My Turn – Dr. Balaji B. Singh
Plan on attending the FlexPO2007 Polyolefins and Elastomers Conference October 17-19, 2007 where we are bringing together for the first time, the whole Polyolefins world to Bangkok to meet, exchange and plan for Global growth via innovations. For more information visit www.CMRHouTex.com
Saudi Aramco and Dow sign MoU to develop one of the largest grassroots plastics & chemicals complexes in the Kingdom of Saudi Arabia
Saudi Aramco and Dow Chemical Company announced the signing of a detailed Memorandum of Understanding regarding the construction, ownership, and operation of a world-scale chemicals and plastics production complex in Saudi Arabia, named the Ras Tanura Integrated Project. The parties will now enter the final negotiation phase for the formation of a joint venture company to build, own and operate the facility to be located near Ras Tanura in Saudi Arabia’s Eastern Province. The Ras Tanura petrochemical joint venture will be operationally integrated with Saudi Aramco’s Ras Tanura Refinery complex and its Ju’aymah gas processing plant, two of the largest facilities of their kind in the world. The latter two facilities will supply feedstock to the joint venture and continue to be owned and operated by Saudi Aramco.
The proposed JV partnership will bring together the world’s largest oil company with the world’s leading chemicals and plastics producer and marketer. The Ras Tanura integrated complex will produce an extensive and diversified slate of plastics and chemicals and introduce new value chains and performance products to the Kingdom. When fully operational, the new complex will be one of the largest grassroots plastics and chemicals production facilities in the world and will be ideally positioned to serve major world markets.
The Ras Tanura petrochemical complex will produce a broad range of both basic and performance products, including ethylene, propylene, aromatic, and chlorine derivatives. Initially, the project scope includes world-scale production units for polyethylene, ethylene oxide and glycol, propylene oxide and glycol, chloralkali, vinyl chloride monomer, polyurethane components, epoxy resins, polycarbonate, amines, and glycol ethers.
Comments: The proposed complex will be the largest and one of its kind in Saudi Arabia. The details about the project are not available and it is hard to speculate if all the plans will materialize. As the details regarding the product slate become clearer it will be easier to understand the impact of the complex on the industry. This will be a big move for both Aramco and Dow. This will be a major step towards downstream integration for Aramco and it will be the first major investment for Dow in Saudi Arabia. Dow already participates in the Middle East polyolefins industry through its Equate joint venture.
GE Plastics sold to Saudi Basic Industries (SABIC)
GE and Saudi Basic Industries Corporation (SABIC) announced that they had reached an agreement for SABIC to acquire GE Plastics for a purchase price of $ 11.6 billion.
According to SABIC, the company has a long-term, strategic interest in the people, communities, customers, products, plants, and technology of GE Plastics, and this acquisition represents another important step in SABIC’s growth and diversification to become one of the world’s leading manufacturing companies. In earlier deals, SABIC has acquired the DSM Petrochemicals business in Europe and the Huntsman Petrochemicals business in the UK.
In each case, existing management teams continued to manage the business, and have been given SABIC’s support to implement various investment and growth initiatives.
The closing of the transaction is subject to completing regulatory approvals and is targeted to occur by the third quarter of 2007. SABIC’s advising bank is Citi as the investment banker, Shearman & Sterling/ Van Bael & Bellis as legal counsel, KPMG as the pension, financial, and tax advisor, MERCER as the HR and Pension advisor, Jacobs Consultancy as the consultant on the plants, URS as the advisor of environmental Health and Safety and Booz Allen Hamilton as General consultant and program manager.
Comments: SABIC’s acquisition of GE will give the company a chance to compete in the engineering plastics market. Engineering Plastics business is hard to penetrate without prior experience and knowledge of the industry. This industry competes on technology, services, and end-user/end-use know-how. SABIC will be able to learn from GE’s experience in the industry. This will also give SABIC an opportunity to transfer some of these practices to the polyolefins product line.
