 KT of propylene. The company sells polypropylene (PP) under the name Capilene®. The company has two production lines based on Spheripol and Spherizone technology.

This acquisition will provide the company with a presence in Europe and will add to its existing PP capacity. This facility in The Netherlands moved from Targor to Basell to Domo. This facility uses Novolen technology for manufacturing PP. Domo is a manufacturer of floor coverings. The company also has a caprolactum unit.

LyondellBasell to License Spherizone Technology to PetroChina

PetroChina Daqing Refining & Chemical Company has selected LyondellBasell Industries’ Spherizone process technology for a new 300 KT per year polypropylene plant to be built at Daqing, Heilongjiang Province in the People’s Republic of China. Start-up is planned for 2010. This is PetroChina’s ninth polyolefin license from LyondellBasell in this decade.

Comments: LyondellBasell has been extremely successful in licensing its Spherizone technology. This is yet another successful license for the company. Basell’s Spherizone technology seems poised to match the success of Basell’s Spheripol technology.

LyondellBasell’s Spherizone process technology is an advanced manufacturing process for the production of polypropylene that uses a unique, multi-zone circulating reactor system. Spherizone process plants can produce the full range of polypropylene grades, as well as entirely new families of propylene-based polymers.

The Daqing plant will be the eleventh to be built worldwide using Spherizone technology. To date, over three million tonnes of annual capacity have been licensed. In the last decade, LyondellBasell technologies have been selected in about half of all new polypropylene projects worldwide.

ExxonMobil Chemical Introduces New Cold Insert Nylon Bonding SantopreneTMTPVs

ExxonMobil Chemical has introduced new grades of Santoprene™ thermoplastic vulcanizates (TPVs) that bond with nylon in cold insert over-molding applications. The new B500 grade family, which is colorable or black, has been developed for applications that require a very strong bond with nylon and high-temperature resistance, such as power tools, kitchen tools, automotive applications, furniture, and sporting goods.

Exhibiting high bond retention values, the new grades enable the design and manufacture of nylon parts coupled with the quality performance properties of a TPV. These properties include long-term sealability; a durable slip-resistant feel; excellent compression set; chemical, oil, and heat resistance; and enhanced bond integrity to extend product life.

Comments: This product essentially extends TPVs into the realm of polarity, providing an opportunity for bonding existing TPVs (PP-EPDM) to polar materials.

There are two broad approaches to accomplish this task: (1) prepare Nylon-EPDM based TPV or (2) Introduce polarity to the PP and/or EPDM via maleation and/or additives.

In our opinion, ExxonMobil’s product falls into the second category.

ExxonMobil Chemical Completes New Facility to Supply High-Performance Polymer Compounds

ExxonMobil Chemical today announced the completion and start-up of a new $20 million compounding facility to supply high-performance polymers to the automotive, appliance, and specialty consumer products industries.

The world-class facility, located at ExxonMobil’s integrated Baton Rouge complex, has an initial annual capacity of 40,000 tons of specialty compounded products. The facility was designed for the flexible and efficient production of high-quality and consistent products. It will manufacture a broad spectrum of products including Exxtral™ thermoplastic olefins and Santoprene™ thermoplastic compounds for interior, exterior, and under-the-hood automotive applications, and other specialty materials for the appliance, packaging, personal care, construction, and electrical end uses.

The facility includes extensive product support and a testing center to manufacture new products more quickly and cost-effectively. This new center is a key addition to ExxonMobil Chemical’s existing network of product support and automotive development centers and will help to promote collaboration between ExxonMobil and its customers.

Comments: In 2007, ExxonMobil Chemical announced the formation of a new specialty compounding business to focus on the development, production, and marketing of engineered polyolefin compounds, including a new line of automotive compounds. Products range from soft and flexible compounds to stiff, reinforced composites.

The completion and start-up of this facility will allow the company to continue its focus on specialty compounding business.

