My Turn – Commentary on Global Petrochemical Industry Issues – Growth in the Indian Petrochemicals & Plastics A Reality Check- Dr. Balaji B. Singh
India is the waking giant in the Global economy. The excitement in the air, increasing consumer confidence, and purchasing power are transforming India into an economic powerhouse. India is on the right path to becoming one of the progressive nations in the future.
The Indian future is driven by: (1) Over 350 million well-educated English-speaking young population, and (2) a society that places high value (sometimes too much value) on education as means of social/economic differentiation.
Historically, Indian society frowned upon “labor”, and “working with hands” as a less preferred way to make a living – hence the current growth focus in “R&D Centers” “Information Technology” “Call Centers”, “Pharma and biotech” and other knowledge-based sector growth.
There are certain issues one has to pay attention to, in categorically translating the growth prospects in “knowledge-based” sectors to “infrastructure and labor-oriented” sectors like petrochemicals and plastics.
1. There are no world-scale producers in India apart from Reliance Industries – most others are still in the planning stage. India does not have the raw material or investment capital advantage essential for petrochemicals growth at this stage.
2. The downstream processing industry, by Government’s choice remains a “mom and pop – cottage industry” lacking economies of scale.
3. India at present cannot compete with China in low labor content commodities like toys, basic chemicals, basic pharmaceuticals, and any intellectually unprotected products. All of the intellectually unprotected products are fair game for Chinese low-cost production.
Polyolefin producers announce 3rdquarter earnings
Dow Chemical
The Dow Chemical Company reported sales of $12.4 billion for the third quarter of 2006, 10 percent higher than the same period in 2005.
Net income for the quarter was $512 million. This was down from $801 million a year ago, reflecting the impact of a $579 million pretax restructuring charge, announced in August, related to the shutdown of several assets as part of the Company’s ongoing commitment to financial discipline and active portfolio management. Dow reported earnings of $0.53 per share, including a $0.45 per share charge for restructuring activities.
Year over year, prices in the third quarter improved by 11 percent, reflecting healthy increases in all geographic areas and across all segments, with the strongest gains in the Basics businesses. This more than offset another significant increase in feedstock and energy costs, which were almost $750 million higher than the same period in 2005 … the 17th consecutive quarter of year-over-year increases, only one of which has been less than 15 percent. Volume for the third quarter fell 1% compared with 2005, as gains in each of Dow’s Performance segments and in Basic, Chemicals were offset by declines in Basic Plastics Hydrocarbons & Energy.
Equity earnings in the third quarter of $317 million were 32 percent higher than in the same period last year, setting a new quarterly record for the Company.
In the Performance Plastics segment, sales for the third quarter were $3.5 billion, an increase of 9 percent compared with the same period in 2005. Volume rose 2 percent, with very strong demand in Asia Pacific, Latin America, and Europe more than offsetting a modest decline in North America. Price was up 7 percent as the segment reported healthy increases across all geographic regions and businesses. Dow Epoxy set a new quarterly sales record, with significant price increases worldwide and double-digit volume growth, reflecting solid demand across most applications and particular strength in epoxy coatings and composite materials. The Specialty Plastics & Elastomers portfolio also saw strong increases in both price and volume, but EBIT was down, principally the result of weakness in Engineering Plastics, which saw polycarbonate prices fall in response to new industry capacity and a slowdown in optical media demand. By contrast, the Wire and Cable business reported another solid quarter, with continued strength in both the power and telecommunications industries. Dow Building Solutions posted a healthy increase in sales compared with the same quarter in 2005, driven by strong pricing momentum in Europe. Despite a slowdown in the North American housing industry, volume remained flat, with the other geographic regions reporting buoyant demand and particular strength in Europe. Notwithstanding a strong contribution from Univation, third-quarter equity earnings for the Performance Plastics segment fell compared with the same period last year, reflecting the impact of the sale of the Company’s interest in UOP in the fourth quarter of 2005. EBIT for Performance Plastics was $144 million, including a restructuring charge of $242 million.
