My Turn – Dr. Balaji B. Singh
THREE TOP REASONS FOR YOU TO ATTEND FLEXPO – OCT 17-19 in Bangkok
Number 3 – First opportunity to meet major suppliers, Government, and downstream processors in Thailand- the Gateway to China;
Number 2 – Come and Meet your future customers – the downstream converting industry in Thailand, and ASEAN Countries;
Number 1 – Bangkok – Hospitality, Food, Tourism; The Future Growth and an Opportunity to meet future growth region.
For more information visit www.CMRHouTex.com
FlexPO2007 on October 17-19th, 2007 and Polyolefins; Downstream Processing Workshop- October 16th Bangkok, Thailand
CMR is pleased to announce that we will be hosting a conference & polyolefins and downstream processing workshop in Bangkok, Thailand. The conference will be held from October 17-19 at Shangri La Hotel and the workshop will be held on 16th October. Please plan on attending.
Comments: Please find enclosed the brochure for FlexPO2007 & Workshop. For more information, please call us at 281-557-3320.
Polyolefin producers announce second-quarter earnings
Dow Chemical
The Dow Chemical Company reported sales of $13.3 billion for the second quarter of 2007, 6% higher than in 2006. Net income for the quarter was $1,039 million and earnings per share were $1.07.
Feedstock and energy costs rose sharply in the second quarter of 2007, increasing by more than $550 million compared with the same period last year. Sequentially, the surge was the largest on record – with second-quarter costs $700 million higher than in the first three months of the year. Joint ventures once again made a significant contribution, as equity earnings rose 11% compared with the same quarter last year to $258 million, with strong year-over-year improvements from OPTIMAL, MEGlobal and EQUATE.
And Dow’s financial discipline contributed to solid cash flow in the quarter, supporting investment in organic growth and acquisitions, as well as $400 million in share repurchases – reflecting the Company’s commitment to balance the use of cash between growth and shareholder remuneration.
In the Performance Plastics segment, sales for the second quarter were $3.7 billion, an increase of 9 percent compared with the same period in 2006. Volume was up 2 percent, as robust demand in Asia Pacific, Europe and Latin America more than offset declines in both North America and the India, Middle East and Africa (“IMEA”) region. In Dow Automotive, although U.S. demand declined significantly compared with the same quarter last year, overall volume showed a marked increase, outpacing growth of 4% in global vehicle production. The Polyurethane and Polyurethane Systems business reported increases in both price and volume, with particular strength in downstream systems applications – including refrigerated transport, pipeline insulation and household appliances. Compared with the same quarter last year, results for the business were also favorably impacted by the acquisition of Hyperlast polyurethane systems in the second quarter of this year and the formation of the Dow Izolan joint venture in Russia last year. And Specialty Plastics and Elastomers achieved a quarterly sales record, driven by solid results in Wire and Cable and in Elastomers and Plastomers, where ENGAGE™ and NORDEL™elastomers continue to gain acceptance with customers worldwide.
Sales in the Performance Chemicals segment were $2.1 billion, 5 percent higher than $2.0 billion in the same period last year. The Specialty Chemicals business reported healthy volume improvements, with very strong growth in Asia Pacific and solid demand from the construction, agricultural chemicals and personal care sectors.
Basic Plastics sales rose 6 percent in the second quarter, from $3.0 billion in 2006 to $3.2 billion in 2007. Price was up 7 percent, while volume declined slightly, reflecting the impact of last year’s permanent plant shutdowns in Canada and the sale of the Company’s Safripol business in South Africa. Polyethylene reported increased prices in all geographic regions outside North America, mitigating the impact of a significant increase in feedstock and energy costs. The business also saw strong volume growth in Asia Pacific and Europe, offsetting a fall in demand in North America. The Polystyrene business achieved double-digit price increases across every region, as the business focused on countering marked increases in the cost of benzene, which rose to record levels during the quarter. Polystyrene demand in Asia Pacific was very strong, especially for refrigerator, printer and air conditioner applications, but elsewhere year-over-year volumes were down as the business focused on retaining margins. Equity earnings in the second quarter increased by more than 30 percent compared with the same period last year, largely reflecting last year’s turnaround at EQUATE. Second quarter EBIT for the Basic Plastics segment was $529 million, a year-over-year increase of 7 percent compared with the same period in 2006.
