My Turn – Commentary on Global Petrochemical Industry Issues – Happy Holidays
We want to thank all of our clients and wish them a happy holiday season and a prosperous New Year. Like most of our clients, we had more opportunities in China, Saudi Arabia, and ASEAN Countries than the traditional U.S based innovative firms.
We refuse to believe innovation has slowed down in the US! We wonder what’s happening.
This year, with the exception of INFUSE blending resins by Dow, there were no significant innovations in polyolefins and elastomers. We understand, most organizations are focused on China, China, and China. We wish everyone the best of luck in their endeavors and hope to see more innovations in the year 2007.
Arkema to increase capacity at its Balan EVA production plant
Following a successful startup in mid-2005, Arkema announces a 15% capacity increase for its High Content Ethylene–Vinyl Acetate (HC EVA) copolymer production plant at its Balan industrial facility. This capacity increase will come on stream at the end of 2006 and will allow Arkema to pursue its development strategy in growth markets while consolidating its commercial rankings in particular in Europe.
Marketed under the trade name Evatane®, Arkema’s HC EVAs are used in countless industrial applications, in particular for the manufacture of hot melt glues, cables, multilayer packaging film, solar panels, petroleum additives, bitumen, and ink.
Comments: Evatane® resins are used in a variety of applications such as hot melt adhesives, co-extruded films, cables, and others. The HC-EVA (high content EVA resins) resins contain VA in the range of 17% to 41%. EVA resins with VA content of 28% and higher are mainly used for hot melt adhesives applications. Some of the food packaging and film applications use EVA resins with a VA content of 12% to 18%. Wire & cable applications use EVA resins with a VA content of 18%. EVA resins are differentiated commodities that provide higher margins and higher growth compared to LDPE resins. The other major suppliers of EVA resins include DuPont, Equistar, and ExxonMobil.
ONGC subsidiary to invest in petrochemicals complex
ONGC Petro Additions Ltd (OPaL), a joint venture between the Oil and Natural Gas Corporation (ONGC) and Gujarat State Petroleum Corporation (GSPC), will invest Rs 13,600 crore in its proposed petrochemicals complex at Dahej. The mega grassroots petrochemicals project will mark ONGC’s foray into the growing and profitable petrochemicals sector.
OPaL will implement the petrochemicals complex through the integration of feedstock from ONGC’s own C2-C3 Plant (currently under execution) and naphtha from its operational units at Hazira and Uran, thereby ensuring the sustainability of feedstock and leveraging cost advantages.
OPaL, with the additional advantage of being the anchor industry in the Dahej special economic zone, will facilitate catalyzing significant economic development in western India and the country as a whole through the setting up of plastic processing industries within the SEZ or petroleum, chemicals, and petrochemicals investment region, offering significant growth and export potential, said a company statement.
The company, with ONGC management control, was incorporated on November 15, 2006, for implementation of a global scale petrochemicals complex comprising 1.1 million tons per annum of ethylene capacity, dual feed cracker along with associated units, and polymer plants to manufacture high-density polyethylene, linear low-density polyethylene, polypropylene, and Styrene Butadiene Rubber. The petrochemicals complex would be commissioned towards the end of 2010.
Comments: This is an expected trend as the petrochemical industry in India is projected to reach exhibit robust growth. Domestic capacity will be required to satisfy the growing demand in India as the excess capacity from other regions will be exported to satisfy the demand in China. With so many announcements for new plants, it will be important to see how many of these plans are realized.
If all the plans are realized then there is a chance of overcapacity in the country.
Mitsui & Excel to produce rubber compounds in China
Excel Polymers and Mitsui and Co announced their plans to form a joint venture for the production of rubber compounds in southern China.
The JV will be owned 61% by Excel and 39% by Mitsui. It will operate under the Excel name EXLP Global (Foshan) Co and will be located in the Shunde Science and Technology Industrial Park in Guangdong province, about 40 km south of Guangzhou and 100 km northwest of Hong Kong.
The Greenfield facility is expected to begin production by the beginning of 2008. It will utilize proprietary Spectrum/Prism production and process control technologies developed by Excel Polymers. There will be two lines operating initially, with an annual capacity of more than 50 million pounds (25,000 tons) of a wide variety of natural and synthetic rubber compounds.
The compounds will be sold in China and the Asian region for applications in automotive, printing, industrial, and consumer markets.
Comments: Just like other custom compounders – GLS, & Poly One, Excel is serious about its commitment in China, expanding its business aggressively.
Not too long ago, Excel announced the expansion of its rubber compounding capabilities, tripling its production of rubber compounds mainly to meet the emerging markets in China.
