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. For more information visit www.CMRHouTex.com
Dow Chemical denies discussions of leveraged buyout & terminates top executives
The Dow Chemical Company said that it has had no discussion about a leveraged buyout. Reiterating comments made earlier by Andrew Liveris, chairman and CEO of The Dow Chemical Company, the Company said that its Board of Directors fully supports Dow’s management team and its plan to continue enhancing value for all shareholders through the execution of its strategy.
The Dow Chemical Company announced that Pedro Reinhard, a senior advisor and member of the Board of Directors, and Romeo Kreinberg, an officer of the Company, engaged in business activity that was highly inappropriate and a clear violation of Dow’s Code of Business Conduct. Reinhard and Kreinberg were involved in unauthorized discussions with third parties about the potential acquisition of the Company.
The Company took swift action: information about the misconduct was first disclosed to Dow on Tuesday, April 10; the Board of Directors was informed on Wednesday, April 11; and the employees were terminated this morning with the full support of the Board.
Venezuelan company Pointer selects Basell’s Lupotech T technology for a new 300 KT per year LDPE plant
Poliolefinas Internacionales, C.A. Polinter, an affiliate of Petroquímica de Venezuela, S.A., Pequiven, and other private shareholders, has selected Basell’s Lupotech T technology for a new 300 KT per year low-density polyethylene plant that it plans to build in Maracaibo, Venezuela. Start-up is expected in 2011.
According to Basell, Lupotech T has globally become the technology of choice for the production of LDPE and EVA copolymers and we are very pleased to provide Polinter with the latest, proven world-scale Lupotech T technology.
Comments: LupoTech T is a high-pressure tubular reactor process for the production of LDPE and EVA copolymers. The process was first licensed in 1953, and through steady improvements in technology, the capacity has grown to over 5 million tons, including a 320 KT line in Europe. The steady increase in single-line capacity has enabled many producers of LDPE to lower production costs and compete more effectively with low-pressure processes. Over the last few years, Basell has signed several licensing agreements for Lupotech T with companies such as PetroChina, Amir Kabir, Sinopec, Kurdestan Petrochemicals, PTT Polyethylene, and others.
For more information on LDPE markets, please refer to our multiclient reports on Worldwide LDPE and a recent update on LDPE/EVA markets with regional forecasts of supply/demand and price until 2025.
Repsol YPF starts pilot plant for polyolefins R&D in Spain
Repsol YPF has opened a pilot-scale plant for polyolefins at its industrial chemicals complex in Tarragona, Spain, which will enable it to pursue technological developments.
The company claims the R&D plant is “the first of its kind in the world” and will conduct research into a wide range of polypropylene and polyethylene. According to the company, the plant’s high degree of miniaturization enables it to simulate a variety of manufacturing processes, which will serve to move ahead on the foundations for new developments in processes, technology, catalysts, and polyolefin-based products. At the plant, Repsol YPF aims to develop high-performance PP and PE with higher-than-standard properties, greater rigidity allied with higher resistance to impact, and also ultra-transparent products, enhanced-feel textiles, and high-strength fibers.
Comments: Repsol YPF in recent years has been active in its polyolefin business and currently has a total capacity of over 1,000 KT that includes polypropylene, polyethylene, and EVA copolymers. The company 2005 bought from Basell its 50% share in the 160 KT per year polypropylene plant in Tarragona, Spain which is operated by Transformadora De Propileno A.I.E. that was jointly owned with Basell. Repsol YPF in Feb 2007 selected Basell’s Spherizone technology for a new 300 KT per year polypropylene plant it plans to build in Sines, Portugal which is expected to start production in 2010.
Repsol’s decision to build a plant to produce high-performance polyolefin products is much needed to compete in certain endues applications. Currently, polyolefin consumers require high-performance polyolefins with properties that are geared for specific markets that include automotive, film, fibers, and other high-end applications.