ExxonMobil
Upstream earnings were $5,953 million, down $1,181 million from the second quarter of 2006 primarily reflecting lower gas realizations, lower gains on asset sales and the absence of prior period tax items. Second quarter natural gas production was 8,711 mcfd (millions of cubic feet per day) compared with 8,754 mcfd last year. Earnings from U.S. Upstream operations were $1,222 million, $422 million lower than the second quarter of 2006. Non-U.S. Upstream earnings were $4,731 million, down $759 million from 2006.
Downstream earnings were $3,393 million, up $908 million from the second quarter of 2006, driven by higher refining and marketing margins and the sale of the Ingolstadt refinery in Germany. Petroleum product sales were 6,974 kbd, 86 kbd lower than last year’s second quarter.
U.S. Downstream earnings were $1,745 million, up $391 million from the second quarter of 2006. Non-U.S. Downstream earnings of $1,648 million were $517 million higher. Chemical earnings were $1,013 million, up $173 million from the second quarter of 2006 due to improved margins. Prime product sales of 6,897 kt (thousands of metric tons) in the second quarter of 2007 were up 42 kt from the prior year.
Lyondell
Lyondell Chemical Company announced income from continuing operations for the second quarter 2007 of $271 million, or $1.02 per share on a fully diluted basis. For the first six months of 2007, net income from continuing operations was $277 million, or $1.05 per share on a fully diluted basis.
Second-quarter 2007 results from continuing operations improved versus the first quarter 2007 primarily due to record refining segment results coupled with strong fuels (MTBE/ETBE) performance. Ethylene segment results continued to reflect good volumes and operating rates with modest margin improvement. In the propylene oxide segment, chemical product results declined primarily due to increased raw material costs; however, these were more than offset by the strength in fuels (MTBE/ETBE).
Ethylene and ethylene derivative product sales volumes increased by approximately 125 million pounds (approximately 4 percent) versus the first quarter 2007. Compared with the first quarter, our quarterly average prices for ethylene and polyethylene increased by approximately 4.5 cents and 5 cents per pound, respectively, while the ethylene glycol price increased by 1.5 cents per pound. The company’s average cost-of-ethylene-production metric (COE) increased by approximately 2.5 cents per pound versus the first quarter primarily due to increases from natural gas liquid-based raw materials. Acetyls results declined by approximately $15 million as a result of higher costs and lower methanol prices.
2Q07 v. 2Q06 — Ethylene and ethylene derivative product sales volumes were up approximately 150 million pounds versus the second quarter 2006. The quarterly average prices for ethylene and polyethylene decreased by approximately 2.5 cents and 2 cents per pound, respectively, and the ethylene glycol price increased by 4 cents per pound. The company’s average COE metric increased by approximately 1 cent per pound. Acetyls results were unchanged.
SIBUR and Tyumen Region Authorities to invest in propylene and PP units
Tyumen Region authorities and SIBUR subsidiary Tobolsk-Polymer LLC have signed an investment agreement. As set in the agreement the government will support the construction of facilities for the production of propylene by propane dehydrogenation and polypropylene in Tobolsk.
In accordance with current legislation, Tyumen region authorities will grant the exemptions for taxes, which are due to be paid to the regional budget.
Tobolsk-Polymer LLC, in return, guarantees implementation of the project which will give to the region economic and social benefits by increasing the tax base, creating new jobs, and promoting small and medium businesses growth. The agreement will be in effect till the end of 2017.
The new dehydrogenating unit will be the largest in the world. Its capacity will comprise 510000 kta of propylene. Annual capacity of new polypropylene production site is estimated at 500 KT which is one of the highest levels within the industry.
In April 2006 SIBUR established a 100 per cent subsidiary Tobolsk-Polymer LLC to implement the investment project of polypropylene production by propane dehydrogenation in Tobolsk city of Tyumen region. In January 2007 SIBUR chose Fluor Company (Project Management Company) to manage the project.