Sales in the Performance Chemicals segment were $2.0 billion for the third quarter of 2006, 8 percent higher than the $1.9 billion reported in the same period last year. Volume increased 5 percent year over year, with more than 20 percent growth in Asia Pacific and strong gains in North America countering modest declines in Europe and Latin America.
ExxonMobil Chemical
ExxonMobil’s third-quarter earnings excluding special items were a record $10,490 million, up 26% from the third quarter of 2005. Earnings per share excluding special items were up 34% reflecting the impact of the continuing share purchase program. Higher crude oil and natural gas realizations and improved marketing and chemical margins were partly offset by lower refining margins. Net income for the third quarter was up 6% from 2005. Record net income of $29,250 million ($4.86 per share) for the first nine months of 2006, increased by 15% versus 2005.
In the first nine months of 2006, spending on capital and exploration projects was $14.8 billion, an increase of 20% over 2005. In the third quarter of 2006, the results of our continuing long-term investment program yielded an additional 270 thousand oil-equivalent barrels per day of production, a 7% increase over the third quarter of 2005.
Downstream earnings were $2,738 million, up $610 million from the third quarter of 2005. The improved results reflect stronger worldwide marketing margins, which were partly offset by weaker refining margins. Petroleum product sales were 7,302 kbd, 175 kbd lower than last year’s third quarter, primarily due to divestments.
U.S. Downstream earnings were $1,272 million, up $163 million. Non-U.S. Downstream earnings of $1,466 million were $447 million higher than in the third quarter of 2005.
Chemical earnings were $1,351 million, up $879 million from the third quarter of 2005. The increase reflects stronger margins, partially offset by weaker demand for commodities. Prime product sales of 6,752 kt (thousands of metric tons) were down 203 kt from last year’s third quarter.
Nova Chemical
NOVA Chemicals Corporation reported a net loss of $25 million ($0.30 per share loss) for the third quarter of 2006 compared to net income of $108 million ($1.30 per share) for the second quarter of 2006, which included a $60 million benefit from Canadian tax rate reductions. NOVA Chemicals reported a net loss of $105 million ($1.28 per share loss) for the third quarter of 2005.
Olefins/Polyolefins – The Olefins/Polyolefins business unit reported a net income of $123 million in the third quarter of 2006. The second quarter net income was $151 million, including $60 million of Canadian tax rate reductions. Third quarter EBITDA of $255 million is $49 million higher than the second quarter and is the highest quarterly EBITDA in NOVA Chemicals’ eight-year history as a publicly traded company. The quarter-over-quarter improvement in EBITDA was primarily related to margin improvement resulting from polyethylene and ethylene price increases which outpaced higher feedstock costs and lower polyethylene volumes.
Polyethylene – Third quarter polyethylene results improved from the second quarter as higher margins more than offset reduced volumes. NOVA Chemicals’ total polyethylene sales volume for the third quarter was 800 million pounds, down 4% from the previous quarter. Volumes declined in September as customers consumed inventory. International sales represented 10% of total polyethylene sales in the third quarter, essentially the same as the second quarter.
DuPont
Consolidated net income for the third quarter of 2006 was $485 million, or $0.52 per share including a $.03 benefit from initial insurance recoveries for prior-year hurricane damage. Net income for the third quarter of 2005 was a loss of $82 million, or $.09 per share, largely due to a tax charge of $320 million, or $.32 per share, and a $95 million after-tax charge, or $.10 per share for hurricane damage. Excluding significant items, earnings per share were $.49 in the third quarter of 2006 compared to $.33 in the prior year.
The increase in third-quarter 2006 net income principally can be attributed to higher sales volume and local selling prices, and lower fixed costs. These benefits were partially offset by the impact of higher ingredient costs.
Consolidated net sales for the third quarter were $6.3 billion versus $5.9 billion last year, up 7 percent, with double-digit increases in Asia Pacific and Europe.
Local selling prices were higher in every region, increasing worldwide sales by 3 percent. Sales volume increased by 3 percent, reflecting higher sales of titanium dioxide, engineering and packaging polymers, industrial chemicals, and electronic materials. The company estimates that about 1 percentage point of worldwide volume growth can be attributed to recovery from prior year business interruptions due to hurricanes Katrina and Rita.