With this new venture, Excel plans to support its customers globally by providing a world-class rubber compounding facility in the rapidly growing Asian region. Excel already has a wholly-owned operation in Shanghai which was recently expanded. By joining together with Mitsui, this new JV can bring a wealth of experience in serving the regional supply chain with a broad basket of polymers and chemicals. Also, this new facility is getting extraordinary local support from Shunde Science and Technology Industrial Park in Guangdong province, about 40 km south of Guangzhou and 100 km northwest of Hong Kong.
Excel Polymers provides custom-mixed elastomers, compounded high-performance elastomers, roll compounds, and additives to the elastomer supply chain. End-use markets include transportation, consumer goods, industrial, construction, oil, gas, and roller markets. Excel is headquartered in Solon, Ohio operates 8 plants in the US, Mexico, the UK, and China. Mitsui & Co, one of the largest general trading companies in Japan undertakes the manufacture, sales, and marketing of a wide range of chemicals and polymers.
Dow Chemical to construct a new plant to produce Styrofoam® brand insulation
Dow Building Solutions, a business group of Dow Chemical Company, announced it had broken ground on a new facility in LaPorte, Texas. The new facility will manufacture STYROFOAM™ brand insulation.
This new plant will provide Dow with the production capacity required to transition its entire North American STYROFOAM manufacturing asset base to next-generation insulating formulations, consistent with proposed federal requirements anticipated to take effect in 2010.
Comments: Dow invented Styrofoam® more than 50 years ago when in the 1900s, the company invented a process for extruding polystyrene to achieve closed-cell foam that resists moisture. Today Styrofoam is most commonly used as insulation in the construction industry and in the consumer market they are seen in the disposable industry in items such as cups, soup bowls, and salad boxes, foam egg cartons; produce & meat trays disposable utensils. Other applications include packing peanuts foam inserts that cushion new appliances and electronics, television and computer cabinets, and others.
The growth in Styrofoam will depend on the increase of new residential and commercial construction which has seen some growth in recent years especially in regions such as Texas at 2.2%, Nevada at 4.4%, Utah at 2.9%, and Florida at 3.1%. The new plant will allow Dow to meet the increase in demand.
Occidental to sell 10 million shares of Lyondell Chemical through IPO
Occidental Petroleum Corp. is selling 10 million of its shares of Lyondell Chemical Co. in a public offering, reducing its ownership from a 12.2 percent stake to an 8.2 percent stake in Lyondell.
Following the offering, Occidental, a Los Angeles-based exploration and production company and its subsidiaries, will own roughly 20.3 million shares, or 18.8 million shares if the underwriters exercise an over-allotment option to buy up to an additional 1.5 million of Lyondell shares owned by Occidental. Occidental also holds a warrant to buy an additional 5 million shares of Lyondell at $25 per share. That stake could increase to approximately 10 percent, assuming that Occidental exercises the warrant it has on Lyondell shares.
Including 1.5 million shares that the deal’s underwriters have the option to purchase, Lyondell could sell as many as 11.5 million shares for estimated maximum proceeds of $299.8 million. The shares are being sold on behalf of Occidental.
Comments: After the sale of 10 million shares, Occidental Petroleum will own about 8.2% of the outstanding shares of Lyondell. The company’s primary focus is oil and natural gas exploration and production and this sale should not have any impact on its core business.
Lyondell Chemical was formed in 1985, from select chemical and refining assets of Atlantic Richfield Company (ARCO). In 1989, Lyondell was spun off from ARCO, becoming a public company listed on the New York Stock Exchange.
During 1990, Lyondell acquired Rexene’s low-density polyethylene (LDPE) and polypropylene (PP) businesses. In 1993, Lyondell collaborated with CITGO Petroleum Corporation to form the joint venture, Lyondell-CITGO Refining (LCR). Lyondell also acquired the high-density polyethylene business of Occidental Chemical Corporation in 1995.
Occidental reduced its stake in 2005 by selling 11 million shares from 15.9% to 11.6% and now it’s reduced to 8%. The funds generated from last year’s sale were used for the acquisition of the Permian Basin with an output of 16,000 barrels per day.
The cash generated by this transaction could be used for more profitable core business.
Packaging company, Sonoco to acquire container producer Clear Pack
Sonoco, the global packaging company, announced that it has signed an agreement to acquire Clear Pack Company, a privately held vertically integrated manufacturer of thermoformed and extruded plastic materials and containers, based in Franklin Park, IL. The transaction is expected to close in the fourth quarter of 2006, pending regulatory approval, and is expected to be slightly accretive to earnings in 2007.
