ADI Chemical Market Resources Newsletter
May 26, 2008

Total and Saudi Aramco consider the construction of a petrochemicals complex in Saudi Arabia

Saudi Aramco and Total are planning to proceed with a previously announced refining and petrochemical project at Al Jubail, Saudi Arabia. The decision follows a comprehensive, joint front-end engineering and design study launched two years ago. The refinery will have a capacity of 400,000 bbl/day, and the petrochemical plants will have the capacity for 700 KT per year of para-xylene, 140 KT per year of benzene, and 200 KT per year of polymer-grade propylene.

The start-up of the complex is scheduled for 2012. A joint venture company will be formed during the third quarter, in which Aramco will initially hold 62.5% and Total 37.5%. The partners plan to sell 25% of the new company via an initial public offering, which will reduce Aramco’s stake to 37.5%.

Comments: Aramco and Total had signed a deal to build the plant in 2006. The current announcement is the signing of the MOU for the same deal. The Jubail project is one of two joint venture export refineries that Saudi Arabia wants to build in the Kingdom.

Aramco officials have said they hope to sign a memorandum of understanding with ConocoPhillips for a 400,000 bpd refinery in Yanbu by the end of May. These deals are a part of Aramco’s plans to spend, together with its partners, $50 billion over the next five years to boost refining capacity at home and abroad. Recent announcements seem to be forming a new wave of petrochemical plants in Saudi Arabia that will start operation after 2012. Aramco has been very active and has announced plans with Total, ConocoPhillips, and Dow in different parts of the value chain.

LyondellBasell introduces new polybutene-1 resins for pipe application

LyondellBasell Industries, a leading global supplier of innovative polyolefins to the pipe market, has developed a new range of developmental polybutene-1 (PB-1) resins, marketed under the tradename Akoafloor that can be used by customers in surface heating and cooling pipe systems that outperform traditional materials. The resins are initially being targeted at the Chinese market. Akoafloor resins are PB-1 copolymers that can address the demanding requirements of surface heating and cooling systems used in household and commercial buildings.

Test results show that pipes made of Akoafloor resins offer excellent flexibility and properties for surface heating and cooling applications in modern architecture. The resins can be processed on high-speed extrusion lines – up to 50% faster than incumbent materials – offering improved surface finish and faster crystallization speed.

Pipes made of PB-1 can be used in all domestic plumbing, heating, and cooling applications, offering fast and easy installation. According to Larrass, sustainable low-energy systems are now a global trend and will increase the consumption of pipe for use in building installations. In China and Asia Pacific, PB-1-based pipes that have been designed, specified, and manufactured by LyondellBasell’s customers have demonstrated proven consistency and reliability since market introduction.

Comments: PB-1 pipes were originally developed and manufactured by Shell Chemical Company in the U.S. and Mitsui in Japan and Europe.

During the late eighties, PB-1 pipes made with Shell’s PB-1 fitted with DuPont’s polyacetal fittings were sold in the Houston area for hot water applications. PB-1 due to its crystalline morphology changes leaked creating a major problem in hundreds of new houses. The Homeowners’ suite was finally settled with Shell and DuPont taking the major liability.

Shell was using PB-1 for pipes, films, and adhesives applications and had problems in both films and pipes.

Mitsui discontinued pipes in the U.S. Shell sold the division to Basell as a part of BASF-Shell, which is currently owned by LyondellBasell. LyondellBasell is only planning on introducing the product in China.

To get more information on the historical case, Google “Shell Polybutylene Pipe” and you will get 1000 hits. In a cold environment such as northern Europe radiant heating is commonly used to heat homes and buildings for comfort. This radiant heating system uses pipes of hot water embedded in a concrete floor, under a tiled floor, or attached to the underside of the subfloor. Instead of heating air and circulating it throughout the house, radiant heat warms objects – carpets, and furniture.

The installation of pipes for radiant heating is common in Europe and is a growing market in North America. In Northern China, low-temperate hot-water ground radiant heating has shown considerable growth in recent years and is increasing the demand for pipe production. The most common pipe initially used was copper but due to issues with corrosion and leakages is losing ground to plastic pipes. The common plastic pipes used in this application are cross-linked polyethylene (PEX), PB-1, and others.

LyondellBasell’s move to introduce its new resin for this market is taking advantage of the high economic and construction growth that China is currently experiencing.