Coatings & Color Technologies – PTOI was $276 million including a $43 million initial insurance recovery, versus prior year PTOI of $26 million which included a $113 million hurricane charge. Excluding these items, earnings improvement reflects increases in titanium dioxide sales and margin improvement in all coatings product lines. Third quarter sales were $1.6 billion, up 8 percent, reflecting 5 percent higher volume and 3 percent higher USD selling prices. Higher titanium dioxide and refinishes volume more than offset lower OEM coatings volume.
Performance Materials – PTOI was $172 million versus $68 million in 2005 as higher prices and volume, and lower fixed costs in the engineering polymers, elastomers, and packaging product lines more than offset higher raw material costs. Third quarter sales of $1.7 billion increased 13 percent, reflecting 6 percent higher volume and 7 percent higher USD selling prices. Sales increased in all regions.
Safety & Protection – PTOI was $292 million, including $7 million from an initial insurance recovery, versus $256 million in the prior year, which included a $31 million gain on an asset sale and a $22 million hurricane charge. Excluding these items, earnings increased by 15 percent due to higher sales and disciplined fixed cost control. Third quarter sales of $1.4 billion were up 11 percent, reflecting 8 percent higher USD prices and 3 percent higher volume.
Dow plans a joint venture liquids cracker in Thailand with Siam Cement Public Company
Dow Chemical announced its plans to develop a joint venture liquids cracker in Thailand with The Siam Cement Public Company Limited (SCC). This project in a key emerging geography will provide propylene and other building blocks.
A number of downstream facilities will be developed by Dow in conjunction with the new development. Among those under consideration are a hydrogen peroxide to propylene oxide (HPPO) plant – technology developed by the Company in collaboration with BASF – and a range of PO derivatives. PO is used to produce propylene glycol, polyurethanes, and glycol ethers. The new cracker will also allow for the expansion of the existing higher alpha olefins polyethylene joint venture facility, which would produce specialty polyolefin products using Dow’s state-of-the-art process and catalyst technology.
Importantly, the proximity of the new facility to the existing Dow-SCC complex at Map Ta Phut in Rayong province will enable existing assets, capabilities and infrastructure to be leveraged, creating a source of advantaged raw materials for downstream derivatives businesses.
The cracker, which is expected to commence operations in 2010, builds on Dow’s long-standing successful business relationship with SCC and is the latest in a series of joint venture projects between one of the world’s largest chemical companies and Thailand’s leading manufacturing company. The two companies signed their first joint venture agreement in 1987, and have since formed a total of five joint venture companies, producing polyols, synthetic latex, polystyrene, styrene monomer, and polyethylene at the Map Ta Phut site. The SCC-Dow Group of companies has also invested in the ethylene cracker operated by Siam Cement at the site.
Comments: One of the basic strategies adopted by a majority of the petrochemical companies focuses on expanding in the supply and demand centers of the world. The emerging supply center is the Middle East and the demand center is Asia. Dow has been adopting a similar strategy. Dow has been strengthening its position in the Middle East through its Equate JV and the recently announced JV between Dow and Aramco in Saudi Arabia. The company has been strengthening its position in Asia as well. The company recently started its research facility in China and now has plans for a new research facility in India. This cracker in Thailand will be one of its major manufacturing operations in Asia. This cracker will be one of the hosts of other ethylene capacity planned in the 2009-10 timeframe.
The planned cracker, which will be operational in 2010, will have an annual ethylene output capacity of 900,000 metric tons and a yearly propylene capacity of 800,000 tons. This cracker will be second for Dow Chemicals in Thailand. Dow Chemical previously invested in an 800 KT ethylene cracker operated by Siam Cement. SCC intends to separately invest about $400 million in new polyethylene and polypropylene plants.
In addition to their polyethylene joint venture, Dow and SCC have ventures to manufacture styrene, polystyrene, polyols, and synthetic latex.