Sibur Plas to Build a Polyethylene-Making Complex

Sibur Company is to decide whether it is feasible to build up a polyethylene-making complex with a capacity of 450-500 thousand tons on the raw base of Astrakhangazprom Ltd. In this stage, the company has allocated RUR236 million for financing pre-design works. If the company makes a positive conclusion the complex could be put into operation in 2012. Sibur’s President Dmitry Konov said that the company aims the development of new large-tonnage productions and export potential in this segment.

Comments: These are still preliminary plans which may or may not materialize into a petrochemical complex. If Sibur decides to build a polyethylene complex then it will have to select a technology, ENC, Project Management Firm, and all the other necessary details. Technology licensors will closely watch the developments to look for licensing opportunities.

Polystyrene Maker American Polymers Shutting Down

American Polymers Inc., a polystyrene resin maker, and resin distributor in Oxford, is closing its doors. “Over the past year, American Polymers, Inc. has experienced disruption in its operations due to the volatile feedstock prices and the imbalance between supply and demand for polystyrene,” company officials said in a Jan. 22 news release. “We see no substantial change in market conditions going forward. As a result, the owners of API have decided to cease the production and distribution operation.” API now will begin “an orderly wind-down of our business,” according to the release. “All creditors will be satisfied and every effort will be made to help our customers find alternate supply sources,” officials said.

Comments: American Polymers at Oxford, MA polymer facility manufactures impact modified and Back to Headlines Back to Headlines general-purpose crystal polystyrene for injection molding and profile extrusion applications. The company also custom compounds and distributes other resins that include polycarbonate, ABS, Polyethylene, Acrylic, Polypropylene, Nylon, and SAN.

Polystyrene producers have been facing increased pressure from feedstock cost due to an increase in crude oil price influencing the price of benzene, the main raw material for styrene monomer. This coupled with shortages of benzene has made it difficult for the polystyrene producer to maintain their margin.

It would appear that American Polymers could not continue operating in light of this sustained pressure of high feedstock prices and relatively low PS prices.

Ineos Plans French PE Expansion

Ineos is considering expanding its high-density polyethylene (HDPE) capacity at Sarralbe, France from 220,000 m.t./year to 350,000 m.t./year. The project would require an additional 150,000 m.t./year of ethylene supply and Ineos is currently in negotiations on a supply contract with Total Petrochemicals, which provides ethylene to Sarralbe from Total’s petrochemical complex at nearby Carling, France. Total has previously announced plans to restructure the Carling site. Ineos is likely to make a decision on the HDPE project in 2008. Ineos announced plans last July to focus its French polypropylene (PP) operations at Lavéra and close 215,000 m.t./year of PP capacity at Sarralbe. Bill Reid, CEO of Ineos Polyolefins, said at the time that Sarralbe would be refocused on specialty polyolefins, Chimie Pharma Hebdo says.

Comments: Ineos’ plan to expand its HDPE capacity is in line with the current situation in Europe. The HDPE market in Western Europe has been in tight supply as production of the material approaches capacity, reaching a plant utilization of 90%. Western Europe accounts for 20% of the global demand and is growing at close to 4.0%. The current capacity for HDPE in Western Europe is close to 6,000 KT. The major markets for HDPE consumption include blow-molding, film & sheet, injection molding, pipe & conduit, fiber, and others. In Western Europe, Blow-molding has the highest consumption of HDPE having close to 37% of its total demand.

US Charges China with Dumping PE and PP Sacks

The US has charged China with the dumping of woven sacks made from polyethylene and polypropylene, which are used for retail packaging of pet food and bird seed. The trade office said it believed Chinese producers had sold the sacks in the US at 63.89% to 108.09% below fair value. US customs have been instructed to collect a cash deposit or bond on imports from China, based on the preliminary dumping margins.

In July 2007, the US Department of Commerce said the country imported 19.9 million kg of laminated woven sacks from China in 2006, valued at $39.7 million.