Currently, there are limited exports of polyolefins from the Middle East to North America. If the current investment climate prevails then soon there will be a need for importing polyolefins. When this happens SABIC will have the advantage of knowing the North American industry through GE.
Reliance Petroleum Limited to build 900 KT plant based on UNIPOL™ PP process
Dow Global Technologies Inc.(DGTI), a wholly-owned subsidiary of The Dow Chemical Company, announced that Reliance Petroleum Ltd., (RPL), a wholly-owned subsidiary of Reliance Industries Ltd. (RIL), has selected the UNIPOL™ PP Process for a new world-scale polypropylene production facility. The facility will be built in a special economic zone (SEZ) adjacent to the company’s Jamnagar complex. The plant will have two reactor lines, each with a capacity of 450 KTA; the total capacity of the facility will be 900 KTA of PP. The startup is scheduled for December 2008.
Reliance Industries Ltd. currently operates four UNIPOL PP Process lines at its Jamnagar complex and two UNIPOL PP Process lines at its Hazira complex. Reliance Industries Ltd. is the largest producer of polypropylene in Asia. The new facility will produce a full range of homopolymers to supply the growing markets in Asia.
Comments: The polyolefins industry in India has been growing at a high rate and is projected to grow for the next few years. Suppliers are ramping up capacity in anticipation of demand. However, now it seems that the capacity is growing faster than demand. It will be interesting to see how many of the planned expansions are realized and how they will impact the operating rates. Reliance is one of the largest producers of polypropylene in India. The company currently operates 6 UNIPOL PP lines and this announcement suggests that the company has continued with its loyalty towards UNIPOL.
One of the reasons for maintaining the same technology could be that the company’s operators are trained on UNIPOL and know how to efficiently run the lines.
Basell launches Stretchene new polypropylene family for injection stretch blow molding applications
Basell announced that it is launching a new high-performance range of developmental polypropylene resins called Stretchene which can address the highly specialized customer requirements of injection stretch blow molding applications (ISBM).
The new family of resins features products that can outperform standard polypropylene in terms of rigidity, transparency, impact strength, and production output. Stretchene resins’ properties and performance attributes address typical customer requirements for a wide range of ISBM applications used in food and household chemical packaging as well as hot-fill applications – historically the domain of traditional materials such as PET or glass.
Two new grades in the range include (1) Stretchene RP1685 – Due to this grade’s low density, (0.9 g/cm3) a significant weight reduction can be achieved compared to traditional materials such as glass and PET. The resin can also outperform conventional polypropylene in terms of rigidity, which enables very high top load potential without distortion. In addition, the material’s heat deflection temperature of 1090 C makes this polypropylene a competitive alternative to PET in hot-fill applications, and (2) Stretcher RP1903 – Possesses the same density (0.9 g/cm3) as RP1685, this resin surpasses standard polypropylene in terms of clarity and provides very high transparency that is required for customer applications such as cosmetic packaging, historically the domain of HDPE-EBM and PET.
Comments: It seems Basell has taken steps in the right direction – expanding the performance envelope and end-use applications of polypropylene. As Total Petrochemicals did before, this is just the first step in taking polypropylene to new ground. Basell’s Stretchene resins for customer ISBM processes make polypropylene one of the most cost-effective options for producing bottles and containers for food contact. In the past, PET has dominated ISBM applications. However, the PP resin producers have been trying hard to modify the PP resins and ISBM process to make PP more competitive with PET in ISBM applications. The new PPs from both Basell and Total Petrochemicals are viable alternatives to PET for ISBM bottles in terms of the required mechanical, optical, and organoleptic properties. These new resins address PET’s limitations in terms of density, MVTR, and HDT, thereby unlocking and expanding PP’s potential in ISBM applications.
Chevron Phillips Chemical reorganizes K-Resin® SBC business
Chevron Phillips Chemical announced that it is restructuring its K-Resin® styrene-butadiene copolymer (SBC) business to improve its economic viability. The company plans to increase its focus on market and application development and streamline its operations, sales, and technology functions.