In February 2007 SIBUR and the Authorities of Tyumen region signed the agreement for the joint housing construction including housing for employees working at the new production site. Presently, construction works of the first stage of two 12-floor apartment blocks scheduled for commissioning in June 2008 have been started.
Moreover, in February 2007 SIBUR and NOVATEK signed the framework agreement which stipulates the possibility to launch a JV on the basis of Tobolsk-Polymer LLC. The construction is scheduled for completion in 2010, production launch – in early 2011.
Comments: Like most emerging economies the government is helping boost investment by providing tax-breaks. This trend is also visible in other emerging economies such as India, China, and Brazil. This project is based on the largest propane dehydrogenation unit with proposed annual capacity of 510,000 tons. As more and more cracker capacity is based on ethane there is a shortage of propylene which is being offset by on-purpose propylene units. The most popular methods for making on-purpose propylene include metathesis and propane dehydrogenation. Metathesis is economically competitive if there is a source of lower cost ethane/ethylene.
This will also significantly increase Russia’s polypropylene capacity. Russia currently has 360 KT of PP capacity that is projected to increase to 700 KT by 2010. This plant will more than double the current capacity and increase 2010 capacity by 70%
Reliance considers $10 billion investment in Egypt?
India’s leading petrochemical company the Reliance Industries Ltd. plans to invest $10 billion in Egypt’s oil refining, petrochemicals and plastic industries, according to Egyptian Government officials.
The decision was reportedly taken by Reliance following the meeting of its executives with Egyptian officials in the northern port city of Alexandria.
Egyptian Prime Minister Ahmed Nazif made the announcement, August 9, saying that he hopes the deal will include the construction of an oil refinery.
Magdy Rady, the Prime Minister’s spokesman, told the official MENA news agency that the investments will include $1 billion to build the refinery and at least $7 billion invested in petrochemicals.
ndian investments in Egypt are currently estimated approximately $320 million. Reliance Petroleum Ltd, (RPL) a subsidiary of the Reliance group, has been importing Egyptian crude oil since 2001.
Comments: Reliance has been trying to expand globally since last few years. There have been several rumors regarding acquisitions by Reliance to expand its geographic scope. The company is looking for expansions in two distinct areas: (1) regions with cost advantage and (2) developed regions such as North America and Western Europe. We anticipate that this move by Reliance addresses one of its areas and the company may still be looking for acquisition opportunities in North America and Western Europe. This acquisition will help Reliance in developing an integrated petrochemical complex outside India and improving its cost position as the company have been importing crude oil from Egypt since 2001.
SP Chemicals considers building petrochemical complex in Vietnam
Singapore based company, SP Chemicals Ltd., the fourth largest ion-membrane chlor-alkali producer and the fifth largest aniline producer in the PRC as at 31 March 2007, announced that it has received in-principle approval from the Vietnamese Prime Minister’s Office, for the Group’s proposed petrochemical project in Vietnam (“Vietnam Petrochemical Project” or “Project”).
SP Chemicals’ Vietnam Petrochemical Project proposal centres on the investment in and development of a modern and integrated industrial park of 1,300 hectares, to be dedicated to the petrochemical industry, in Hoa Tam, Phu Yen Province, Vietnam, as well as the investment in the construction, and operation, of a naphtha cracking complex with an estimated production capacity of 800,000 tonnes of ethylene per annum in the said industrial park.
The proposed Project forms a part of the long-term growth strategy of SP Chemicals to expand upstream, so as to ensure a reliable supply of raw materials and to cater for future expansion of its core production of chlor-alkali products and related downstream products, in the PRC. If successfully implemented, the Project will signal a historic milestone for the Group, in its bid to become a regional chemical company.
The Project also represents SP Chemical’s first overseas manufacturing plant outside of the PRC, and will complement its facilities in Taixing City, Jiangsu Province, the PRC.
SP Chemicals will now focus on the next exploratory step in the Project development. This includes identifying potential strategic partners who possess the relevant experiences and abilities to contribute to the success of the Project, while launching a rigorous feasibility study to assess the suitability of the location and the viability of investing in the construction of a petrochemical complex and a naphtha cracking plant in Hoa Tam.