Comments: Various segments of polyethylene and polypropylene-converted goods have been under scrutiny by the US Department of Commerce. With the results of this inquiry out, domestic PP & PE sack manufacturers will experience some relief.

The probe began in July 2007, focusing on woven sacks consisting of one or more layers of PE and/or PP fabric, and laminated by an exterior layer of plastic films such as biaxially-oriented PP, or paper.

US woven sack producers Bancroft Bag, Mid-America Packaging, Coating Excellence International, Polytex Fibers Corp., and Hood Packaging Corp. petitioned the government for the investigation in June. At the time, they estimated that Chinese suppliers may have sold sacks in the US at 74.4% to 91.73% below fair market value.

Dow Inks Deal for Alberta Oil Sands Feedstock

Dow Chemical and Aux Sable Canada (ASC; Calgary) have agreed on the sale of ethane and ethylene to Dow from ASC’s Heartland Offgas Plant (HOP), which is currently under construction at Fort Saskatchewan, AB. Financial terms of the deal were not disclosed, and Dow declined to comment on whether it planned to expand downstream capacity.

HOP will produce a mixture of ethane and ethylene, a mixture of propane and propylene and heavier hydrocarbons, and a residue gas stream composed primarily of methane. Up to 8,000 bbl/day of ethane-ethylene will be produced at the facility and sold to Dow. The site will also have the capacity to produce upwards of 7,300 bbl/day of propane-propylene. The HOP facility will reach full-scale capacity in 2012.

Dow also allied with Sable NGL Canada, an affiliate of Aux Sable, for the development of processing facilities for upgrader offgas, to recover hydrocarbon feedstock. Dow and Sable NGL Canada will work jointly with Alberta upgraders and refiners to develop offgas projects that will produce feedstock for Dow’s petrochemical facilities at Fort Saskatchewan.

Sable will construct, own, and operate the off-gas processing facilities and Dow will be the exclusive buyer of the ethane-ethylene streams produced at the facilities, under the terms of the agreement. The majority of the facilities will be built at ASC’s Fort Saskatchewan site, the company says.

Dow will submit the HOP project for consideration under Alberta’s Incremental Ethane Extraction Policy (IEEP), which provides royalty credits for increased ethane consumption for use as feedstock by petrochemical facilities in Alberta.

Comments:  This deal will provide Dow access to relatively cost-advantaged feedstock. Access to feedstock in Alberta will help Dow strengthen its position in North America. This will also help the company in securing a continuous source of supply.

ASC signed an agreement with Nova Chemicals last year to build an extraction plant at Fort Saskatchewan that will produce 40,000 bbls/day of ethane for Nova’s Joffre, AB site.

Dow’s has seven petrochemical production facilities at Fort Saskatchewan – the facility that will use the feed. In August 2006, Dow announced the closure of two of the seven petrochemical facilities at this location. Both facilities were to shut down operations by October 31, 2006.

The two plants that were closed began operations in the late 1970s. The operations at this facility include its Fractionator, Ethylene, Polyethylene, Power and Utilities, and STYROFOAM™ manufacturing plants after the shutdown of Chlor-Alkali and EDC.

It is unclear if the feedstock will be used to maintain the existing products or if a new investment will be made.

Hexion Specialty Chemicals, Inc. and Huntsman Corporation Agree To FTC Request To Extend Review Time For Proposed Merger

Hexion Specialty Chemicals announced that both it and Huntsman Corporation have agreed to allow additional time for the Federal Trade Commission to review the proposed merger of the two companies. As a result, the merger is not expected to close before May 3. To accommodate the extension, Hexion has also given notice to Huntsman that on April 5, it will exercise its option to extend the Termination Date under the Merger Agreement for 90 days, and thus, if the conditions to Hexion’s extension right are met on April 5, the termination date under the Merger Agreement will be extended until July 4, 2008.