Clear Pack was founded in 1968 and has annual sales of approximately $45 million. The company operates a 240,000-square-foot manufacturing and warehouse facility in Franklin Park that produces commercial roll stock and thermoformed products. Clear Pack has 14 high-speed, roll-fed thermoformers capable of running high-impact polystyrene (HIPS), PP, HDPE, and oriented polystyrene (OPS). The company has five extrusion lines capable of extruding a variety of high-impact polystyrene and polypropylene blends. The company also has co-extrusion capabilities as well as in-line lamination for the application of multilayer laminates to meet chemical resistance and barrier requirements.
Clear Pack produces plastic containers for several consumer product and food service companies, including packaging for single-serve condiments, fresh produce, and other food service needs.
Founded in 1899, Sonoco is a $3.5 billion global manufacturer of industrial and consumer packaging products and a provider of packaging services, with more than 300 operations in 35 countries, serving customers in 85 nations.
Comments: Sunoco, headquartered in Hartsville, South Carolina, has more than 300 locations worldwide with 2005 sales of approximately $3.5 billion. Sunoco’s business is in the manufacture of industrial and consumer packaging products and services. The company 2000 has 60 percent of its sales growth coming from acquisitions and joint ventures, including 18 transactions completed since 2004 and six transactions in 2006. Clear Pack was established in 1968 and headquartered in Franklin Park, Illinois, Clear Pack is a vertically integrated manufacturer of extruded plastic materials and thermoformed plastic containers. The acquisition of Clear Pack will increase Sunoco’s business for packaging services. The packaging industry has been showing healthy growth of 5.1%. This is expected to continue for the next 5 years.
A. Schulman reduces compounding capacity & eliminates jobs
A. Schulman Inc. announced its plans to eliminate 60 jobs and removed 17 million pounds of compounding capacity in North America.
The job cuts represent about 15 percent of Schulman’s North American manufacturing workforce and the capacity reduction represents about a 6% decrease.
Schulman now reduced about one-third of its North American manufacturing capacity and workforce since 2000. The firm also has reduced its dependence on the automotive market to about 37 percent of its North American sales, down from 55 percent in 2000. Packaging now accounts for 24 percent, up from 12 percent.
Comments: This is somewhat expected to happen for all custom compounders for the reasons: (1) The major resin producers like ExxonMobil Chemical, Dow, and others begin to build compounding facilities to address their internal needs. 2) Relocation of compounding industries to other parts of the world, specifically China for a lower cost. Schulman’s North American sales declined by 2 percent, resulting in a pretax loss of $9 million in 2006. Schulman management is under pressure from new investment partner, Barington Capital Group LP, a New York investment firm that has pushed for change – cutting the cost and business diversification. Schulman has been actively searching for new business opportunities other than automotives to utilize its facilities to the full extent but could not. Schulman now has cut about one-third of its North American manufacturing capacity and workforce since 2000. Hopefully, moving away from commodities and into more engineering-type products is a step in the right direction for Schulman to turn around its compounding business in North America.
Degussa gets approval for construction of MMA plant in China
Degussa AG plans to construct an integrated production network in Shanghai to manufacture methyl methacrylate (MMA) and methacrylate specialties. The Degussa Supervisory Board has given the go-ahead for this facility to be constructed. The investment volume for the entire plant including all intermediates is around 250 million euros, making it Degussa’s second-largest single investment. The world-scale facility is scheduled to come on stream in 2009 upon completion of the construction phase, which should last approximately two years.
Once all the approvals have been obtained from the Chinese authorities, Degussa will construct an MMA facility with an annual capacity of 100,000 tons, which will practically all be processed into highly-refined methacrylate specialties and polymers. These are components used in a wide variety of products, such as LCD screens, scratch-proof paints, top-quality adhesives, modern interior trims for cars, and numerous plastics applications.
Comments: The demand for MMA is expected to grow at a very heathyl rate in Asia Pacific mainly China. Degussa’s decision to construct an MMA plant in China is no exception to the ongoing trend in the acrylics business. Recently, Lucite commissioned an MMA plant in China, and PMMA producer Chi-Mei is also constructing a plant in China.
MMA/PMMA is a complex plastic material that has far-reaching impacts on the raw materials – Acetone, HCN, Phenol, Bisphenol A, Isobutylene, ethylene, etc., in addition to being the growth plastic. CMR Inc. recently evaluated all of the technologies and markets to present the most probable technologies by region.
GE Plastics opens 2 technical centers in Asia
GE Plastics announced its plans to open two new application technology centers in Japan and South Korea. The new centers give GE Plastics seven such facilities worldwide.
Making its debut on Nov. 3, the Korea Technology Center (KTC), located in Sungnam City in Kyunggi Province, involved an investment of US$1 million. Initially, KTC employs 20-25, according to a company representative. KTC’s 2,000-square-meter building houses equipment aimed at developing applications in the telecommunications, backlit frames, and automotive industries. KTC also offers a clean room for liquid crystal display film work.
