My Turn – Commentary on Global Petrochemical Industry Issues – Dr. Balaji B. Singh
ExxonMobil’s announcement of Qatar Petrochemicals sets the right direction for the future Global petrochemical industry – a movement towards feedstock-rich regions of the world. Despite these developments, the U.S. Gulf Coast will remain the world’s largest single site. If it is of any concession, the U.S gulf Coast is becoming crowded, with increasing environmental restrictions, and increasing feedstock prices it may be difficult to build Greenfield and/or brownfield units in the U.S. Gulf Coast.
Eastman sells its polyethylene business to Westlake Chemical
Eastman Chemical Company announced it has entered into a definitive agreement with Westlake Chemical Corporation for the sale of its polyethylene business. The sale will include Eastman’s polyethylene and Epolene polymer businesses, related assets, and the company’s ethylene pipeline. The sale is for a purchase price of $255 million in cash at closing.
Closing is expected in the fourth quarter of 2006, subject to regulatory approval and customary conditions. The businesses and assets to be divested in this transaction generated approximately $680 million in revenue during 2005.
Included in the sale are three polyethylene manufacturing plants, an Epolene facility—all located at Eastman’s Texas Operations in Longview—and an ethylene pipeline between Mont Belvieu, Texas, and the Texas Operations site. About 400 Eastman employees are associated with the polyethylene and Epolene businesses. Results from the polyethylene product lines are reported in the company’s performance polymers segment, while results from the Epolene product lines are reported in the company’s coatings, adhesives, specialty polymers, and inks (CASPI) segment.
About 255 employees will remain with Eastman and continue producing polyethylene for Westlake. The two companies have an agreement that will allow continued operation of the Longview cracking facilities with a staged phase-out of older units beginning in 2007, allowing both companies to optimize the value of their respective olefin businesses under various market conditions.
Comments: Please refer to our upcoming article on this news. For more information or questions, call us at 281-557-3320.
ExxonMobil Chemical to construct compounding facility in Baton Rouge
ExxonMobil Chemical announced that the company will build a new facility at its Baton Rouge, Louisiana, complex to produce specialty compounded products. The investment is part of the company’s global compounding strategy and commitment to providing engineered thermoplastic materials to the automotive and consumer products industries.
The Baton Rouge plant will have the capability to manufacture a broad spectrum of commercial compounded products including ExxonMobil Chemical’s Performance Polyolefin grades (compounded polypropylene), Santoprene(TM) thermoplastic elastomers, and other specialty elastomers.
The facility will include a new products center and organization that will fully leverage ExxonMobil’s broad range of polymer and compounding technology and works with the company’s global technology organization to develop, innovate and rapidly deploy new products to the marketplace.
Construction is expected to begin in October 2006. The new facility is expected to start-up in the second quarter of 2007.
Comments: This is a somewhat expected development by ExxonMobil Chemical (EMC) and good news for end users, specifically for the automotive industry to get the polyolefin compounds without any intermediate “compounders”. Construction at the Baton Rouge complex is scheduled to begin in October. The startup of the 37,000-ton-per-year first phase is targeted for the second quarter of 2007.
The facility will feature a new Specialty Compounding organization that will create polypropylene- and elastomer-based products for the automotive, appliance, packaging, and durable goods industries. The new Specialty Compounding organization collaborates with ExxonMobil Chemical’s global polypropylene, specialty elastomers, and technology organizations to develop innovative compounded products for the marketplace.
Mytex Polymers was formed in 1987 in the U.S. as a joint venture between Mitsubishi Chemical and ExxonMobil Chemical primarily to supply the TPO compounds for Toyota based on Mitsubishi formulation. EMC and Mitsubishi Chemical Corporation (MCC) agreed to terminate certain joint venture agreements for Mytex Polymers in the last few years. Exxon Chemicals historically stayed away from its compounding to focus on selling more PP and EPDM to the compounders. Except for TREFSIN in the early 80s in Europe, Exxon did not have its own PP/EPDM compounds till the formation of Mytex.