In addition to internal changes, the company will also be shutting down older, less efficient K-Resin® SBC production lines at the Pasadena Plastics Complex in Pasadena, Texas. This action will bring Pasadena’s K-Resin® SBC nameplate capacity to 100 million pounds per year.
The company’s joint venture plant in South Korea, K R Copolymer Co. Ltd., will maintain a nameplate capacity of 115 million pounds per year. Implementation of the new strategy will begin immediately, with the transition expected to be complete in the second half of 2007.
Introduced in the 1970s, K-Resin® SBC is a clear resin known for its unique blend of sparkling clarity, impact toughness, stiffness, and exceptional gloss.
Comments: Chevron Phillips is the largest producer of high styrene SB Copolymers in North America. High Styrene SBC was growing steadily until the explosion in 2000 at its plant in Pasadena, TX. The situation created a reduction in the capacity of K-resin production with the resins being imported from Korea. Due to the shortage in 2000, some of the consumers were forced to try alternate materials.
Recently K-Resin has been facing stiff competition from other materials such as PET, HDPE, and clarified PP. K-Resin is normally priced higher than competing materials and is most commonly used where clarity and impact resistance is required.
High Styrene SBC is used in various applications and the demand for these applications varies by region. The main markets for high Styrene SBC are (1) injection molding, (2) thermoforming, (3) films, and (4) blow molding. The single largest market for high styrene is thermoforming which includes cups, plates, dishes, trays, and others. The reduction in capacity by Chevron Phillips may not create a shortage due to strong inter-material competition.
Norsk Hydro sells its polymers business to INEOS Capital
NEOS Capital today announced that it has reached an agreement to acquire Norsk Hydro ASA’s polymers business for NOK 5.5 billion, (EUR 670 million) subject to closing adjustments.
The acquisition of Hydro’s polymers activities, recently renamed Kerling ASA, will allow INEOS to progress its growth strategy in Europe and will enable the company to integrate high-quality assets, people, and capabilities into its wider business. The acquisition of Kerling represents a very good product and geographic fit, providing complementary assets, expertise, and market positions across Europe. INEOS will benefit from an enhanced position across its chloralkali, polymer, and compounds businesses, as well as acquiring a 50% share in the Noretyl ethylene cracker at Rafnes, Norway, which is a joint venture with Borealis.
Kerling is a wholly-owned subsidiary of Norsk Hydro ASA, consisting of 1,200 staff and production facilities in Norway, Sweden, and the United Kingdom. The business also has interests in joint ventures in Norway, Qatar, and China and a shareholding in the Portuguese PVC Producer CIRES, which is listed on Euronext in Lisbon.
The acquisition is being made by INEOS Capital and stand-alone financing for the acquisition has been fully committed by Barclays Capital and Merrill Lynch. The transaction, which is conditional on approval from the EU competition authorities is expected to close in the third quarter of 2007.
Comments: Norsk Hydro has 3 PVC manufacturing facilities in Western Europe with a total capacity of 580 KT. Ineos’ acquisition of Norsk Hydro’s PVC business will help it maintain its leadership position in Europe. PVC business was a non-core operation for Norsk Hydro and a good strategic fit for Ineos. Norsk Hydro had planned on divesting its PVC business after announcing its decision to merge its oil and gas business with Statoil in December 2006.
Hydro Polymers AS, Norway, was established in 2000 and is a wholly owned company in Norsk Hydro’s petrochemicals division.
Ineos Chlorvinyls sells its emulsion-PVC business to Vinnolit
INEOS ChlorVinyls announced that it plans to sell its Emulsion PVC (E-PVC) business to Vinnolit GmbH & Co. KG. The sale consists of the commercial goodwill of the INEOS ChlorVinyls E-PVC business along with its E-PVC production facilities at Hillhouse (UK) and Schkopau (Germany). The deal will also include Vinnolit entering into an offtake agreement for the entire E-PVC output at Porto Torres (Italy). The E-PVC business has an annual turnover of approximately EUR 150 million.
