My Turn – Commentary on Global Polyolefins and Elastomers – Dr. Balaji B. Singh
Conferences serve a vital role in keeping up with the latest developments and interacting with colleagues who have the same goals and objectives in mind.
We don’t understand what it is with the organizations. The marketing/salespeople who have the money are not permitted to attend the conference because there may not be enough “Customers” there. The technical people are not allowed to attend because there are not enough techies there to discuss polymer structures and IR spectra.
What we need is more participation of business-savvy technical innovators. FlexPO conferences are meant for such people. Sad to see, once again, we are ahead of time and waiting for the industry to play catch-up….,
The opinions expressed are those of Dr. Balaji B. Singh and do not necessarily reflect those of CMR Inc, its employees, and/or management.
Borealis selects Basell’s Lupotech T technology for the new 350 KT per year LDPE plant
Borealis AB selected Basell’s Lupotech T technology for a new 350 KT per year LDPE plant to be built at Stenungsund, Sweden. The new plant would replace 350 KT of older capacity as part of a scrap-and-build project. Start-up is expected in 2009.
Borealis currently operates two Lupotech T process plants in Austria, and five Spheripol plants licensed by Basell and its predecessors with a combined annual capacity of over 1.2 million tons.
Lupotech T is a high-pressure tubular reactor process for the production of LDPE homopolymers and EVA-copolymers. With 22 Lupotech T plants operating worldwide and another 8 plants in construction for a total of 5.5 million tons per year of licensed capacity, Lupotech T has placed itself at the forefront of the high-pressure technology industry.
Comments: Borealis is the largest LDPE producer in Western Europe with a total LDPE production capacity of over 1,000 KT. Its manufacturing facilities are located in (1) Schwechat, Austria, (2) Sines, Portugal, (3) Porvoo, Finland, (4) Bamble, Norway, (5) Stenungsung, Sweden, and (6) Antwerp, Belgium. Borealis has the largest LDPE capacity in Schwechat, Austria.
Borealis has both autoclave and tubular capacity allowing it to compete in all LDPE markets and allowing enough flexibility in operations. The new 350 KT tubular line replaces older lines and should allow Borealis to take advantage of economies of scale resulting in a larger single-line capacity.
ExxonMobil to license LDPE technology in Thailand
ExxonMobil Chemical Technology Licensing LLC announced the signing of a licensing agreement with Thailand’s PTT Chemical Public Company Limited, (PTTChem), for the production of low-density polyethylene (LDPE) and ethylene vinyl acetate (EVA) in a 100 KTA autoclave system.
PTTChem, an affiliate of PTT Group and the largest producer of ethylene and propylene monomer in Thailand, also produces HDPE and supports their downstream petrochemical plants with a variety of utilities and logistics facilities.
The flexibility of the ExxonMobil LDPE technology will enable PTTChem to produce an extensive grade slate. The products produced by ExxonMobil technology can be used in a variety of applications, including film packaging, injection-molded articles, insulation materials, and pipe and tubing.
Comments: PTTChem is a subsidiary of PTT Public Company Limited. Besides PTTChem, PTT Public Company Limited also has polyolefins interest via PTT Polyethylene Co., Ltd., Bangkok Polyethylene Plc., and PTT Polymer Marketing Ltd. Established at the end of 2005, PTTChem represents the merger of Thailand’s two major players, the National Petrochemical Public Company Limited (NPC) and Thai Olefins Public Company Limited (TOC).
PTTChem’s combined annual production capability of olefins is slightly in excess of 1,500 KT making it one of the largest olefins producers in Asia and the dominant olefins supplier in Thailand. PTTChem is also vertically integrated into polyolefins via its HDPE assets based on Mitsui CX technology. The expansion into high-pressure LDPE should allow PTTChem to further strengthen its position, and provide an additional outlet for upgrading its ethylene. The licensing of ExxonMobil’s autoclave technology should also enable PTTChem to produce higher value-added products such as clarity LDPE and High EVA resins.
Basell to close its plant in Pernis, Netherlands by mid-2007
Basell announced its plans to close its 260 KT per year LIPP polypropylene technology plant in Pernis, The Netherlands by the middle of 2007. This decision is part of an ongoing review of the company’s manufacturing assets to assess their long-term viability.