AES was formed as a jv of Monsanto’s Santoprene division and Exxon in 1989, again the main focus of Exxon was to sell more captive PP and EPDM. The Monsanto Santoprene TPV concept, originally developed to encompass a variety of polymers/rubbers failed to achieve its goals and limited its activities to PP, EPDM, and in some cases nitrile rubber. ExxonMobil acquired Monsanto’s portion of the AES, to keep AES going. AES brought extensive: (1) rubber knowledge, (2) compounding knowledge, (3) TPV product development knowledge, and (4) an established customer base. ExxonMobil integrated its polyolefin and Olefin elastomers businesses in the late 90s in product development, continuing its quest in PP/PE polymer development parallel to Dow Chemical Company.
This new polyolefin compounding or rather the performance polyolefin product center is the goal of most polyolefin players and ExxonMobil reached it first – just watch for other major ones to follow.
Ferro announces termination of negotiations to sell specialty plastics business
Ferro Corporation announced that it has discontinued discussions with Wind Point Partners regarding the sale of its Specialty Plastics Business.
Ferro is headquartered in Cleveland, Ohio, and has over 6,800 employees globally.
Comments: Ferro was formed in 1986 as a combination of several PP/EPDM compounders. Ferro currently is in a leading position as a technology-based compounder with an emphasis on new product developments.
A casual observation of the polyolefins and elastomers industry indicates both the resin producers and compounders are taking a similar market/application development, albeit using two different directions. The resin companies are using reactor/catalyst combinations to reach the end users, while the Ferros of the world are taking the approach via compounding and processing.
If recent ExxonMobil’s foray into compounding is any indicator of the future – we are again going through the same movement of Compounder-Resin producer wars of the late 80s, that resulted in Dexter, Republic getting absorbed – Something to think about… Is Ferro next in line?
Dow introduces new grade of NORDEL™ MG
Dow Chemical introduced NORDEL™ MG NDR 46100.00 Hydrocarbon Rubber, filling the market need for an EPDM product that delivers superior performance for applications in which excellent low-temperature properties are required.
Produced using Dow’s proprietary INSITE™metallocene catalyst technology and a gas-phase production process, NORDEL MG NDR 46100.00 is a low-ethylene, medium-ethylidene-norbornene (ENB), high-viscosity grade: 55 wt.% ethylene, 4.5 wt.% ENB, 100 MU (ML 1+4 at 125°C, calculated). These characteristics make the new product ideal for peroxide-cured building profiles, hoses, bicycle tire treads, automotive weatherstrips, and other rubber products that require superior performance in low temperatures.
According to the company, the gas-phase reaction process and granular form of all NORDEL™ MG products allow for the creation of high-Mooney-viscosity (greater than 90 ML1+4 at 125°C) polymers that offer significant improvements in bulk handling and processing productivity and economics.
Comments: The EPDM market currently is close to 800 million pounds and growing at 3% annually. EPDM is used extensively because they exhibit a number of desirable properties such as (1) excellent ozone and weathering resistance, due to their saturated polymeric backbone, a low compression set, and good low-temperature flexibility, (2) excellent resistance to heat and oxidation, (3) good chemical resistance, (4) good electrical insulating materials, and (5) accept large amounts of low-cost solid filler and oil compared to other rubbers yet they retain a high level of compounded physical properties. EP(D)M is commonly used in industrial roofing, an application that requires sufficient weather, heat, ozone, and water resistance to function over a lifetime that can exceed 20-30 years. The other advantage EPDM has is its high-temperature resistance allowing it to be used in automotive under the hood application.
EPDM produced via metallocene catalyst technology have added benefits such as high catalyst efficiency resulting in low catalyst residues and low cost of production, consistency of product composition, low odor, low gel, and the granular gas phase EPDM provides exceptionally fast mixing with good filler dispersion.
