ADI Chemical Market Resources Newsletter
June 9, 2008

 

Chemical companies announce price increases to combat energy costs

Several companies such as Dow Chemical, Rohm & Haas, and Huntsman, announced their plans to increase prices for all their products.

Dow Chemical Company announced that on June 1 it will raise the price of all of its products by up to 20 percent – depending on their exposure to rising energy, feedstock, and transportation costs – and will review all terms to all customers. According to the company, sweeping price increases and reviews are essential as the Company attempts to mitigate the extraordinary rise in energy and related raw material costs. Dow spent $8 billion on energy and hydrocarbon-based feedstock costs in 2002. At the current rate, those costs would climb to $32 billion this year.

Huntsman Corporation announced that, in response to sharp and sustained increases in its costs for energy, commodity and intermediate feedstocks, and transportation, it will raise prices for all products, some by as much as 25%, and also impose an energy surcharge across a wide range of products. The amount of each price increase and energy surcharge will vary by product, in accordance with costs attributed to each product. Each price increase and any necessary surcharge will be effective immediately or as soon as applicable contracts allow.

Rohm and Haas Company said it will apply an indexed surcharge in the Asia Pacific region to its tin heat stabilizer products, beginning in June 2008. The index will be adjusted monthly, based on the collective changes in key raw materials like tin, crude oil, and natural gas costs. The index will be in place for products shipped in the Asia Pacific effective June 1, 2008.

Comments: Such announcements are expected as oil prices continue to remain high. Producers have not been able to pass the high cost of production in the form of price increases for all the products. This announcement suggests the company believes that high oil prices are here to stay and the cost needs to be transferred in order to maintain competitiveness. Other companies that have made similar announcements include Rohm & Haas, Ciba, & Huntsman.

Following US-based Rohm and Haas’ announcement of a mandatory monthly energy and raw material surcharge across its $4.9 billion specialty materials business on April 29, a handful of leading companies have announced across-the-board price increases of the order of 20-25%. On May 28, 2008, Dow Chemical, of the US, announced it would raise the price of all its products by up to 20%, depending on their exposure to energy, feedstock, and transportation costs.

On May 29, US-based Huntsman announced it would raise the price of all its products by as much as 25%and impose an energy surcharge across a wide range of products. The price increases and surcharges were effective immediately or as soon as contracts allow. On May 30, Switzerland’s Ciba Specialty Chemicals announced price increases across all product ranges, effective immediately – some in excess of 20%.

We anticipate that this is just the beginning and we will see more companies making similar announcements.

We also see the price of oil climbing to unprecedented heights and $ 6-gallon gasoline by the end of the year – That is the nature of the beast.

What does it mean to the plastics industry????? Soon, the cost of shipping a plastic part to the U.S. will be more expensive than the raw materials.

LyondellBasell to consolidate PP compounding and business locations in North America

Following its February 2008 acquisition of Solvay Engineered Polymers, Inc., LyondellBasell has announced plans to consolidate its North American-based polypropylene (PP) compounding production, sales, marketing, and technology activities.

The company will close its Sales & Application Development Center in Auburn Hills, Mich. The sales, marketing, and technology activities currently conducted at the Auburn Hills site will be relocated to the company’s expanded Advanced Polyolefins Business & Development Center in Lansing, Mich.

LyondellBasell will also close its PP compounding facility in Grand Prairie, Texas. Production will be moved to the company’s nearby Mansfield, Texas plant, and to its new plant in Altamira, Mexico, scheduled to come on-stream this year. Both sites are scheduled to close by the end of this year.

Comments: LyondellBasell is continuing to reorganize and consolidate its assets. This was anticipated after the recent acquisitions of Lyondell and Solvay Engineered Polymers. As the company continues with the integration process we anticipate that the company will optimize/streamline its assets.

More importantly, it is the prediction from the late eighties that comes true. In the late eighties, there were three major compounders of polyolefins – Dexter, Republic, and A. Schulman. Almost all of the polyolefin organizations raced with each other to acquire Dexter and Republic, since A. Schulman had a poison pill.