According to the company, there is a key focus in Basell to operate world-scale polypropylene plants utilizing one of the company’s proprietary manufacturing technologies, the Spheripol and Spherizone processes. Basell also stated that there will be no disruption for their customers currently supplied by the Pernis plant.
The Pernis plant is mainly operated by Shell employees with some Basell employees at the site.
Comments: Basell has been going through restructuring after its acquisition by Access Industries last year. The company has also revisited some of its JVs. It seems Access Industries is trying to rationalize capacity and close plants that are not cost-competitive. Basell has had operating losses in two of the last five years. As the company reviews its manufacturing assets it will operate fewer world-scale and cost-competitive plants at higher operating rates. This restructuring may continue till the new owners are convinced that Basell’s operations are lean and operating profitably.
DuPont under alleged price-fixing investigation in Canada
Tier 2 plastics processors in Canada have filed a class action lawsuit against DuPont. On December 15, 2005, Canadian molder, Axiom Plastics began legal action against DuPont, claiming the engineering polymer supplier has been fixing the prices of Delrin® and Zytel® resins in conspiracy with Tier 1 automotive suppliers. These resins are used by Tier 2 plastics processors in Canada in the manufacture of plastic parts, many of which are used by Tier 1 automotive suppliers.
In a statement posted to the Ontario courts in December, it alleges that DuPont linked with Tier 1 suppliers so that Tier 2 molders were forced to use DuPont materials. According to the claim, DuPont would fix prices for its resins with its authorized distributors. Tier 1 suppliers would monitor the purchase volumes among Tier 2 suppliers and anyone suspected of buying from outside the authorized routes would be reported to DuPont. For their troubles, the Tier 1 suppliers would receive a kickback from DuPont.
DuPont has rejected completely the claims contained in the action initiated by Axiom Plastics. In a statement, the company said: “Quite simply, the claims are baseless. The picture of DuPont that they present is contrary to the facts and does not reflect how the company and our employees strive to conduct business. We intend to defend ourselves vigorously.”
The court will consider within the next few months whether the action can proceed to the next stage.
Comments: This is the second sticky situation DuPont is involved in the last few years in the area of polyolefins and elastomers. Price fixing is a serious allegation.
Please see the primer on “Competitive Behavior” on our website www.CMRHouTex.Com under Recent Presentations by CMR.
Huntsman ends discussions of the sale
Huntsman Corporation announced the termination of discussions regarding existing proposals to acquire the Company.
After careful review of the proposals received, the Company’s prospects, and other strategic initiatives available, as well as thorough discussions with the parties, the Board of Directors of the Company and its special committee concluded that none of the proposals were in the best interests of the shareholders.
According to the company, its fourth quarter 2005 results were negatively impacted by Hurricanes Rita and Katrina and the unprecedented spikes in energy prices leading up to and during that period. The company said that they did not expect continued hurricane impact of any significance in 2006.
Comments: Even with the termination of discussions regarding the sale of the Huntsman Companies, the stock is still trading above $20.00/share. Not as high as during the sale rumor period but higher than the range of $18.50/share in the period previous to the takeover discussions. This stock performance is evidence that the market believes that many problems for Huntsman’s earnings are over. The company has scheduled a conference call on Friday, February 24th to discuss results for the 4th quarter of 2005. Rita and Katrina had an impact on this quarter. According to one analyst, the company is in line for “clean” earnings quarters in early 2006 with market conditions still strong which means earnings prospects are bright – expect profitability and improved EBITDA in future quarters.
Basell acquires Akzo Nobel’s polymerization catalysts & components business
Basell announced its plans to acquire Akzo Nobel’s Polymerization Catalysts & Components business. The business includes catalyst manufacturing and other assets located in Edison, New Jersey in the United States. The deal is expected to be completed in the second quarter of 2006, following regulatory notifications and approvals.
Akzo Nobel’s Edison site has been producing Avant catalysts for Basell licensees for nearly 20 years. Basell’s primary interest in acquiring Akzo’s assets is to better ensure the long-term security of supply for catalyst customers worldwide.