Sibur to construct polyolefins plant jointly with Orenburggazprom
Sibur Ltd and Orenburggazprom Ltd announced their plans to construct polyolefins units – a polypropylene plant with 450 KT/year and a polyethylene plant with – 650 KT/year.
After getting approval from Gazprom, a joint enterprise will be established. Orenburggazprom will provide the construction site and make infrastructure arrangements. Construction works are planned to begin in 2008 and start-up is scheduled for 2011. Gazprom JSC will supply feedstock to the new operations.
Orenburggazprom is the only producer of helium in Europe. As a result of an accident in 2004, the plant’s operation was temporarily stopped. After the reconstruction, the plant will produce 340 KT/year of ethane, 1 million tons of wide fraction of light hydrocarbon, and 6.5 mils. cubic meters of helium.
Comments: Central Europe is seeing a wave of investments in the polyolefins area due to increasing demand. Sibur is one of the leading petrochemical producers in Russia. The company is involved in the manufacture of synthetic rubbers, fertilizers, LDPE, HDPE, PP, PS, ABS, PVC, and PET. Sibur is a subsidiary of Gazprom, which is the world’s largest publicly traded hydrocarbon company in terms of reserves, production, and transportation. This complex will have the advantage of lower-cost feedstock and integration into the raw materials.
Lanxess to expand EPDM capacity
Lanxess announced its plans to raise the capacity for ethylene propylene (diene) (EPDM) synthetic rubber to 140 KT per year, through a debottlenecking and modernization exercise.
According to the company, the investment will be of a smaller scale and the capacity expansion will be completed by the beginning of 2008. Lanxess’s EPDM business was realigned last year with marketing, research, production, and control in Europe assigned to Lanxess Buna GmbH in Marl. In the US, Lanxess pooled its EPDM operations in Lanxess Buna LLC, which became a separate legal entity on March 1 this year,
The Bayer spin-off company is the only EPDM maker to use both slurry and solution processes, enabling it to offer “a uniquely broad range of crystalline, amorphous, branched and linear EPDM products.
Comments: LANXESS Corporation was formed when Bayer Group combined most of its chemical businesses and large segments of its polymer activities. The company currently produces EPDM (ethylene propylene diene terpolymer) in Marl, Germany, and Orange, Texas under the trade name Buna EP® LANXESS currently targets their EPDM grades for use in plastics and film applications, wire and cable, tires, and construction. The demand for EPDM in 2006 was close to 1080 KT and grew at a rate of 4.2%.
In the last few years, there has been an increase in the demand for EPDM and the producers have been running their production plants at a high utilization rate. The shutdown of the DSM plant and the increase in the demand for EPDM especially in China has contributed to the shortage in demand and increase in pricing. Lanxess’ decision to increase its EPDM capacity will ease the supply constraint and better serve its consumers.
Dow Chemical and Chevron Phillips Chemical to form styrenics joint venture in the Americas
he Dow Chemical Company (Dow) and Chevron Phillips Chemical Company LP (Chevron Phillips Chemical) have signed a non-binding Memorandum of Understanding relating to the formation of a joint venture involving assets from their polystyrene and styrene monomer businesses in the Americas. The new venture is subject to customary regulatory review, due diligence, completion of definitive agreements, and corporate and other approvals. Upon the necessary approvals, the parties would expect the transaction to close in the second half of 2007.
The 50-50 joint venture is expected to establish a competitive model for an integrated producer of polystyrene in the Americas. The potential joint venture is expected to realize significant manufacturing, commercial, and feedstock synergies between Dow and Chevron Phillips Chemical.
Subject to due diligence, the parties intend to contribute the following assets to the venture. Dow intends to contribute: a styrene monomer plant (Camacari, Brazil) and six polystyrene plants (Gales Ferry, Connecticut; Ironton, Ohio; Joliet, Illinois; Torrance, California; Cartagena, Colombia; and Guaruja, Brazil). Chevron Phillips Chemical intends to contribute a styrene monomer plant (St. James, Louisiana) and a polystyrene plant (Marietta, Ohio).