Qatar Petroleum and ExxonMobil Chemical sign agreement for a petrochemical complex
Qatar Petroleum and ExxonMobil Chemical Qatar Limited, a subsidiary of Exxon Mobil Corporation announced they have signed a Heads of Agreement (HOA) to progress studies for a proposed $3 billion world-scale petrochemical complex in Ras Laffan Industrial City, Qatar.
The proposed petrochemical complex includes a world-scale, 1.3 MTA steam cracker, and associated derivative units, including polyethylene and ethylene glycol, and will employ ExxonMobil’s proprietary steam cracking furnace and polyethylene technologies. It will utilize feedstock from gas development projects in Qatar’s North Field and serve markets with premium products in both Asia and Europe. Currently, the start-up of the proposed facility is estimated in 2012.
Qatar Petroleum (QP), formerly Qatar General Petroleum Corporation, is a state-owned corporation established, by Emiri Decree No 10, in 1974 responsible for all phases of the oil and gas industry in Qatar. The principal activities of Qatar Petroleum and its subsidiaries and joint ventures cover exploration, drilling and production operations, transport, storage, marketing, and sale of crude oil, natural gas liquids, liquefied natural gas, refined products, petrochemicals, and fertilizers, and providing helicopter services.
Qatar Petroleum’s strategy of conducting hydrocarbon exploration and new projects is through Exploration and Production Sharing Agreements (EPSA) and Development and Production Sharing Agreements (DPSA) concluded with major international oil and gas companies.
Comments: The basic differences – the Kingdom of Saudi Arabia and most other GCC nations have both gas and oil; Qatar has only gas.
ExxonMobil has a strong presence in the Middle East via its JV in Saudi Arabia. With this investment, ExxonMobil is diversifying its portfolio in the Middle East. The complex will produce 1.3mtpa of ethylene, 570 KT of low-density polyethylene, and 700 KT of ethylene glycol among other products. The complex would utilize ExxonMobil’s steam cracking furnace and polyethylene technologies as well as feedstock from gas development projects in Qatar’s North Field. The strategy to expand in the cost-advantaged Middle East is expected to continue for the next few years.
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.
Under 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.
Comments: The main impact is in the area of polyolefins technologies and potential participation options for ExxonMobil in the KSA. With the increasing offset-based private investments, it would have been difficult for ExxonMobil to participate in non-Sabic joint ventures. This settlement essentially frees up that restriction.
Bayer MaterialScience to acquire largest Asian TPU producer Ure-Tech Group
Bayer MaterialScience will acquire Taiwan’s Ure-Tech Group, the largest thermoplastic polyurethane (TPU) producer in the Asia Pacific region. With this acquisition, the Germany-based company will become the worldwide largest supplier and solutions provider of TPU resins and films. The deal is subject to regulatory approval by the cartel office and is expected to be closed in the first quarter of 2007. Both parties have agreed not to disclose the purchase price and other related details of the acquisition. In 2005, approximately 180 employees of the Ure-Tech Group generated sales of around USD 55 million. Sales of Bayer MaterialScience’s Business Unit Thermoplastic Polyurethanes amounted to 192 million Euros last year with roughly 450 employees.
Combining its activities with Ure-Tech will substantially strengthen Bayer MaterialScience’s existing TPU market position in Asia Pacific, significantly widening and solidifying its market access, especially in Taiwan, China, and South Asian countries. It will become the market leader in TPU resins supply in the Asia Pacific region.
The acquisition will solidly position Bayer MaterialScience to tap into the significant growth potential for TPU resins in the Asia Pacific region, especially China. It also provides the impetus for Bayer MaterialScience to accelerate its global growth in the TPU resins market. In 2005, the total TPU resins and films market was worth about 1.2 billion Euros.
Together with Ure-Tech’s production facilities, Bayer MaterialScience will have in close proximity to its customers a total of six TPU resins and two film production facilities in North America, Europe, and the Asia Pacific region. Four of these are in Asia Pacific, Taichung, Taiwan; Shenzhen in Southern China; Cuddalore, India; and Osaka, Japan (a joint venture with Dainippon Ink & Chemicals, Inc.). The other four are in New Martinsville, West Virginia, USA; South Deerfield, Massachusetts, USA; and in Dormagen and Bomlitz in Germany. The acquisition of Ure-Tech’s TPU operations will have no negative impact on employees.