Dow Chemical’s new product will increase its EPDM product portfolio allowing it to expand its market.
Qatar Petrochemical to construct two polyethylene plants in Pakistan
Qatar Petrochemical Co. plans to build two polyethylene (PE) plants in Pakistan. The plants will produce 450 KT per year of linear low-density polyethylene (PE) and 250 KT per year of low-density (PE).
Qapco is a major exporter to Pakistan, particularly of PE, which it sells to about 50 end users in the country.
Comments: Qatar Petrochemical Company (QAPCO) is a joint venture between Qatar Petroleum (80% share) and Atofina (Total) of France (20% share). The company was established by Emiri Decree in 1974 to utilize associated ethane gas from petroleum production in line with the industrialization plan of the State of Qatar. QAPCO commenced full commercial operations in 1981. The company manufactures ethylene, low-density polyethylene (LDPE), and other petrochemical products. LDPE is marketed under the brand name Lotrene. QAPCO currently has 360 KT LDPE and 525 KT of ethylene capacity. This will be the first LLDPE facility for QAPCO and the first polyethylene capacity for QAPCO in Pakistan. QAPCO inaugurated its commercial liaison offices in Pakistan in September 2006.
Pakistan currently does not have any capacity for LDPE or LLDPE and is dependent on imports. This will be the first polyethylene capacity in Pakistan. QAPCO has not yet announced its plans regarding the source of ethylene/raw materials for these two facilities.
Indian Oil Corporation to Invest in refinery expansion
Indian Oil Corporation (IOC) plans to invest Rs. 50 billion to expand the capacity of its 12 million-ton Panipat refinery to 15 million tons per year. The expansion, which has already been approved by the IOC board, will be completed in three years. The 2 million tons per year naphtha cracker plant is also expected to be complete by the same time.
The total value of the petrochemicals project in Panipat is estimated at Rs 119 billion, significantly higher than the previous estimate of Rs 63 billion. The naphtha plant will have the capacity to manufacture 8 lakh tons per annum (tpa) of ethylene, 5.75 lakh tpa of propylene, 3.5 lakh tpa of linear low-density polyethylene, 3 lakh tpa of high-density polyethylene, 2 x 3,00,000 ton of polypropylene and 2.5 lakh ton of mono ethylene glycol.
The company is also expanding the capacity of its Haldia refinery to 7.5 mt from the existing 6 mt for Rs 16 billion with a technology upgrade to ensure a higher crude cut at the Haldia refinery. The firm is also considering putting up a hydrocracker facility at the Haldia complex. This would be IOC`s fourth hydrocracker plant.
Comments: Indian Oil Corporation (IOC) had already announced plans of monetizing its naphtha by integration into a petrochemical complex. This announcement refers to the plans of expanding capacities beyond what was announced. Capacity expansions and new plant announcements have become common in India as significant growth in the petrochemical industry is projected.
Capacity increases are being announced by both established players such as Reliance & Haldia and new players such as ONGC and IOC.
The Indian petrochemical industry is projected to become a true oligopoly in the next five years. The Indian petrochemical industry so far has been dominated by domestic players. There has been very little foreign direct investment in petrochemical complexes in India. However, the state governments and central governments in India have been offering incentives to multinational corporations to invest in the petrochemical sector in India. These incentives include tax benefits, 100% ownership, and the formation of SEZs, export-oriented units, and mega-industrial parks. It is anticipated that in the next few years, the petrochemical industry in India will also see investments from multinational corporations.
Mitsubishi Chemical building China compounding plant
Mitsubishi Chemical Corp. announced its plans to build an engineering plastics compounding plant in southern China’s Guangdong province, to meet demand in the growing automobile market there.
The Tokyo-based firm is planning to construct a 13,500 metric ton capacity plant that would start operation in February 2008. Its Mitsubishi Engineering Plastics Corp. unit would invest 800 million yen (53 million Yuan).
Southern China is attracting significant investment from Japanese car makers, with Honda Motor Co. last month opening its second manufacturing plant in Guangdong.