The contemplated plan is to implement the Project in two stages. Phase 1 of the Project, will be for the development of basic infrastructure and the construction of a naphtha cracker and utility plants, with an estimated investment of US$1.5 billion, targeted to be completed in 2014. Phase 2, will be to promote the petrochemicals park and invite investments for upstream and downstream petrochemical projects, targeted to be completed in 2024.
The investment plan and structure, as well as the actual investment amount and construction schedule, are entirely subject to the outcome of the feasibility study, and would have to be approved by the Board, and the relevant authorities in Vietnam.
Comments: Vietnam has large gas and oil reserves that are attractive to investors in energy and petrochemical industry. Progress in the petrochemical industry has been very slow in Vietnam due to government related issues. In recent years there has been some decrease the time related to government approvals to increase investment in the country. Vietnam has a large population base of 85 million with double digit growth rates in the petrochemical sector. A number of players from Japan and Taiwan, among others, have been investing in plants to produce consumer and electrical products.
China-based petrochemicals minnow SP Chemicals has received in-principle approval from the Vietnamese prime minister’s office to set up a petrochemical project in Vietnam centered on a naphtha cracker with 800,000 mt/year ethylene production capacity. The proposed project forms part of SP Chemicals’ strategy to expand upstream, to ensure a reliable supply of raw materials and to cater for future expansion of its core production of chlor-alkali products and related downstream products in China. The company has clearly stated that this project is tentative and in feasibility stage.
Vietnam’s downstream oil sector is marked by unusually long project delays and fallouts with foreign investors. The country’s first refinery project at Dung Quat in the central Quang Ngai province took more than a decade of planning and saw several potential foreign partners drop out along the way, finally began construction in November 2005. Originally planned as a joint-venture project with several overseas partners, the 130,000 b/d refinery is now being set up solely by state-owned oil and gas company PetroVietnam.
The petrochemical project envisages development of an integrated industrial park over 1,300 hectares to be dedicated to the petrochemical industry at Hoa Tam in Phu Yen province. The project plan will be implemented in two stages. Phase 1 will involve development of basic infrastructure and the construction of a naphtha cracker and utility plants, with an estimated investment of $1.5 billion, targeted for completion in 2014. Phase 2 will be aimed at promoting the petrochemicals park and inviting investment in upstream and downstream petrochemical projects, targeted for completion in 2024.
SP Chemicals is conducting the feasibility study and it will also begin identifying potential strategic partners with the relevant experience and abilities to invest in the petrochemicals project. Successful planning and outcome of this project may attract more investment in the country.
Sinopec plans JV refinery and petrochemical complex
Chinese petrochemical company Sinopec is planning a new joint venture refinery and petrochemical complex to consolidate its foothold in South China.
The company is negotiating with overseas partners to build a refinery and petrochemical complex in Guangdong Province. Its processing capacity will be 12 million tons, while the petrochemical plant will roll out 800,000 to 1 million tons of ethylene (a year). Sinopec said that they were in talks with companies such as Royal Dutch Shell, Kuwait Petroleum Corp and Dow Chemical Co.
The project, if it goes ahead, will create pressure on China National Offshore Oil Corporation’s (CNOOC) refinery in Guangdong and the nearby $4.3-billion Nanhai petrochemical complex built by Shell and CNOOC, analysts said.
Comments: Sinopec is one of the largest refiners in China with total ethylene capacity of 6.15 million metric tons. The demand for ethylene in China is expected to remain strong for the next few years and hence Sinopec is considering this investment. There is still interest among the western companies to invest in Asia and Sinopec is taking advantage of this interest. The company has also successfully handled Secco JV with BP, and BASF-YPC with BASF and its experience should be helpful in creating this other JV.
Dow introduces new calendaring-grade thermoplastic polyurethane (TPU) elastomer
Dow Chemical introduced a new calendaring-grade of thermoplastic polyurethane (TPU) elastomers to be commercialized under the PELLETHANE™ brand. The new elastomer can offer performance and processing advantages for a wide array of demanding applications including fabrics, non-wovens and industrial products such as conveyor belts and sewer liners.