Comments: Bayer has been one of the largest manufacturers of thermoplastic polyurethane (TPU). The company markets its TPU to automotive, sports, belts, hoses, and cables and profiles agricultural and film applications. TPUs have excellent physical properties. They exhibit very high tensile strength and elongation. Thermoplastic polyurethanes are noted for their excellent abrasion resistance, and tear propagation resistance, exhibit flexibility over a wide temperature range, and are resistant to oils and greases.
Ure-Tech was founded in May 1992 and now has a manufacturing with plant in Taichung, Taiwan, and another production facility in Shenzhen, China. Ure-Tech’s Utechllan(R) brand of TPU is widely used by the footwear and sports and leisure industries among others in the Asia Pacific region.
The global demand for TPU in 2005 was 275 million pounds growing at 3%. The main application for TPU includes (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. The acquisition of Ure-Tech will allow BASF to better market its product to the fast-growing Asia Pacific region.
PolyOne to acquire vinyl compounder in China
PolyOne Corporation announced that it has signed a definitive agreement to acquire the assets and operations of Ngai Hing PlastChem Company Ltd. This business is the vinyl compounding subsidiary of Ngai Hing Hong Company Limited (The Stock Exchange of Hong Kong: NHH). The current shareholders of Ngai Hing Hong, which is headquartered in Hong Kong, will retain a 5 percent interest in a new company that PolyOne will establish to conduct vinyl compound business in Asia.
Included in the transaction is the transfer of a manufacturing facility in Dongguan, a city in the Guangdong province of South China. This plant will be PolyOne’s fourth manufacturing site in China; the others make products for its Engineered Materials, Color and Additives, and Polymer Coating Systems businesses.
As part of the agreement, PolyOne will also receive 6 million common shares of Ngai Hing Hong Company Limited. The transaction is expected to close during the first half of 2007, pending completion of the Stock Exchange of Hong Kong requirements, approval by governmental authorities, and other customary closing conditions. PolyOne anticipates the acquisition being accretive to earnings in the first full year of operation.
Ngai Hing Hong Company Limited, a plastics resin corporation, was established in 1993 and has been listed on The Stock Exchange of Hong Kong since April 1994. Ngai Hing Hong Company Limited has core businesses in trading and manufacturing pigment blends, color masterbatches, and compounding services.
Comments: As part of core strategies, this is a step in the right direction for PolyOne Corporation to capture growth within Asia by acquiring the assets and operations of Ngai Hing PlastChem Company Ltd, the vinyl compounding subsidiary of Ngai Hing Hong Company Limited. This acquisition will allow PolyOne to bring manufacturing for one of its primary businesses, Vinyl Compounds, to China and to accelerate the business growth there. With the other three existing manufacturing facilities, PolyOne is establishing a strong presence in the hot China market. The combination of NHPC’s people and assets with PolyOne’s current Asian customer base, broad product line, market knowledge, and technology will make for a winning opportunity in China. Specialty Compounders like GLS Corporation and others have already set up their manufacturing operations in China.
PolyOne Corporation, with 2005 annual revenues of approximately $2.5 billion, is the world’s premier provider of specialized polymer materials, services, and solutions.
Headquartered in northeast Ohio, PolyOne has operations in North America, Europe, Asia, and Australia, and joint ventures in North America and South America. Ngai Hing Hong Company Limited, a plastics resin corporation, was established in 1993 and has core businesses in trading and manufacturing pigment blends, color masterbatches, and compounding services.
Teknor Apex to construct TPE compounding facility in Europe
Teknor Apex announced its plans to invest in its thermoplastic elastomer sales and support activities in Europe and start TPE compounding in the region in 2008.
In 2005, Teknor Apex acquired the UK-based engineering plastics compounder Chem Polymer whose UK site in Oldbury is one of the locations being considered for the new TPE production facility, but other options in mainland Europe are also under consideration. An announcement on the final decision is expected next year.