Solvay acquired Dexter, which later became Solvay Engineered Polymers; Himont acquired Republic which became their internal PP compounder. Over time A. Schulman went through a major crisis and is still in a bad position.

Now, Basell Lyondell getting together essentially brings everyone back together. The only other major development was Exxon acquiring AES (ex-Monsanto) and ExxonMobil developing AES into an independent compounder.

INEOS Polyolefins introduces Eltex®MED, a new LDPE grade for medical and pharmaceutical packaging

NEOS Polyolefins announces the launch of Eltex®MED LDPE, a range of polyolefins grades dedicated to meeting the exacting and long-term requirements of Medical and Pharmaceutical Packaging applications. These products are produced at the Bamble (Norway) polyolefins site.

Eltex®MED LDPE is a leading brand for the Blow-Fill-Seal technology used in pharmaceutical liquid packaging, and which continues to replace traditional materials in these applications.

Primary Blow-Fill-Seal applications are IV fluid bottles and single-dose ampoules for packaging respiratory and ophthalmic treatment solutions – such applications can be steam treated up to 110 °C.

The excellent performance Eltex®MED LDPE also suits the requirements of injection molded packaging allowing sterilization with Eto-treatment or radiation up to 35 kGy.

Eltex®MED is dedicated to serving the Medical and Pharmaceutical markets which require long-term continuity of supply and consistent product specification. Eltex®MED LDPE grades are contamination-free and compliant with European Pharmacopeia, USP class VI, filed under DMF.

Comments: The introduction of a new polyethylene grade by INEOS is a step to ensure competitiveness via innovation and broad product offerings. The products used in medical and pharmaceutical applications typically command a higher premium over other applications due to stringent requirements.

Idemitsu Kosan plans to commercialize its new polyolefin in 2009

Idemitsu Kosan is developing markets for its new polyolefin with low molecular weight and low modulus of elasticity, called LMPO, primarily in the areas of nonwoven fabrics and hot melt adhesives, targeting commercialization in 2009.

Idemitsu used a unique metallocene catalyst to produce its novel material, whose lower crystallinity provides flexibility that is far superior to that of ordinary polypropylene, and which offers a melting point of 70 deg C, lower than those of high-density polyethylene and linear low-density polyethylene, along with low melt viscosity.

In addition, LMPO does not feel sticky, which, together with its excellent compatibility with polypropylene, makes it especially suited for use in elastic nonwoven fabrics, according to Idemitsu.

The company has already started making trial products jointly with Reifenhauser Reicofil GmbH & Co., a German spun-bond-machinery manufacturer. It anticipates LMPO to be initially used in medical products like disposable diapers, patches, bandages, and masks, as well as sporting goods such as supporters and medical tapes.

Comments: In the past years, Idemitsu has had significant patent activity suggesting ongoing efforts for the development of metallocene catalyst-based resins, particularly polypropylene. But the development activities had not translated into a commercial product. In addition to polypropylene, the company has invested in R&D programs for use of metallocene catalysts in other products such as higher liquid olefins and poly-alpha-olefins. Some of these developmental products now seem closer to commercialization.

The current product called “LMPO” is a low molecular weight and low elastic modulus product made via copolymerization of propylene and butylene using a metallocene catalyst.

They are expected to be targeted at nonwovens in Hygiene and medical application.

The nonwovens in the disposables market such as Hygiene and Medical are moving towards lightweight and better sensorial comfort, of course, given the mechanical strength, moisture management, and barrier properties. The continuous struggle has been to balance the stiffness (due to required mechanical properties) and the drapeability of the fabric (for sensorial comfort). Metallocene catalyst-based LMPO seems to provide this balance and is likely to provide the product improvements sought by these markets. Lower density (~0.87) also provides the benefit of lightweight.

Further, the product has a much lower melting point than atactic and isotactic PP, spanning the entire range of melt viscosity. In addition to nonwovens, the applications are expected to be in hot-melt adhesives and polymer modification.