In addition to Basell’s Avant catalysts, the Edison site includes assets for the toll production of other polyolefin custom catalyst systems and the preparation of catalyst components and other specialty chemicals.
Akzo Nobel’s divestment of its Polymerization Catalyst & Components Business is part of a restructuring program the company initiated last year to focus its portfolio in five strategic areas: pulp & paper chemicals, polymer chemicals, surfactants, functional chemicals, and base chemicals.
Comments: This is one of a series of steps that Akzo Nobel has been taking to refocus its business strategy around its coating and chemicals unit. In April 2004, Akzo Nobel agreed to sell its petroleum refining catalyst business to Albemarle for $750 million. In February 2005, Akzo Nobel further released a master divestment program for divesting 14 businesses with combined 2004 sales of EUR 700 million. Some of the closed or ongoing deals include:
– Akzo Nobel divested a 65% majority interest in its Malaysian oleochemicals joint ventures to JV partner Lam Soon Group for EUR 24 million.
– The company signed an agreement to divest its Electro Magnetic Compatibility (EMC) business to ETL Semko K.K., part of UK company Intertek Group plc.
– The company will close the MACC plant at Delfzijl in the Netherlands in April, and sell two other MACC. – Akzo Nobel will close the McCook plant operated by its Surfactants business near Chicago in the United States by 2007. Some production will be transferred to some of the company’s other U.S. chemicals facilities.
– Akzo Nobel announced its intention to create two independent companies-Coatings/Chemicals and Pharmaceuticals. The intended first step is a minority IPO of the Pharmaceuticals business.
Akzo Nobel aims to finalize agreements for the remaining businesses during the first half of 2006.
The transaction to sell Akzo Nobel’s Polymerization Catalysts & Components Business to Basell is expected to be relatively smooth, due to the two parties’ long-term relationship and the synergy between the two businesses.
Dow sells its superabsorbents business to Degussa
Dow announced that it has signed an agreement to sell its Superabsorbent Products (SAP) business to Degussa AG. Close of the transaction is dependent upon regulatory approvals.
According to Dow, it was becoming increasingly difficult to justify the product and process research investments needed to satisfy large, global Superabsorbent Products customers.
Ownership of Dow’s Superabsorbent Products plant in Rheinmünster, Germany will transfer to Degussa as part of this transaction. Dow will retain ownership of the Midland, Michigan plant where Dow will contract manufacture Superabsorbent Products for Degussa, ending in the First Quarter of 2007. Dow will continue to evaluate its alternatives concerning the Midland facility.
The transaction also includes a long-term agreement to supply a substantial volume of glacial acrylic acid (GAA) to Degussa, with opportunities for future growth in volume over time.
Comments: Dow has two manufacturing locations for superabsorbent polymers (SAP) namely in Midland, MI, and Rheinmuenster, Germany. The company’s SAP business was integrated into the manufacture of raw material, acrylic acid. The company had recently acquired the acrylic monomers business from Celanese. Dow manufactures acrylates that also require acrylic acid as the raw material and hence are not included in the deal.
This acquisition will strengthen Degussa’s global position in the superabsorbents business. The company has SAP manufacturing plants in Germany (Krefeld and Marl) and the USA (Garyville, Greensboro, and Deer Park, TX). In 2004 its Business Unit Superabsorber generated sales of 432 million euros with a workforce of around 500. In North America, Degussa, along with its subsidiary Stockhausen will be the leading producer of SAPs.
Georgia Gulf to increase PVC capacity
Georgia Gulf announced its plans to invest about $100 million at Plaquemine, LA to modernize and expand its polyvinyl chloride (PVC) plant at the site by 450 million pounds per year. The scheduled completion of the project is early 2008.
The project will increase Georgia Gulf’s PVC capacity to 1.7 billion lbs/year. The company has applied for an air permit from the Louisiana Department of Environmental Quality and hopes to receive approval by the second quarter.
The project will not increase vinyl chloride monomer (VCM) and chloralkali capacity at the site. The company says it has enough existing VCM capacity to feed the expansion.