Meanwhile, a small TPE compounding facility will be installed at the Oldbury plant for producing trial quantities for developmental purposes. Teknor Apex TPEs are currently supplied into Europe mainly from the company’s facilities in the US with some special grades coming from its Singapore plant. A further TPE manufacturing plant is being built in Suzhou, China.
Comments: Teknor Apex is one of the leading compounders of TPEs in North America. The company is privately held founded in 1924 and headquartered in Pawtucket, Rhode Island. Teknor Apex has eight divisions and two subsidiaries. The company has 10 locations in the United States, one in Singapore, and two in the United Kingdom.
Teknor Apex’s move to expand in the European market is in response to the increase in demand for soft applications for various markets such as sports and leisure goods consumer goods construction and automotive. The demand for TPE in Europe is currently close to 800 MM Lbs growing at 4%.
This move from Teknor is part of its initiative in its long-range strategy of broadening the technology base and expanding its geographic reach, which is similar to most of the other companies.
Solvay to construct PEEK manufacturing facility in India
The Solvay group announced its plans to expand and upgrade its facilities in Panoli (Gujarat State, India), which will result in the creation of a new, world-class production unit for polyether ether ketone (PEEK) and other materials in the ultra-performance segment of the specialty polymers business. The installation will be built to provide for a natural expansion of production, resulting in a stepwise increase in capacity as warranted by demand. It will come on stream in the first quarter of 2008, with a production capacity of 500 metric tons per year of KetaSpire®, the new line of PEEK products developed by Solvay Advanced Polymers.
The extraordinary mechanical properties, temperature resistance, and processability of KetaSpire® designate this PEEK product as a lightweight alternative for metal parts in critical aerospace or medical applications, among many other possible uses. The R&D center and production plant in Panoli were formerly operated by the Polymers Division of Gharda Chemicals, which Solvay acquired earlier this year. The successful completion of this acquisition laid the groundwork for Solvay’s entry into the PEEK market. In parallel, the extensive research carried out at Solvay Advanced Polymers’ R&D center in Alpharetta, (Georgia, United States) was finalized and resulted in a fully operational, robust, proprietary product and manufacturing technology for the new line of KetaSpire® materials.
Solvay Advanced Polymers has begun the production of KetaSpire® ultra-performance polymers, which will initially be based at its semi-commercial plant in Alpharetta, in a progressive rollout that will culminate in the launch of full commercial production in Panoli.
Comments: This is an expected strategic move for Solvay ETP after it bought Gharda Polymers early this year. Gharda started India’s first specialty thermoplastic manufacturing facility at a Greenfield site at Panoli, 350 km north of Mumbai in the State of Gujarat in 1997. The first product line is Polyether Sulfone (GAFONE™ PES) resins, their compounds, and their monomers. The manufacturing of Polyether Ether Ketone (GATONE™ PEEK) was started in 2001. The technology was from Victrex, the largest PEEK polymer producer in the world. In the following years, Gharda continued to expand its product portfolio and capacity. Solvay bought the polymer division of Gharda Chemicals in early 2006. By the time of the acquisition, Gharda Polymer had around 180 employees and had revenue of 10 million USD. The acquisition is a strategic step for Solvay to reinforce its presence in specialty polymers and expand in Asia. It is very likely that Solvay may further expand its PEEK and polysulfones capacity at the site once this expansion is completed.
PEEK (polyether ether ketones) is a linear semi-crystalline aromatic polymer. It is considered one of the highest-performance thermoplastics. PEEK has an outstanding combination of heat resistance, chemical resistance, wear resistance, and hydrolytic resistance. It also has good mechanical properties, dielectric properties, and radiation resistance. It is used in many extreme conditions in electrical/electronic, automotive, aerospace, medical, food processing, and industrial applications.