INEOS ChlorVinyls retains its European VCM and Suspension PVC (S-PVC) businesses at Runcorn and Barry in the UK; Wilhelmshaven and Schkopau in Germany; and Porto Marghera, Porto Torres, and Ravenna in Italy. VCM/S-PVC is the largest business of INEOS ChlorVinyls, with the Group’s production capacity standing at around 1.1 million tons of VCM and 1.4 million tons of S-PVC.
Comments: Ineos’ sale of its emulsion PVC business is part of its strategy to focus on core businesses and strengths. Vinnolit will acquire production facilities in the U.K. and Germany and buy the output of a third E-PVC plant in Italy.
Vinnolit was acquired by Advent International in 2000 from German chemical groups Celanese AG and Wacker Chemie AG. Vinnolit plans to expand its PVC capacity and this acquisition is part of its expansion strategy.
Overall PVC markets in the developed countries will undergo consolidations to remain competitive with other Asia regions such as China where alternative cheaper route – such as calcium carbide is used for the manufacture of PVC.
Hexion Specialty Chemicals to acquire German resins business from Arkema
Hexion Specialty Chemicals, the world’s leading global source of thermoset resins, announced that it has reached a definitive agreement to acquire the German resins and formaldehyde business of ARKEMA GmbH.
Based in the Leuna industrial park, located in east central Germany, the ARKEMA German resins and formaldehyde business manufacture formaldehyde and formaldehyde-based resins including urea-formaldehyde, phenol-formaldehyde, and melamine-based resin systems. These resins are used to manufacture engineered wood panels including oriented strand board, particleboard, and medium-density fiberboard. The business also produces impregnation resins used to laminate decorative paper surfaces to wood products. The business employs 100 people and had 2006 revenues of approximately EUR101 million.
Comments: Based in Columbus, Ohio, Hexion Specialty Chemicals is one of the leading producers of a global leader in thermoset resins. Hexion serves the global wood and industrial markets through a broad range of thermoset technologies, specialty products, and technical support for customers in a diverse range of applications and industries. Hexion had 2006 sales of $5.2 billion and employs about 7,000 people.
Hexion was formed in 2005 through the merger of Borden Chemical, Inc., Resolution Performance Products LLC (RPP), and Resolution Specialty Materials LLC (RSM), and the acquisition of Bakelite AG. Hexion Specialty Chemicals is owned by an affiliate of the private investment firm Apollo Management, L.P.
The company has been increasing its revenues via acquisitions over the last few months. In 2006 Hexion grew through the acquisitions of the decorative coatings and adhesives business of The Rhodia Group, the wax business of Rohm and Haas, and the ink and adhesive resins business of Akzo Nobel. The main areas of focus for the company are epoxy, phenolic, and formaldehyde resins.
LANXESS promotes growth and innovation in China
A year after the start of the Group-wide initiative “LANXESS Goes Asia”, the company is driving growth and innovation in China further forward. In Wuxi, near Shanghai, the LANXESS Semi-Crystalline Products business unit has opened a development center for high-tech plastics. The business unit will bring a second production line at this site into operation in the fourth quarter of 2007, thereby doubling production capacity, as it had announced in the spring of last year. As early as the summer of 2007, a manufacturing line exclusively for specialties and customer samples will start up in Wuxi.
In Qingdao in the province of Shandong, LANXESS’s Technical Rubber Products business unit plans to set up a rubber research center. Furthermore, among others, LANXESS is currently analyzing the Chinese locations of Nanjing and Ningbo as candidates for the international competition launched in March to find a suitable location for a new facility in Asia for producing ion exchange resins. The planned investment by LANXESS’s Ion Exchange Resins business unit lies in the eight-figure Euro range.
Comments: LANXESS Corporation was formed when the Bayer Group combined most of its chemical businesses and large segments of its polymer activities. The company in recent years has been active in increasing its presence in China and taking advantage of the growing Chinese market.