GE also opened a 3,700-square-meter Japan Technology Center (JTC) opened in Moka City. A US$8.5 million (1 billion yen) investment, JTC will serve as an application technology center for the automotive industry, and for the electronics industry in optical media such as Blu-ray discs and heat-resistant films. A company spokeswoman said it employs about 70. Hoping to capitalize on increasing automotive safety requirements, JTC includes an automobile impact-testing facility with pedestrian impact testing (head and legs) and bumper and fender impact-testing equipment.
Both facilities have plastics processing equipment and laboratories, as well as a virtual lab linking GE Plastics experts worldwide. GE Plastics’ other application technology centers are located in Pittsfield, Mass.; Bergen Op Zoom, the Netherlands; Russelheim, Germany; Bangalore, India, and Shanghai.
Comments: GE Plastics was the trendsetter in moving the R&D and technical centers to the Asian region. Mr. Banholzer currently with Dow was the architect for developing the GE operations to China and India. He is currently continuing the same trend in China and India in his current position at Dow. While GE is moving to Japan and South Korea.
DuPont Tate & Lyle Bio Products begin Bio-PDO™ production
DuPont Tate & Lyle Bio Products, LLC, an equally owned joint venture of DuPont and Tate & Lyle, announced the first commercial shipments of Bio-PDO™ from its $100 million facility in Loudon, TN. The joint venture uses a proprietary fermentation process developed jointly by DuPont and Tate & Lyle to produce Bio-PDO™ using corn instead of petroleum-based feedstocks. The production of Bio-PDO™consumes 40 percent less energy and reduces greenhouse gas emissions by 20 percent versus petroleum-based propanediol. Production of 100 million pounds of Bio-PDO™ will save the energy equivalent of 10 million gallons of gasoline per year, or enough to fuel 22,000 cars annually.
The first shipments of Bio-PDO™ were sent to DuPont for the manufacture of DuPont™ Sorona® polymer and to a customer evaluating a new industrial product formulated with Bio-PDO™. Bio-PDO™ can be used in a variety of applications, either by itself or as an ingredient in the production of materials that have traditionally been based on petroleum feedstock.
The joint venture also announced the launch of two new brand names for Bio-PDO™. Zemea™propanediol will be the name of products introduced in the personal care and liquid detergent categories where the products’ purity level and low irritation are benefits. For industrial applications such as de-icing fluids, anti-freeze, and heat transfer fluids where their low toxicity and biodegradability are beneficial, Bio-PDO™ will be branded Susterra™ propanediol.
Comments: PDO is used as a feedstock to produce Sorona® polymer. In 2004, DuPont entered into an agreement with Tate & Lyle to produce 1,3-propanediol using renewable resources such as corn. After this, the polymer will be produced from renewable resources. The two major producers of this polymer are Shell and DuPont. Before the commercialization of corn-based PDO DuPont has been using PDO derived from petrochemical feedstock. This will help the company realize Sorona’s “green” image, with the logo “Clothing from a Cornfield.” As the prices of oil keep increasing the development of these polymers derived from natural resources will intensify. Over the last few months we have seen new developments in biopolymers and the trend will continue.
DuPont recently agreed with BP to develop biofuels. The company is increasing its efforts to develop industrial materials that are derived, in whole or in part, from farm-grown sources, like corn, sugar cane, and sugar beets. DuPont is also looking at non-food crops and waste products as future alternative sources.
Wal-Mart aims to phase out some chemicals
Wal-Mart Stores Inc. announced its plans to be more environmentally friendly by isolating three commercial chemicals it wants phased out among its suppliers.
Companies will have the option to not take part in the program, but Wal-Mart says it will reward firms that find alternatives to the compounds it wants out of circulation.
Wal-Mart named two chemicals used in insecticides, propoxur and permethrin, and a cleaning agent, nonyl phenol ethoxylate. Wal-Mart has developed a list of preferred chemical characteristics that it wants its suppliers to use. The company says it will add 17 chemicals to its list in the next two years.
Wal-Mart says it will use a three-phase process to involve its suppliers. The first will give a vendor time to notify Wal-Mart about its uses of the chemicals in question. The second will be for the supplier to inform Walmart about its plans for the chemicals and the third would be for “recognition and reward” for participating suppliers, according to the company.
Comments: Nonylphenol ethoxylates have been under environmental pressure for a long time now. They are used as surfactants in consumer products such as cleaners, and other industrial products. Propoxur is a methyl carbamate-based insecticide that Wal-Mart will move away from.
WalMart, among the other consumer-driven companies, is most active in influencing the material trends for the future – a 900-pound Gorilla can sit where it wants and accomplish what no other consumer-based organization could accomplish – It’s a good thing.
Contact us at ADI Chemical Market Resources to learn how we can help.