Novamont & Coldiretti joint venture start Europe’s first bio-refinery
Italian bioplastics producer Novamont started its EUR 35 million bio-refinery projects at Terni, in Italy. The project, a joint venture between Novamont and Coldiretti, involves 600 local partners that will cultivate the crops needed to supply its new central bio-refinery. By the middle of next year, it will be operating at an effective yielding capacity of 40,000 tpa, according to Novamont, and will produce 60,000tpa in 2008.
The bio-refinery will use vegetable oils and corn starch to produce a range of bio-based chemical derivatives, including materials required to manufacture Novamont’s Origi-Bi biodegradable polyesters and Mater-Bi thermoplastic starches.
Novamont, Europe’s largest bioplastics producer, estimates that in Italy alone more than 800,000 hectares of agricultural land is un-cultivated under EU set-aside rules. It says converting this land to corn and oleaginous plant production could yield around 2 million tons of bioplastics.
Comments: Warner-Lambert, the pharmaceutical company originally developed starch-based biodegradable plastics. The material was called Novon® and was manufactured from a thin matrix of polyethylene filled with starch (Novon contained 80% starch). After the products made from Novon are thrown away, the micro-organisms would eat away the starch, leaving a polyethylene structure that soon degrades.
The company commercialized the production in 1992, at the facility with a production capacity of 100 million pounds per year. In 1995, Churchill Technology Inc (Delray Beach, FL) acquired Warner-Lambert Company’s Novon degradable polymer division along with Ecostar International (Buffalo) and formed Novon International.
Novamont SpA, an Italian firm working to promote its biodegradable plastics in North America, purchased several starch-based thermoplastic patents as part of bankruptcy proceedings against Novon International Inc. of Tonawanda, NY in 1997.
The patents are used in the manufacture of Mater-Bi™ a biodegradable and compostable thermoplastic material that degrades fully in a normal composting cycle. In North America, Mater-Bi is distributed by Biocorp of Redondo Beach, CA, which uses the material to manufacture re-Source-brand biodegradable bags, cutlery, cups, and plates.
NatureWorks announces post-consumer bale specifications for PLA bottles
NatureWorks LLC has announced Oct. 25 the next phase in the responsible integration of corn-based PLA bottles into the U.S. recycling stream, distributing detailed bale specifications for its bottle buyback program this week at the National Recycling Coalition Congress in Atlanta, GA.
The buyback program was initiated to create market-driven demand for post-consumer PLA bottles and encourage their separation in the plastics recycling stream at recycling facilities.
This year’s announcement provides additional details to help the recycling industry sort and collect PLA bottles in returnable bales. The protocol for the bale type and condition that will be accepted is based on accepted and recognized industry specifications and guidelines for reclaiming and sorting plastic materials.
The recycling associations coalition had expressed concern that PLA bottles will disrupt and contaminate the lucrative recycled PET stream. The coalition of five recycling associations and two nonprofit recyclers asked NatureWorks LLC on Oct. 19 to place a moratorium on any further expansion of PLA into bottles.
Comments: Plastic recycling, be it bottles, wire & cable or film has the following steps: (1) collection, (2) sorting, (3) re-processing, and (4) re-distribution. All these steps can make/break the viability of a recycling program.
In the early 80s, recycling was somewhat difficult because the soda bottles were – HDPE bases, PET bodies, PVC labels, and PP caps. The processors develop elaborate technologies to address PET recycling. PET recycling was successful because it could be recycled back to PET or even to glycol. The development of mostly PET-based design obviated these needs.
No one in the U.S. in their right mind would have imagined in the eighties and early 90s that someday people will be paying more for water on a per gallon basis than gasoline – rather than drinking at the water fountains on each floor like they did for the last 60 years.
The water industry surpassed the soda bottles and is here to stay. Environmentally friendly materials like PLA will be very successful in water bottles but will naturally face some difficulties in recycling issues – because they have to be categorized, separated, and processed separately – a step that will add cost and complexity to the already complex recycling. Once the recycling program is in place, PLA bottles will be well-accepted in the market. This whole process will take some time.
One question – PLA was supposed to be bio-degradable, not reprocessed – then why recycle????
Contact us at ADI Chemical Market Resources to learn how we can help.