Sinopec to build ethylene joint venture with Korean company SK Energy

China Petroleum and Chemical Corporation (Sinopec) announced its plans to tie up with SK Energy Co., the biggest oil refiner in the Republic of Korea to construct an ethylene project in Wuhan, Hubei Province.

According to the agreement, Sinopec and SK will sign the contract for joint investment in 2008. SK will hold a 35 percent stake in the project, which has an estimated investment of more than 14 billion yuan.

Preliminary work is being done by both companies and the joint venture will be established after receiving permission from the Chinese government. Construction of the project launched at the end of last year. When completed in late 2011, the plant will annually produce 800,000 tons of ethylene.

It will also produce key petrochemical products, including 300,000 tons of high-density polyethylene, 300,000 tons of linear low-density polyethylene, and 400,000 tons of polypropylene.

Comments: Sinopec has been looking for partners to invest in its petrochemical complex for some time now. This announcement is a step forward toward the construction of the proposed petrochemical complex with the required funding.

SK Energy was incorporated in 1962 and is a petroleum refiner. SK Energy is engaged in refining, fuel retailing, and storage of petroleum products and petrochemicals in the Asia Pacific region. It supplies 32 percent of refined petroleum products to the domestic market. Moreover, SK Energy also conducts oil exploration and production activities, and the importation and distribution of bituminous coal. It operates in Korea and also has a presence in global markets.

Kuwait considers Shell and Dow as potential partners for China refinery JV

Kuwait Petroleum Corp is considering Royal Dutch Shell and Dow Chemical Co as possible partners in a 250000-300000 bpd refinery planned as a joint venture with Sinopec in Guangdong. Sinopec will hold about 50-51% stake in the Nansha refinery to be located in Southern China. The refinery will include a petrochemical plant with annual ethylene output of 1 mln tons. Petrochemical production helps ensure profitability in a market where fuel prices are tightly controlled by the government. KPC awaits final approval from China’s main economic planning agency- National Development and Reform Commission and from the environment ministry. State-owned KPC and Sinopec, Asia’s top refiner, received preliminary government approval for the Guangdong plant in 2006.

Comments: KPC and Sinopec received preliminary government approval for the Guangdong plant in 2006 and negotiations regarding the execution of this plant have been going on since then. KPC has said it aims to become one of China’s top five crude suppliers within three years and in 2008 alone will boost imports to 115,000 barrels per day from 88,000 bpd last year. By 2015, KPC expects to supply between 500,000 and 700,000 barrels per day of crude to the Nansha plant and a second one in Quanzhou. British firm BP, which had been in talks with KPC over the plant in the manufacturing hub of Guangdong province, appeared to have been ruled out. These negotiations take a long time and remain uncertain till finalized.

Exxon Mobil and Saudi Aramco are also building a $US5 billion refinery in Fujian province to help meet China’s fast-growing demand for oil.

Russian oil company, Lukoil starts blow-molding plant

Russian petroleum company Lukoil Group has opened a new motor lubricating oil packaging and filling plant in Perm, Russia, capable of processing up to 110 KT of oil per year.

At the heart of the new facility, which opened in April, are six high-capacity Uniloy Milacron extrusion-blow molding machines that produce up to 60 million plastic jerry-can containers per year from one liter to 5 liters in size.

The equipment, supplied by Uniloy Milacron’s plant in Magenta, Italy, produces the blow molded containers in four different metallic colors. It uses production scrap in molding the three-layer containers and offers in-mold labeling (IML) technology.

In addition, Lukoil’s Perm packaging plant is equipped with three BMB KW series injection presses, each with a clamping force of 350 tons, which turn out co-injection printed container caps in two colors. The presses are specially developed by BMB for the application with a rotary table and second injection unit at right angles to the first.

The Lukoil packaging plant, handles the whole supply chain from container and closure molding to oil filling, final jerry-can packaging, and storage in a fully-automated warehouse, according to Uniloy Milacron. Moscow-based Lukoil Group, which runs 5,800 petrol stations in Russia and abroad, recorded a turnover of nearly $61bn in 2006 and has reported double-digit growth each year for the past five years.