A method often used for coatings applications, calendaring allows resin to be placed directly onto fabrics. Specifically engineered for this technique, the new TPU elastomer is easily processed and produces excellent adhesion and chemical resistance.
According to the company, Dow’s PELLETHANE TPU elastomers are a material of choice for a wide range of demanding applications mainly due to its properties such as clarity, abrasion resistance, tensile strength, chemical resistance and excellent processability. PELLETHANE TPU elastomers are among many innovative products that underscore Dow’s strategy to strengthen its Performance business portfolio by prioritizing technology and solutions.
Comments: The introduction of Dow’s new TPU grade that can be calendared will open the market to new application and an opportunity to increase their market share. Dow has continuously been working on improving their TPU business, by upgrading their TPU development facilities, improving their delivery systems and introducing new grades.
TPU is a specialized product that commands premium pricing due to its property performance. These materials combines the high performance properties of thermoset polyurethane elastomers and the efficiency of thermoplastics processing.
Thermoplastic polyurethanes advantages include abrasion resistance, tear propagation resistance, exhibit flexibility over a wide temperature range, and are resistance to oils and greases. TPUs are commonly used in these major applications: (1) automotive, (2) Film, (3) mechanical goods, (4) medical, (5) wire & cable, (6) hoses & tubes, (7) footwear, (8) wheels & casters, (9) coatings, (10) adhesives, and others. Applications for calendered TPU include conveyor belts, synthetic leather and various other applications.
Sumitomo Chemical to expand its PP compounds business in North America and Europe
Sumitomo Chemical will establish new manufacturing and marketing operations in both North America and Europe for polypropylene (PP) compounds used in automobile bumpers and other components as part of the global strategy of its polypropylene business. Sumitomo Chemical positions its PP business as one of its core petrochemical businesses and has long been actively promoting its global development. With manufacturing facilities in Chiba, Japan; Singapore; Texas, USA; and a plant in Rabigh, Saudi Arabia scheduled to come on-stream in the latter half of 2008, the Company operates four worldwide production bases capable of supplying an annual 2 million tons of PP using its proprietary technologies.
Taking maximum advantage of these strengths, Sumitomo Chemical will consolidate its position as a global player in the world’s major markets for PP compounds. Last year, the Company established Zhuhai Sumika Polymer Compounds Co., Ltd. In China and began operation of a new plant with an annual production capacity of 10 thousand tons of PP compounds, and is studying plans for further expansion.
In North America, Sumitomo Chemical has for many years operated its business in PP and PP compounds through Phillips Sumika Polypropylene Company, a joint venture with Chevron Phillips Chemical Co. LLC, and is also expanding its sales volume of PP compounds through toll manufacture. Under the current plan, a new joint venture will be established between Sumitomo Chemical and the Toyo Ink Group, and the new company will construct a new PP compound plant to further expand the business in North America with higher quality and more cost-competitive products.
Sumitomo Chemical’s PP and PP compounds business operations in Europe, however, have been rather limited until now. Following a series of studies on the best ways to expand the business, Sumitomo Chemical has entered into an agreement together with the Itochu Group and Toyo Ink Group to acquire the PP compound operations run by Asahi Kasei Chemicals and Planesa S.A. in the UK and France. The businesses targeted by this acquisition serve a broad spectrum of the automotive and home appliance industries in Europe.
Comments: In recent years the consumption of polypropylene has been growing at a healthy rate of 4.8% in Western Europe and 5.2% in North America. One of the major applications of PP compounds is automotive application. In automotive application polypropylene compounds are most commonly used in: (1) bumper application (2) interior trim applications such as cowl kick panels, inner door liners, seat belt retractor covers glove box bins, (3) under the hood parts such as batteries, (4) heater and air condition parts and others.