Mitsubishi had announced that it was considering building a polycarbonate/bisphenol A plant in Beijing, in a joint venture with China Petroleum and Chemical Corp., or Sinopec.
That US$190 million (1.5 billion Yuan) venture, which would be completed in 2008, would have the capacity for 60,000 metric tons of PC and 100 KT per year of BPA. At the time it also said it was expanding PC production in Japan with a 60,000 metric ton plant in Kurosaki.
Comments: Mitsubishi Engineering Plastics Corp. is a 50:50 joint venture between Mitsubishi Chemical and Mitsubishi Gas. Its product portfolio includes polycarbonate(PC), polyphenylene ether (PPE), polyamide (PA), polybutylene terephthalate (PBT) Polyoxymethylene (POM, or polyacetal), polyphenylene sulfide (PPS), liquid crystal polymer (LCP). Mitsubishi’s new compounding facility and PC JV in China is a classical example that the downstream supplier shifting manufacturing locations following the OEMs, in this case, Honda.
All the major PC producers are starting plants in China. In June 2006, GE Plastics just announced starting a joint venture with PetroChina to manufacture PC. Teijin and Bayer have started/are starting local production and both have announced an expansion plan.
GE to expand high-performance polycarbonate capacity
GE Plastics announced its plans to increase capacity for a line of “extreme” Lexan* polycarbonate (PC) resins boosting overall capacity by approximately 300%. The company will invest 62 million euros to retrofit its Lexan Resin facility in Bergen op Zoom for the manufacture of Lexan EXL, SLX, DMX, and XHT copolymer resins, giving European customers the advantage of shorter delivery times. Broader availability of these unique materials will help more customers differentiate their applications and achieve new levels of performance, processability, and aesthetics.
According to the company, GE’s xtreme resins – each with a set of specialized properties – offer customers new ways in which to differentiate their products and even create applications they couldn’t produce previously.
The Lexan extreme resin line includes the following grades:
Lexan EXL resins: These grades have high ductility and impact performance in extremely low temperatures (down to -60C). They also provide improved resistance to heat and humidity. Lexan EXL resins provide improved flow, processing characteristics, and release with opportunities for shorter cycle times, compared to conventional PC resins.
Lexan SLX resins: Offering outstanding long-term weather ability and UV resistance, these grades are being used in lighting, outdoor vehicles, and marine components. Compared to clear or opaque UV-stabilized PC, Lexan SLX resins demonstrate enhanced retention of clarity, color, gloss, and toughness. They give customers an alternative to the use of clear UV coatings and paints that can add time and cost.
Lexan XHT resins: These materials expand heat resistance capabilities beyond that of standard polycarbonate resins from 165C to 220C Tg, while maintaining many of the desirable properties of polycarbonate. Typically used in automotive, industrial lighting, and personal protective equipment segments, Lexan XHT resins also offer improved flow and processability compared to other options with equivalent heat resistance, allowing customers to fill larger tools or thinner wall sections.
Lexan DMX resins: Improved scratch resistance with H pencil hardness, combined with good processing characteristics, offer the potential for improved yields and elimination of painting/coating vs. conventional PC. Lexan DMX resins also provide up to five times better oxygen and moisture barrier performance plus excellent resistance to ammonia, compared to standard PC.
The project will be completed in several phases, with the first production expected in the summer of 2007.
Comments: This is another example of the industrial trend that new product development is transferred from region to region. Most global companies have multiple R&D or technology centers in different regions.
For example, GE has research centers in Schenectady, NY; Bergen op Zoom (BOZ) the Netherlands; Shanghai, China; and Bangalore, India. So far, it is more common that new products are developed in the US or Europe, and then transferred to other regions. As time goes by, we expect the research centers in China and India will improve their capability and develop more new products to meet local specifications.