Lanxess is one of the first foreign suppliers to manufacture an antioxidant for rubber in China. The plant at Tongling manufactures its Vulkanox® product. Lanxess in 2004 established a jv with Weifang Yaxing Chemicals which would allow it to move the bulk of its hydrazine hydrate production from the United States to the Chinese market. In April 2006, LANXESS opened a production plant for the compounding of high-tech engineering plastics in Wuxi.
Ticona to create a new customer application development center in Shanghai
Ticona, the engineering polymers business of Celanese Corporation, announced its plans to create a CustomerApplicationDevelopmentCenter in Shanghai. When completed, the new Center will be part of a global support network that includes similar Ticona centers in Kelsterbach, Germany, and Auburn Hills, Michigan, USA.
The Shanghai region was chosen for the facility because many Ticona customers have their headquarters and engineering facilities nearby. When the Center is completed in 2008, the company plans to offer a wide range of locally based services, such as support for product and mold design using computer-aided engineering, process optimization based on injection molding trials, material testing, troubleshooting, and customer training.
Comments: Ticona’s decision to create a Customer Application Development Center is no different than that of most polymer companies. The trend is to participate in the growing Asian markets and hence have a presence there.
Packaging company Sonoco Products to acquire rigid container firm – Matrix Packaging, Inc.
Sonoco, one of the largest diversified global packaging companies, has signed a definitive agreement to acquire privately held Matrix Packaging, Inc., a leading manufacturer of custom-designed blow-molded rigid plastic containers and injected molded products, for an all-cash purchase price of approximately US $210 million.
The acquisition, which is subject to regulatory approval, is expected to be modestly accretive in 2007 and is expected to generate sales on an annualized basis of approximately $140 million. The transaction is expected to be closed by the end of June 2007.
Headquartered in Mississauga, Ontario, Canada, Matrix operates six state-of-the-art manufacturing facilities in the United States and Canada and employs approximately 860 workers. Founded in 1992, Matrix utilizes some of the most technologically advanced rigid plastic packaging equipment, including extrusion blow molding, injection stretch blow molding, and injection molding that can produce mono- and multi-layer rigid plastic containers utilizing a number of plastic materials. The company manufactures a variety of custom-designed and stock containers and closures for multi-national consumer product goods companies serving the personal care, household chemicals, automotive, pharmaceutical, and other markets. In addition, Matrix provides full-service decorating and component assembly capabilities including silk-screen printing, pressure sensitivity, and heat transfer labeling.
Since 2002 Matrix has been owned by its two founders, Pushminder Judge, and Graeme Malloch, in partnership with certain institutional investors led by Tricor Pacific Capital, Inc., a leading private equity firm with offices in Vancouver, B.C., Canada, and Lake Forest, Ill.
Comments: Sonoco Products’ main activities include the manufacturing of industrial and consumer packaging products and providing packaging services. It operates in four segments: Engineered Carriers and Paper, Consumer Packaging, Packaging Services, and Others. The engineered carriers and paper segment designs and develops high-performance paper and composite engineered carriers, fiber-based construction tubes and forms, and paperboard. The consumer packaging segment produces round and shaped rigid packaging, both composite and plastic, printed flexible packaging, metal, and plastic ends, and closures. The packaging services segment provides products and services like point-of-purchase displays, packaging fulfillment, and brand management.
The “other” segment’s products include wooden, metal, and composite reels for wire and cable packaging, custom-designed protective packaging, machinery manufacturing, and specialty packaging.
Sonoco has been constrained by capacity in its Midwest facility for the manufacture of plastic containers. This acquisition of Canadian firm Matrix Packaging with six facilities should help Sonoco. Until this acquisition, Sonoco has been mainly supplying rigid containers in the food packaging markets while Matrix supplies its products in the personal care markets. This acquisition will give Sonoco a foothold in the personal care market.
In order to strengthen its position in the packaging industry, Sonoco will actively pursue bold-on-sized acquisitions, including opportunities to 1) build out its geographic presence in both the consumer and industrial product set; and 2) potentially initiate joint ventures with the intent to eventually gain 100% interest.
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