Comments: In an attempt to improve competitiveness and operational efficiency, chemical companies are undergoing restructuring. Lyondell Chemical sold its inorganic chemicals business in February 2007 to reduce debt and achieve operational synergies. Huntsman Corp. announced the sale of its base chemicals and polymers business to reduce uncertainty due to volatility in energy prices. Consolidations are a trend in the styrenics (particularly commodity polystyrene) industry to tackle increasing feedstock prices and lower costs via economies of scale.
This joint venture between Dow and Chevron Phillips is part of Dow’s “asset-light” strategy. Dow had previously announced its intentions to form a joint venture for its PP and PS business.
Turkish company Petkim makes third privatization attempt
The Turkish state is making a third attempt to privatize Petrokimya Holding (Petkim) which is the country’s largest petrochemical company and a producer of thermoplastics. The state is offering a 51% share of its 62% stake valued at USD 470 million.
The remaining 38% is openly traded on the Istanbul stock exchange. Turkish energy and textile group Akkok, along with Qatar Petrochemical Company (Qapco), Indian Oil Company (IOC), and Socar, the state oil company of Azerbaijan, has been mentioned as bidders. The deadline for bids is 14 June 2007.
Comments: Demand for petrochemical products in Turkey has been increasing faster than that of developed countries and the global average. While the average GNP growth rate in Turkey within the last ten years was 3.9%, demand for petrochemical products increased by a CAGR of 11.2%, nearly triple that of GNP growth. Petrochemical consumption in Turkey increased by 10.7% on average from 2000-05. Despite this high growth rate, per capita, thermoplastic consumption in Turkey remains below that of most foreign counties.
Petkim is the sole producer of basic petrochemicals and the biggest producer of thermoplastics and intermediaries in Turkey. The other petrochemical companies do not have any significant share in the market. Until 2001, the Company had two production sites in Izmir and Yarimca. However, most of the plants in Yarimca Complex were closed within 1993-1995, since they had completed their economic lives and had lost their competitiveness. Finally, in 2001, Petkim sold its Yarimca Complex along with the remaining plants to Tupras.
Privatisation Administration (PA) launched a tender for the block sale of Petkim in April 2003 and received five bids, all submitted by local investors. The auction took place in June 2003 with only 3 bidders and the highest bid was given by Uzan Group with US$605mn for an 88.86% stake, valuing the entire company at US$681mn. However, Uzan Group was unable to pay the transaction value, and the tender was canceled in July 2003.
PA re-launched a tender for the block sale of Petkim in August 2003, but the tender was canceled in February 2004 due to an insufficient number of bidders.
PA made a secondary public offering of 34.5% of Petkim at a price of TRY5.22/share (US$3.90), corresponding to a US$787mn value for the whole Company. As a result of the public offering, PA’s stake in Petkim declined to 54%, while the Company’s free float increased to 39%.
Thai company PTT considering a joint venture with JG Summit Petrochemical Corp in the Philippines
Thailand’s largest energy company PTT Public Co. Ltd. is considering a joint venture with JG Summit Petrochemical Corp. to develop a petrochemical project in the Philippines.
Talks are on for some form of cooperation with JG Summit, a subsidiary of JG Summit Holdings Inc. of the Gokongwei Group. The Philippines ranks number five countries on PTT’s existing export list of plastic products in Thailand. With domestic demand growing at 19%, the Philippines will change in terms of position from no. 5 to no. 3.
Currently, JG Summit is in the process of reviving its petrochemical business with several investment plans. While PTT’s main business in Thailand is still oil and gas, the company is focusing on the petrochemical industry as a new source of revenue growth. PTT has several subsidiaries engaged in the petroleum industry such as PTT Chemical Public Co. Ltd.., The Aromatics Thailand Public Co. Ltd., Bangkok Polyethylene Public Co. Ltd., PTT Polymer Marketing Co. Ltd., PTT Polyethylene Co. Ltd., and PTT Phenol Co. Ltd.