SABIC and ExxonMobil in final settlement of its disputes
Saudi Basic Industries Corporation (SABIC) has reached a full and final settlement of its disputes with ExxonMobil arising from technology and a patent that can be used in the production of polyethylene.
Pursuant to the settlement, SABIC and its worldwide affiliates will have the right to use the technology royalties-free and will equally share in any third-party royalties from the past or future licensing of the technology by ExxonMobil.
All disputes and litigations between SABIC and its partner ExxonMobil have thus been fully and finally settled.
Sumitomo to increase PES capacity in Japan
Sumitomo Chemical announced its plans to expand the capacity for polyether sulfone (PES) at Ehime, Japan. The expansion will add 500 metric tons per year of capacity, increasing the site’s total to 3,000 metric tons per year. Sumitomo completed a 500-m.t./year expansion of PES capacity at Ehime last July.
Rapid growth in demand, particularly from the aviation industry, has prompted the latest expansion, the company says. Completion is expected in June 2007, by which time Sumitomo’s capacity for special grade PES specifically targeting the aircraft industry will have increased to 1,000 m.t./year. That should be sufficient to meet demand through 2010, Sumitomo says.
Comments: Sumitomo Chemical is currently the only manufacturer worldwide to have received approval from major aircraft manufacturers for this special grade of PES for use in aircraft applications, and therefore decided to undertake this latest capacity expansion to meet the increasing demand from its customers. The expanded facilities are scheduled for completion in June 2007, after which production capacity for special grade PES suitable for aircraft applications will be 1,000 tons per year, which is anticipated to meet demand up to 2010. Sumitomo Chemical also plans to develop the market for applications outside the aircraft industry going forward to grow its super engineering plastics business with its PES operations as one of the cornerstones.
PES is a super engineering plastic that exhibits a number of outstanding properties such as lightweight, heat resistance, strength, and transparency and is used for electronics components and membranes, as well as carbon fiber composites and a wide range of other materials that require these special properties. Among these uses, carbon fiber composites for aircraft applications are finding use in a broader range of components equivalent to as much as 3-4 times the amount conventionally used per aircraft, as the industry seeks to reduce fuel consumption by light-weighting aircraft. As this trend gains momentum, demand for PES used in carbon fiber composites is seeing rapid growth.
The origins of Sumitomo Chemical can be traced back to 1913, when the company used sulfur dioxide emissions from the Bessie Copper Mine in the Shikoku region of Japan to produce calcium superphosphate fertilizers, thereby reducing pollution from the mine.
Ciba Specialty to sell its masterbatch business to Clariant
Ciba Specialty Chemicals has announced today that it has signed an agreement to sell its Masterbatch business to Clariant. The sales price was not disclosed. The divestment is expected to be concluded in the fourth quarter of 2006 after the necessary regulatory approvals.
All approximately 300 employees will transfer to Clariant, the Basel‑based, specialty chemicals company. The Ciba Masterbatch business, with sales of CHF 80 million, operates in Malaysia, Saudi Arabia, and France.
A masterbatch is a customized blend of additives or pigments dispersed in customer-specific resin and concentration intended for direct molding or extrusion.
Comments: This decision from Ciba is part of its overall strategy to sell its smaller business units. Ciba plans to focus mainly on plastics additives, paint effects, and water and paper treatment chemicals businesses. Recently, Ciba sold its textile effects business to Huntsman. Clariant is one of the leading producers of masterbatches globally and hence this acquisition from Ciba is a good fit for the company.
Rohm and Haas to restructure to accelerate profitable growth
Rohm and Haas Company announced a set of strategic initiatives designed to accelerate growth and enhance profitability. These initiatives include (1) Reorganization: A strategic realigning of the company into three business groups; (2) Emerging Markets: Increased allocation of resources to emerging markets, such as Asia and Central and Eastern Europe; (3) Innovation: A sharper focus on aligning innovation efforts with the specific, often local, needs of customers around the world; (4) Talent; and (5) Portfolio: Stronger, more proactive portfolio management, along with a relentless focus on operational excellence and continual improvement.