Comments: This plant by Lukoil will help the company participate in the downstream industry and also improve its profit margins. The company is producing blow-molded containers for its use – packaging oil. This will enable the company to be completely integrated – starting from polyolefins to containers.

LUKOIL Oil Company (Lukoil) is a leading vertically integrated oil and gas company engaged in the exploration, production, and marketing of oil and gas, petroleum products, and petrochemicals. The company’s products are sold in Russia, Eastern Europe, the Commonwealth of Independent States countries, and the US. Lukoil’s strategy for its Chemicals segment includes: (1) Realizing new investment projects at existing petrochemicals plants and (2) Developing new large-scale projects for increasing the production volumes.

RAG-Stiftung to sell 25.01% stake in Evonik to CVC for 2.4 billion euros

RAG-Stiftung has agreed to sell a 25.01 percent stake in Evonik Industries AG to investment company CVC Capital Partners for 2.4 billion euros, adding that Evonik will go public in the medium term.

According to RAG, Luxembourg-based CVC won the bidding because of the price it offered and because of its experience in the chemical and energy industries and its long-standing presence in Germany.

RAG-Stiftung in April called off the planned initial public offering (IPO) of Evonik, the German energy and chemicals conglomerate it owns.

RAG, a government-controlled foundation, is winding up Germany’s hard-coal mining industry and will use the proceeds from the sale to cover future liabilities from closed mines.

Comments: Formerly called Degussa, Evonik Industries AG is a producer of specialty chemicals, coal power, and renewables and participates real estate business. It manufactures chemicals for the automotive, pharmaceuticals, cosmetic, plastic, and rubber industries. Evonik focuses on designing, building, and operating power plants worldwide. It is specialized in the production of electricity from coal and renewable energies. The company focuses its engineering and consulting skills on the design, building, and operation of power plants worldwide to provide complete end-to-end solutions. As a part of the real estate business, it owns more than 60,000 housing units.

The company is headquartered in Essen, Germany, and employs about 43,000 people. In the polymers area, Degussa has been involved in the specialty polymers such as PEEK and polyamides.

Braskem and Estrela sign partnership around a green plastic

Braskem and Brinquedos Estrela have announced their plans to establish a long-term partnership to develop products made of green polyethylene made of 100% renewable raw material.

The first result of this partnership is Sustainable Monopoly, a modern version of one of the most traditional games in the Brazilian toy industry, which shall soon be in the market with the proposal of joining environmental education and entertainment. New joint developments have been scheduled by the companies for the next few months, particularly from 2010 on, when Braskem’s green polyethylene production shall achieve industrial scale.

The new game design and concept were developed together by Braskem and Estrela. The partnership is based on the creation of a new green plastic product capable of using both companies’ know-how in innovation, technology, environment, and market. Through this initiative, Braskem moves one more step further toward offering breakthrough technology to the market, and Estrela reinforces its leadership position in the Brazilian toy market.

Braskem was the first company in the world to announce an internationally-certified polyethylene made of 100% renewable raw material. Besides this high initial density polyethylene, which is being produced at a pilot plant in Braskem’s Technology and Innovation Center with a capacity of 12 tons a year, the company certified low linear density polyethylene containing green butane at the beginning of this year. It will soon announce where it is going to implement a polyethylene production plant with a capacity of 200 thousand tons a year.

Comments:  Braskem’s ethanol-based green polyethylene production on an industrial scale is expected in late 2009 with an annual production capacity of up to 200,000 tons. In terms of feedstock, Brazil being one of the leaders, Braskem is expected to have a secure supply.

Having said this, the uncertainties associated with ethanol pricing may or may not favor the overall cost economics of PE production using this proprietary technology. Through joint development efforts with environmentally conscious end-users, Braskem is working to secure customers for its product. Teaming up with end-users such as Estrela, who has a leading position in their respective markets (toys in this case), Braskem could potentially have sizeable market volumes to supply come 2010-11. 

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