Eastman completes expansion of specialty copolyesters

Eastman Chemical Company announced the mechanical completion of the expansion of specialty copolyester capacity at its manufacturing site in Columbia, S.C. The additional copolyester production is expected to come online in June 2008.

This expansion is consistent with the company’s previously announced plans to increase its global copolyester manufacturing capacity by transitioning legacy PET manufacturing assets to large-scale copolyester assets at its South Carolina site, the location of the company’s PET facility based on IntegRex™ technology. In addition to its facility in Kingsport, Tenn., this site is now the second Eastman facility in North America producing the copolyester family of specialty plastics.

Eastman’s copolyesters are known for their excellent clarity, toughness, and ease of use in processing. Additionally, they possess a number of environmentally-attractive qualities and are safe to use in a broad range of applications including rigid medical and electronics packaging, cosmetics and personal care packaging, medical devices, plastic cards, point-of-purchase displays, and shrink film.

Comments: Copolyesters are commonly used in some packaging applications due to their toughness, versatility, and chemical resistance. The product in addition provides clarity, higher heat resistance, improved design flexibility, and ease of processing. Copolymer markets include medical and medical packaging, appliances, consumer goods such as pens, toys, sporting goods, cosmetics, and others. The growth in this market sector has shown to be increasing in recent years and new capacity coming onstream will help meet this growing demand.

Peruvian company Petroperu considers the construction of a petrochemical complex

Peruvian refining company Petroperu is studying the possibility of building a new steam cracker and integrated polyethylene plant in Peru.

Neither the location of the plant nor its estimated production capacity has yet been defined. The project was expected to take 5 years to be completed. This will be a big investment in the Peruvian petrochemical industry if everything progresses as planned.

Petroperu, working in conjunction with Petrobras and Braskem, was expected to feed the petrochemical plants through surplus from its existing natural gas business. Peru currently imports 300 KT per year of ethylene, and following the start-up of the plant was expected to become self-sufficient.

Comments: Petróleos del Perú, S.A. (PETROPERU) is a Peruvian state-owned petroleum company. Its activities include transport, refinery, and commercialization of fuel and other oil derivatives. It was created on July 24, 1969, during the presidency of Juan Velasco Alvarado, using properties expropriated by Peru from the International Petroleum Company, a subsidiary of Esso Corporation. This petrochemical complex will help the company enter downstream activities. Braskem’s experience in petrochemicals should add significant value to the partnership.

Petrobras ranks as the third-largest company in the Americas

Petrobras is the third biggest company in the Americas by market value, surpassing Microsoft, and the world’s sixth biggest based on the same criterion.

Petrobras’ market value has reached $295.6 billion (R$487.9 billion), higher than Microsoft’s ($274 billion). The Company is now the third biggest in market value in the Americas, behind Exxon Mobil Corp. and General Electric Co. Petrobras’ market value is also higher than that of the Industrial & Commercial Bank of China Ltd ($289.3 billion), ranking Petrobras as the sixth biggest in market value in the world.

Petrobras’ growth is the result of market recognition, of its excellent operating and financial performance, and of the Company’s growth perspectives, with the spotlight on the recent oil and gas discoveries made in the pre-salt layer, over and beyond the heated demand for oil in developing countries.

Comments: Petroleo Brasileiro S.A (Petrobras) is Brazil’s national oil company. It is engaged in the exploration and production of oil from reservoir wells, shale, and other rocks, refining, processing, transport, and trading of oil, natural gas, oil products, and other fluid hydrocarbons. The company also performs other energy-related activities. Petrobras also promotes the research, development, production, transport, distribution, and marketing of all sectors of energy, as well as other related or similar activities. It operates in five reportable business segments: exploration and production, supply, gas and energy, distribution, and international.

The market value of the company has also increased due to the increasing oil prices. The company is now planning to invest in downstream activities and expand its presence outside Brazil.

Indian textile producer Nahar Group to invest in a BOPP plant

Integrated textile producer in India, Nahar Group announced its plans to set up a new plant for manufacturing bi-axially oriented polypropylene film (BOPP) at Mandideep in Madhya Pradesh with an estimated investment of Rs 200 crore ($50 million). The company has also proposed to carry out this film project under the company’s new name Nahar Poly Films Limited.