Comments: Georgia Gulf Corporation is a producer of aromatics and color vinyl-related products. The company headquarters are located in Atlanta, Georgia. The company is involved in the manufacture of several products including PVC, VCM, cumene, phenol, and others.
The company is the third-largest North American producer of vinyl chloride monomer and vinyl suspension resins; the second-largest North American producer of vinyl compounds. The company has a total PVC resins capacity of 2,765 million pounds. The manufacturing facilities of PVC resins are located at (1) Plaquemine, LA, (2) Aberdeen MS, and (3) Addis, LA. It has a VCM capacity of 3,100 million pounds per annum. The company manufactures suspension and emulsion PVC resins.
The company markets its PVC products under the trade name Purgovin®. Georgia Gulf is downward integrated into the manufacture of PVC compounds. The total manufacturing capacity for PVC compounds is about 960 million pounds. It has four manufacturing locations including (1) Gallman, MS (500 million pounds), (2) Madison, MS (230 million pounds), (3) Aberdeen, MS (135 million pounds), and (4) Prairie, MS (95 million pounds).
For more information on PVC markets, please refer to our multi-client study. Please contact 281-557-3320 for more details.
Hercules sells its majority stake in FiberVisions to a private equity firm
Hercules Incorporated announced an agreement to sell a 51% interest in FiberVisions, L.L.C., a wholly-owned subsidiary of the Company, to Snow, Phipps & Guggenheim, L. P., an affiliate of SPG Partners, LLC (SPG), a New York-based private equity firm.
Under the terms of the agreement, Hercules will receive an initial cash distribution of $109 million at closing for its 51% interest. SPG has the option to purchase an additional 14% interest in FiberVisions for $7.4 million. Also under the agreement, Hercules will receive additional payments should FiberVisions meet certain performance measures.
Closing is expected to occur by the end of March 2006 pending debt financing and other required approvals. In connection with its commitment to sell a majority interest in FiberVisions, Hercules recognized a non-cash goodwill impairment charge of $41.6 million and recorded a deferred tax charge of $7.6 million to provide for US taxes on previously undistributed earnings of a FiberVisions foreign subsidiary. Cash taxes associated with the transaction are expected to be minimal.
The cash proceeds from the transaction are expected to be used to pay down debt. The transaction is expected to be earnings accretive in 2006.
Comments: FiberVisions, a wholly-owned subsidiary of Hercules is one of the global leaders in the manufacture of polypropylene staple fiber used in non-wovens application. FiberVisions, formed in June 1997 was a joint venture between Hercules’ Fibers Division and Jacob Holm & Sons’ Danaklon Group. In 1998, Hercules acquired a 49% share of Jacob Holm & Sons Group.
It is the world’s largest producer of thermal-bond polypropylene staple fiber. The company participates in several markets including disposable diapers and other hygienic products; automotive, decorative, and industrial applications. The company has manufacturing facilities in Athens and Covington, GA; Suzhou, China; and Varde, Denmark. The major application of PP staple, thermally bonded fabrics is disposable hygiene products. Other end-use applications include polyolefin fibers, filaments, and yarns for the textile and industrial markets.
SPG is a New York-based private equity firm that acquires businesses in attractive industries where it can leverage the expertise of its exclusive Operating Partners.
The North American market for polyolefin-based staple nonwoven fabrics in 2005 was 550 million pounds, where 16% of the total staple polypropylene was consumed in the hygiene market.
This market has a growth rate of 4.3% with main end-use markets including (1) baby diapers, (2) feminine care (3) adult continence, (4) baby wipes, and others.
Asahi Kasei & Mitsubishi Gas to Expand PPE Capacity in Singapore
Asahi Kasei Chemicals Corporation (AKCC) and Mitsubishi Gas Chemical Co., Inc. (MGC) will expand the plant capacity of Polyxylenol Singapore Pte. Ltd. (PXS) for the production of PPE powder, the key material for modified PPE resin production. PXS is a joint venture of MGC and Asahi Kasei Plastics Singapore Pte. Ltd. (APS), AKCC’s wholly-owned subsidiary for the production of modified PPE resin and related materials in Singapore.