The growth of polypropylene based parts in automotive application will continue to grow as manufacturers continue to replace parts where polypropylene can be used to take advantage of the low cost and recyclability. Automotive manufacturers are also heading towards consolidating parts made from polypropylene and saving cost instead of manufacturing individual parts. Sumitomo’s move to expand their polypropylene compound facility will takes advantage of this trend. This expansion will enable Sumitomo Chemical to enhance its global PP compound supply capabilities & increase their businesses worldwide.
BASF introduces polyarylsulfone based high performance plastic
BASF announced the addition of a third type of polyarylsulfone to the two existing materials Ultrason® S (PSU) and Ultrason E (PESU). This new family member is Ultrason P, a polyphenylsulfone (PPSU). The first grade of the new product line is called Ultrason P 3010 and it is already available to customers.
The material Ultrason P combines the high melting temperature of Ultrason E with the low water absorption of Ultrason S, while also displaying high chemical resistance. Its good notched-impact resistance is of particular significance since most amorphous high-performance plastics are notch-sensitive and can break at notches under impact stress. This property also becomes evident when the so-called Charpy notched impact strength is measured: Ultrason P achieves a value that is almost ten times greater than that of other amorphous high-temperature materials. It also lends itself much better to being sterilized with hot steam than other plastics of this class. Even when exposed to a combination of strong cleansers and disinfectants as well as high heat, Ultrason P remains unharmed, withstanding up to 2000 hot-steam cycles without problems. On top of it all, its inherent fire resistance is yet another plus point.
Comments:This is a good move by BASF – expanding the range of high-performance plastics and penetrating markets that were hardly accessible with the materials they had so far. The production of this new product with high quality is so complex that only a few companies in the world are in a position to manufacture it. Hopefully, BASF will get additional market share in this high margin, niche market.
Akzo Nobel acquires Imperial Chemical Industries
Dutch chemicals group Akzo Nobel agreed to buy ICI for 8 billion pounds on Monday to create the world’s biggest paint maker and retain its lead in industrial coatings. Akzo had to raise its bid twice to secure a deal but still has to win shareholder support and faces opposition from at least one major investor, U.S. fund TPG-Axon.
Akzo, whose coatings are used on Airbus’s A380 superjumbo, said it would pay 670 pence a share in cash for ICI, which makes Dulux paints. That is 22 percent above ICI’s closing share price on June 15, the day before it announced a bid approach from Akzo.
Shares in ICI V, Britain’s biggest chemicals company, closed 2.8 percent higher at 642 pence, around 4 percent below the offer price and reflecting some doubts whether Akzo shareholders will back the deal. Akzo shares, helped by an upturn in European stock markets, rose 2.4 percent to 58.05 euros. Akzo sought to sweeten the ICI deal for shareholders by saying it could return up to 3 billion euros (2 billion pounds) to them from next year, on top of an existing cash return of 1.6 billion euros.
Comments: Akzo Nobel has been trying to acquire ICI for a long time now. After several attempts it was able to conclude the deal. The key reason for this acquisition by Akzo is to increase its market position in the coatings industry. Recently coatings segment has been perfoming well amongst the company’s product portfolio. The company recently restructured its pharmaceuticals division into a separate company called Organon BioSciences for which it plans to float an IPO.
Within the coatings market, Akzo Nobel supplies products mainly into decorative coatings, industrial coatings, marine & protective coatings, and car refinishes.
Sealed Air acquired Alga Plastics – thermoformer for medical products
Sealed Air announced the acquisition of Alga Plastics that is involved the manufacture of thermoformed packaging for medical products.
The company plans is to combine Alga Plastics expertise in custom thermoforming and strong reputation in the U.S. rigid medical packaging market with Nelipak and Sealed Air’s flexible film technology.
Comments: Sealed Air is the pioneer of the protective packaging (38% sales) niche within the packaging industry, although the food packaging business (62% sales) is the dominant business in the portfolio, following the acquisition of Cryovac (flexible packaging) from W.R. Grace in 1998. The company has a leadership position across both businesses, with products such as bubble wrap and films (with barrier technology) used for meat packaging. In addition, the company has a geographically diversified sales base, with sales ex-U.S. accounting for >50% of the portfolio (emerging markets about 20% of total). With this acquisition, the company will be able to increase and strengthen its position in medical products business.
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