The board of directors of the company has decided in its board meeting to change the name of Nahar Investments and Holdings Limited to Nahar Poly Films Limited. To fund this project, the company plans to raise money through a combination of internal accruals and loans from banks.

The total manufacturing capacity of the plant has been fixed at 30,000 tons per annum. The company plans to commission the manufacturing facility within one year, the company expects to achieve a turnover of Rs 300-400 crore ($ 70-94 million) within the next two years.

Comments: The overall market for BOPP films in India is relatively small accounting for only 1.5% of the global demand. However, the demand for BOPP films in India is expected to grow at double-digit rates. The supply of BOPP films has usually exceeded demand. Domestic suppliers address this imbalance in supply and demand by exporting BOPP films. The major suppliers of BOPP films in India include: (1) Cosmo Films, (2) Flex Industries, (3) Jindal Polyesters, (4) Max India, and others.

Cosmo had also recently announced its expansion plan to raise the capacity of the Vadodara plant by 37,000 tons. Cosmo currently has an aggregate capacity to manufacture up to 68,000 tons of BOPP films, which will be increased to 105,000 tons by the first quarter of ’10. There will be a significant new BOPP film capacity in India with the addition of this 30,000 tons capacity by Nahar Poly Films.

Kimberly Clark develops PS-based absorbent foam

SABIC Innovative Plastics appoints Charlie Crew as President & CEO

SABIC Innovative Plastics announced that Charlie Crew has been promoted to president and CEO of the company, effective immediately. The crew will lead the multi-billion-dollar engineering thermoplastics business with operations in more than 25 countries and over 10,500 employees worldwide. Crew succeeds Brian T. Gladden who left the company to pursue other opportunities.

The crew has had a long and accomplished career with the company. He joined GE Plastics in 1977 as an account manager, and over the years he has held a variety of roles of increasing responsibility. The crew was president and chief executive officer of LNP* Engineering Plastics and served as vice president and general manager of the Cycolac* and Geloy* resins and petrochemicals business. He led the European operations as president and senior managing director of GE Plastics Europe, Middle East, and Africa, and also was vice president and general manager of commercial operations for GE Plastics Americas. Most recently Crew was vice president and general manager of SABIC Innovative Plastics’ global ventures business. Crew graduated from Villanova University in Pennsylvania with a bachelor’s degree in marketing.

SABIC Innovative Plastics was launched in 2007 following the acquisition of GE Plastics.

Comments: Sabic Innovative Plastics plans to implement the old GE Plastics model to produce engineering plastics including ABS, SAN, PB, etc., – but in the Middle East. Hence for the next few years, the main activity will be in the Middle East – most probably in Damman/Al Jubail area.

The travel and cultural differences of the actual plants being inside the Saudi Area would put additional stress on most executives from GE who are in their 50s. Travel will become a major reason for personnel changes … more to come.

China’s ban on ultra-thin plastic bags in effect from June 1st

Chinese retailers are getting ready for the ban on ultrathin plastic bags from June 1, 2008. But the enforcement of the new law will face some tricky points, including pricing, farmer’s markets, and more.

According to a few multinational and local supermarkets in Beijing, the prices will range from 0.1 to 0.4 yuan, depending on the size. The new bags introduced in Beijing are roughly 0.03 millimeters thick, more than the 0.025 millimeters minimum thickness specified by the government. In Shanghai, supermarkets have announced tentative prices in the 0.1-0.5 yuan range for plastic bags.

Targeting shopping bags, the new law exempts produce bags at supermarkets and grocers from charges. In anticipation of customers using self-dispensed produce bags to pack other types of goods, retailers are purchasing more produce bags.

Produce bags can also be the ultimate solution for farmer’s markets, which are more price-sensitive than supermarkets and chain stores. Consumers at farmer’s markets are considered to have less purchasing power than those at supermarkets and are less likely to be willing to pay for plastic bags.

Farmer’s markets, an important part of Chinese people’s daily life, present the biggest difficulties for enforcement of the ban. Wenzhou Business News reported that some local markets are not taking action. Management told the press that no word has been heard from “higher levels.”

Supermarkets including Walmart, Carrefour, and the Metro Group had been selling eco-bags even before the ban was announced in January. Even so, organizations and businesses have been giving out eco bags in their green initiatives. China Resources Breweries, for example, is handing out 10m such bags in Beijing.

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