The expansion of the PXS plant will raise its PPE powder production capacity by 9,000 tons/year to a total of 39,000 tons/year and will be accompanied by a related expansion in APS’s production capacity. The commercial start-up of the expanded capacity is scheduled for July 2006. The expansion will be carried out at the Jurong Island facility in Singapore.
According to the companies, the demand for modified PPE resin, with its excellent thermal, mechanical, and flame-retardant properties, is rising worldwide and particularly in Asia for applications in electrical and electronic goods, business equipment, automotive components, and other growing fields.
Comments: Polyphenylene ether (PPE) or also known as polyphenylene oxide (PPO, PPO is a trademark of GE Plastics), is an engineering thermoplastic with excellent thermal stability, mechanical properties, dielectric properties, and flame retardancy. It was first invented by GE Plastics in the late 1950s and commercialized in the 1960s. Jack Welch, the former CEO of General Electric, was the first product manager for the Noryl® line at GE. After GE’s original patents expired, Asahi Kasei entered the market in the 1980s. At present, GE Plastics is still the number 1 supplier of PPE in the world.
The demand for PPE is driven by the Asia Pacific, particularly China. This new expansion is a sign of the growing demand in the area. So far, China only has PPE compounding capacity but has no local PPE resin production.
PPE is always used in the form of blends/alloys with other plastics, such as high-impact polystyrene (HIPS), nylon, or polypropylene. Traditionally, PPE blends are mainly used in rigid applications in automotive, electrical/electronic, and business equipment. Recently, GE Plastics has introduced novel PPE blends for flexible applications, for example, as a flexible coating material for electrical wire and cable. It was also found that PPE can be used as additives to improve the heat resistance, melt strength, and flame retardancy of other polymers including polyolefins at very low loadings. For more information regarding the new development of PPE, please contact CMR staff.
ADM and Metabolix to build the first commercial plant for PHA natural plastics
Archer Daniels Midland Company and Metabolix announced that ADM will build the first commercial plant to produce polyhydroxy alkanoate-based natural plastics.
The plant will have an initial annual capacity of 50,000 tons per year, be located at a major ADM North American site, and serve the joint venture being established by the companies.
The plant will produce PHA natural plastics that have a wide variety of applications in products currently made from petrochemical plastics, including coated paper, film, and molded goods. The PHA natural plastics are produced using a fully biological fermentation process that converts agricultural raw materials, such as corn sugar, into a versatile range of plastics that have excellent durability in use, but are compostable in both hot and cold compost, and are biodegraded even in the marine environment.
In 2004, ADM and Metabolix announced a strategic alliance to commercialize the Metabolix proprietary PHA technology, which is protected by over 130 issued and pending US patents.
Comments: Polyhydroxyalkanoates (PHAs) are a group of biologically produced polyesters by fermentation using corn or beet sugar (glucose) as the feedstock. The polymers are grown inside microbes such as Ralstonia eutropha which contain about 70% PHA. The cells are then broken open to harvest the product and the PHA is separated from the biomass.
In 1925, polyhydroxybutyrate (PHB) became the first known PHA, and in the 1970s several other PHAs including (1) polyhydroxyoctanoate, (2) copolymers of 3-hydroxybutyrate and 3-hydroxy valerate (PHBV) were identified. By the 1990s, almost 100 microbial PHAs were known. The major advantages of aromatic-aliphatic copolyesters include (1) flexibility, (2) toughness, (3) good contact clarity, and (4) good adhesion properties. Its disadvantages are (1) relatively low stiffness, (2) poor melt strength, and (3) a tendency to stick in injection molds.
Responses from Saudi Minister & US chemical companies against US State of Union Address
In the State of the Union address, US President Bush mentioned his plans to replace 75 percent of the oil that steams from the Middle East with alternative “homegrown” fuels like ethanol. He also committed to raising alternative energy funding by 22 percent for clean coal, wind and solar power, ethanol, and fuel cells.
In response to this Middle-Eastern ministers commented that mandating costly alternatives to oil could impoverish people and lower living standards.