Hexion announced on July 12, 2007, that it had entered into a definitive agreement to acquire Huntsman Corporation in an all-cash transaction valued at approximately $10.6 billion, including the assumption of debt. The transaction was approved by Huntsman shareholders on October 16, 2007, and is subject to customary closing conditions, including regulatory approval in the U.S. and several other countries.

Comments: The merger approval is subject to several issues including some concerns regarding the market share of the epoxy business after the merger of Hexion and Huntsman.

Last year, Hexion agreed to pay an 8 percent annual premium for Huntsman’s shares if the closing took longer than nine months. If the deal is not completed until early July, the end of the three-month extension, Hexion would pay about $120 million more for Huntsman.

Dow’s Fourth Quarter; Sales up 16% but Net Income down 16%

Dow reported its fourth-quarter net income results.

Fourth Quarter 2007 Highlights

Sales for the fourth quarter set a new Company record, rising 16 percent from the same period last year to $14.2 billion.

Earnings for the quarter were $0.49 per share. Excluding certain items, earnings for the quarter were $0.84 per share. Earnings in the fourth quarter of 2006 were $1.00 per share. Excluding certain items, earnings for that quarter were $0.98 per share (see supplemental table at the end of the release for a description of these items).

Compared with the same quarter of 2006, price increased 12 percent, with gains in all operating segments and geographic areas.

Volume was up 4 percent compared with the fourth quarter of last year, with improvements in all operating segments and every geographic area outside of North America. Asia Pacific recorded volume gains of 10 percent, and Europe 6 percent.

Purchased feedstock and energy costs climbed $1.7 billion compared with the fourth quarter of last year, the largest year-over-year increase in the Company’s history.

Equity earnings increased 21 percent year-over-year, totaling $294 million for the quarter.

2007 Full-Year Highlights

2007 sales increased 9 percent compared with 2006, setting a new record for the Company of $53.5 billion.

Dow reported full-year earnings of $2.99 per share. Excluding certain items, earnings for the year were $3.76 per share. Earnings for 2006 were $3.82 per share. Excluding certain items, earnings for 2006 were $4.25 per share (see supplemental table at the end of the release for a description of these items).

Equity earnings rose 17 percent compared with 2006, to $1.1 billion, exceeding $1 billion for the first time in the Company’s history.

Comments: Dow’s strategy focuses on three major components: (1) asset-light, (2) innovation through low-cost R&D, and (3) Regional emphasis to optimize resources – feedstocks, labor, and/or growth markets. This is the first indication that the strategy is working.

NOVA Profits from Feedstock Advantage

NOVA reported its fourth-quarter net income results on January 31, 2008.

NOVA made a profit of almost $350 million after losing more than $700 million in 2006. Annual sales also were up more than three percent to $6.7 billion. “Nova Chemicals just finished the best quarter and the best year in our history,” Chief Executive Officer Jeff Lipton said in a news release. “Based on our record-breaking feedstock advantages…and unique new product portfolio, we expect an ongoing step-up of performance in the high oil price environment we foresee for many years to come.”

Nova’s performance styrenics unit struggled in 2007, with a pretax loss of $5 million, but its olefins/polyolefins business surged to a pretax profit of $975 million — a jump of almost 20 percent over 2006. The firm’s PE sales volume in pounds also grew four percent during 2007 to almost 3.4 billion pounds.

Comments: NOVA due to the “Alberta Advantage” has a better cost position than most players in North America. This “Alberta Advantage” in the 4th quarter of 2007 was at a staggering 27 cents per pound. As long as oil prices remain high NOVA will continue to benefit from the “Alberta Advantage”.

“Alberta Advantage” comes from a structural advantage that the light-feed ethylene crackers located at Joffre, Alberta, Canada have over U.S. Gulf Coast ethylene light-feed crackers. This advantage is the incremental ethylene margin that Alberta crackers enjoy and is stated in terms of cents per pound of ethylene. This advantage comes from the larger natural-gas liquids-extraction plants, the larger average size of ethylene crackers, and lower natural-gas costs in Alberta.

 

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