Comments: JG Summit Petrochemical Corporation (JGSPC) is the first integrated polyethylene (PE) and polypropylene (PP) plant in the Philippines. It is a joint venture between JG Summit Holdings Inc. of the Philippines and Marubeni Corporation of Japan. The manufacturing processes are based on the UNIPOL® PP process.
PTT is one the largest petrochemical companies in Thailand and now it is looking to increase its presence in Asia by expanding its presence in the Philippines.
PQ Corp. increases capacity for silica-chrome catalysts
Valley Forge, PA-based PQ Corporation announced that it has increased capacity for silica-chrome catalysts at its Rahway, NJ, and Kansas City, KS plants.
According to the company, silica-chrome catalysts are used to make high-density polyethylene (HDPE), a market that is growing at about 5%/year, and demand for higher value-added HDPE resins, however, is growing faster than the broader HDPE market.
The company says it is “actively pursuing additional demand” in HDPE, as well as other chemical synthesis opportunities that use silica-based catalysts. PQ says its customized catalysts allow PE producers to manufacture exceptionally tough films, blow-molded products, wire and cable sheathings, and pipes.
Comments: There is no surprise here. In general, the demand for polyolefin catalysts is increasing and producers like PQ are meeting the industry need. To keep up with future growth, PQ has been continuously upgrading and debottlenecking its processes. This is the initial phase of a multiphase expansion aimed at extending PQ capabilities. PQ is pleased with this project as it has resulted not only in a “major expansion of capacity but also a significant improvement of overall quality and customer service – the capability to produce and deliver the catalysts.
Silica-chrome catalysts are used to make high-density polyethylene (HDPE), a market that has been growing at about 5 %/per year. Demand for higher value-added HDPE resins, however, is growing faster than the broader HDPE market. PQ is also “actively pursuing additional demand” in HDPE, as well as other chemical synthesis opportunities that use silica-based catalysts.
Sinopec looks for foreign investment partners in the $1.9 billion ethylene project
China Petroleum and Chemical Corporation (Sinopec) said that it is talking to a number of foreign companies about investment in its $1.9 billion ethylene plant project at the Wuhan Petrochemical complex. Although approval for the project has been given by the state’s top planning body, the National Development and Reform Commission (NDRC), Sinopec has already invested in ethylene plants in Tianjin and Zhenhai and is stretched for project investment capital.
Comments: Sinopec has had success in forming joint ventures with companies like BP and BASF over the last few years. To raise the required investment for the construction of the ethylene complex, the company is looking for foreign partners.
Chemtura to restructure and reduce workforce
Chemtura Corporation announced that it is implementing an industry-based business model to improve performance and accelerate growth. Chemtura will simplify its financial reporting structure from the current six units to four – (1) Polymer Additives, which will include the former Plastic Additives and Flame Retardants business units, (2) Performance Specialties, which will include the former Petroleum Additives, Urethanes, Optical Monomers and Fluorine Specialties, (3) Consumer Products, and (4) Crop Protection.
Each business will have responsibility for its production facilities, operational and financial forecasting, sourcing decisions, process excellence initiatives, and technical development efforts.
Organizational streamlining is expected to result in a reduction of the company’s global workforce by approximately 10 percent (620 positions), resulting in an annualized cost reduction of approximately $50 million beginning in 2008. The company expects to record charges related to the restructuring in the range of $25-$35 million. Most affected personnel are expected to be notified by the end of the second quarter.
Comments: Chemtura, formed by the merger of Great Lakes Chemical and Crompton Corp. is still undergoing the integration of two companies. This restructuring and reduction in workforce is a result of this integration and improving stockholder value. The company is also trying to overcome high raw materials prices, and declining margins that some of its businesses are facing, and improve profitability in its core businesses.
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