The existing company structure will be consolidated into three more logical and efficient major business groups – Electronic Materials, Specialty Materials, and Performance Materials.
Underlying this structure will be a stronger regional organization – strategically charged with ensuring that the company can move more quickly to respond to local market needs for technology, new products, and services.
The organizational structure outlined below will be effective January 1, 2007:
Electronic Materials ($1.3 billion in 2005 sales)• Circuit Board Technologies • Semiconductor Technologies • Packaging and Finishing Technologies
Specialty Materials ($5.7 billion in 2005 sales) • Primary Materials ($2 billion in 2005 sales) – includes the company’s existing Monomers business and the polyacrylic acid segment of Consumer and Industrial Specialties • Paint and Coatings Materials ($1.9 billion in 2005 sales) – includes the architectural and industrial coatings segments of today’s Architectural and Functional Coatings business, as well as other coatings-related polymer lines from other parts of the Rohm and Haas portfolio. • Packaging and Building Materials ($1.8 billion in 2005 sales) – includes the existing Plastics Additives, Adhesives, and Sealants businesses, as well as the graphic arts, paper, leather, textile, and non-woven segments of today’s Architectural and Functional Coatings business.
The objectives for the Specialty Materials Business Group are to leverage the company’s flagship technical and operational strengths in acrylic technology, optimize the supply chain, and invest in innovation. Pierre R. Brondeau will be the Business Group Executive for Specialty Materials.
Performance Materials ($1.1 billion in 2005 sales)
This business group represents the company’s expertise in enabling technologies that meet growing societal needs for water treatment, health care, and energy. This includes the ion exchange and sodium borohydride technologies of Process Chemicals, the biocides and personal care-related segments of Consumer and industrial Specialties, the AgroFresh™business, and other profitable, niche technologies. Alan E. Barton will be the Business Group Executive for Performance Materials.
In addition to these major business groups, the Salt ($925 million in 2005 sales) and Powder Coatings ($322 million in 2005 sales) businesses will be managed as stand-alone businesses.
Comments: This reorganization plan by Rohm & Haas is a normal move done by companies from time to time. Emerging markets are where all the major companies are focusing to maintain their growth and margins and Rohm & Haas is no exception.
Texas Petrochemicals to double production of polyisobutylene unit
Texas Petrochemicals Inc., a Houston-based petrochemical company specializing in C4 hydrocarbons, announced plans to more than double its current production of polyisobutylene (PIB) by mid-2008 with the addition of a new manufacturing facility at its Houston plant site.
The scheduled expansion is expected to supplement the company’s existing production capacity of more than 65,000 metric tons per year, which has been debottlenecked during the past several years. A significant portion of the planned capacity is committed to long-term contracted customers, but unreserved capacity is available for new customers seeking to expand their polyisobutylene supply.
TPI is the only merchant producer of HR-PIB in North America, where its application in lubes and fuel additives continues to generate strong demand. TPI services all PIB markets, which include both the industrial and additive markets.
TPI first entered the PIB market in May 2000 with the startup of its patented process to produce a wide range of PIB products. Since that time, the company has more than doubled its capacity through multiple expansion projects.
TPI’s Houston plant manufactures a full range of high-quality polyisobutylene products ranging in molecular weights from 350 to 3500, which serves all the major markets including caulks, sealants, adhesives, cling film, lubricant base stocks, and personal care. The company is a direct marketer of PIB but also uses national break-bulk distributors. TPI also has an extensive line of highly reactive polyisobutylene products ranging in molecular weights from 350 to 2300, which are specially designed for use as dispersants for lube and fuel additive applications.
Comments: In 2000, Texas Petrochemical became the main merchant supplier of polyisobutylene. The company started a 23 KT per year facility in 2000 when the only PIB available was from imports. The company mainly produces products based on C4 chemistry. Recently the company purchased Huntsman’s butadiene business in the US and now this investment is in PIBs.
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