The chemical industry was disappointed with the State of the Union address, saying that it did not emphasize the natural gas crisis. According to American Chemistry Council, the high price of natural gas is driving the global chemical industry out of the US. As the US has gone from having the lowest cost of natural gas in the industrialized world to the highest, the US chemical industry has lost more than $50 billion in business to overseas operations and more than 100,000 good-paying jobs have disappeared.
Comments: “Impoverish people and lower living standards???” sometimes even the king has to worry about where the next paycheck will come from…..
Chemicals are a significant part of a general global US manufacturing share decline. The energy driver has shifted chemical production overseas and this is a major factor in a drop in the US share of manufacturing from 13% in the 1990s to 10% recently according to figures released by the National Association of Manufacturers. Among several factors, the major inflation of energy, specifically natural gas, has forced US chemical production offshore. The support of increased innovation in alternate energy sources is a start to dealing with the problem but we are in a long-term struggle. NPRA officials commented that regardless of new alternate fuels programs, the nation can not ignore that petroleum and natural gas will likely continue to be the basis fuels for our economy for today and the foreseeable long term. We must face the fact that something must be done in the short term to deal with a crisis in natural gas.
EPC contracts awarded to Foster Wheeler, Jacobs Engineering & Stone & Webster
Foster Wheeler Ltd. announced that its subsidiaries Foster Wheeler Energy Limited and Foster Wheeler Arabia, Ltd. have been awarded an engineering, procurement, and construction (EPC) contract by Rabigh Refining and Petrochemical Company (PETRORabigh) for the utilities and offsites of PETRORabigh’s world-scale, integrated refining and petrochemical complex at the Red Sea town of Rabigh, Saudi Arabia. PETRORabigh is a joint venture between Saudi Aramco and Sumitomo Chemical Co. Limited.
Saudi Aramco’s existing refinery and infrastructure at Rabigh will serve as the base platform for this major development. A total of 2.4 million tons of petrochemical solids and liquids, along with large volumes of gasoline and other refined products, will be produced. A new high-olefins fluid catalytic cracker complex is being integrated with a world-scale, ethane-based cracker, producing approximately 1.5 million tons per year of ethylene, 900,000 tons per year of propylene, and 60,000 barrels per day of gasoline as well as other refined products. Downstream units will convert all of the olefin production into petrochemical products, such as linear low-density polyethylene, high-density polyethylene, polypropylene, propylene oxide, and mono-ethylene glycol. Construction will commence during the first quarter of 2006 and the project is planned for completion in 2008.
Saudi Basic Industries Corp. (Sabic) has signed a letter of intent with US Shaw Stone & Webster for the engineering, procurement, and construction of a high-density polyethylene (HDPE) plant at the large Yansab petrochemical complex under development in Yanbu Industrial City, Saudi Arabia. Production of more than 4 million tons/year of various petrochemicals at Yansab will include 400,000 tons/year of HDPE.
Reliance enters biopharmaceuticals
Reliance Life Sciences, a Reliance Industries subsidiary, announced its plans to construct a protein manufacturing facility at the Dhirubhai Ambani Life Sciences Center at Rabale, near Mumbai. The company will invest more than Rs9 billion ($200 million) to build the complex, which will be Reliance’s first such facility. It will use mammalian cell and microbial fermentation technology to produce proteins. Completion is due at year-end, and FDA validation is expected to follow eight months later.
The protein plant will have an initial capacity for 10,000 liters of mammalian cell culture and 1,000 liters of microbial cell culture.
Reliance Life Sciences was incorporated in 2001. It specializes in developing business opportunities in the fields of medical biotechnology, plant biotechnology, industrial biotechnology, contract research, clinical research, and contract manufacturing. The medical biotechnology initiative covers cell biology, therapeutic proteins, molecular diagnostics, and genetics. The business’s plant biotech activities include an initiative in medicinal and aromatic plants covering agronomy, plant tissue culture, metabolic engineering, extraction of medicinal plant extracts, and aromatic oils. Its industrial biotech initiative covers biopolymers, biofuels, biochemicals, and bioprocess development opportunities.
Comments: The news can also the rephrased as “Reliancing of Indian Biopharmaceuticals has begun” Reliance in its way did wonders with first the textiles, petrochemicals, telecommunications, energy, and now the biopharmaceuticals.
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