Chemical Market Resources Inc. moves to a new home
Chemical Market Resources Inc., moved to a new home on March 25, 2005. The premium market research firm and the publisher of this news analysis moved its offices from Nasa Parkway to Blossom Street. The new address and phone number for Chemical Market Resources Inc. are given below:
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Innovene is the new name for BP’s petrochemicals company
BP announced that the name of its new olefins & derivatives subsidiary will be Innovene. Innovene will be formed as a separate entity within the BP Group in April, with more than $9 billion in assets and $15 billion in third-party sales globally. The new company will be headquartered in Chicago and have more than 8,500 employees at 26 principal sites around the world.
Innovene will be created as a wholly-owned subsidiary of BP on April 1, 2005. BP expects to sell the company later in 2005, possibly by way of an IPO, subject to necessary approvals and market conditions.
Innovene’s major manufacturing sites will include Grangemouth in Scotland, Lavéra in France, Köln in Germany, Lima, Chocolate Bayou, and Green Lake in the US. SECCO, the joint venture with Sinopec and SPC in Shanghai and the largest petrochemical complex in China to date, is due to become fully operational in the next few months.
Innovene manufacturers petrochemicals, including olefins (ethylene and propylene) and their derivatives such as polyethylene, polypropylene, acrylonitrile, linear alpha olefins, polyalphaolefins, and solvents, as well as gasoline, diesel and other refined products made in the Grangemouth and Lavéra refineries. These chemicals are used to make a wide variety of plastic goods, including food and drink containers and wrappings, pipework, automotive parts, and moldings of all kinds.
Comments: Innovene is the group of BP Chemicals, essentially combining most of the olefin derivatives and other selected divisions that are destined for either sale or an IPO in the future.
BP Chemicals followed the same strategy as Shell Chemicals from London – essentially focusing on the oil industry and reducing the involvement in petrochemicals and derivatives. Shell Chemicals made the decision to divest through the sale of assets. BP is determining the alternatives including sale and/or IPO.
The silver lining in all of the transactions is that Innovene will be moving to the Houston Clear Lake area and adding back nearly 300 jobs for the 500 jobs lost by Amoco upon becoming BP in the Clear Lake area.
Innovene’s polymer division will finally find a home in Houston, nearer to the other polyolefin companies and production sites – after moving from Houston to Naperville to Smyrna GA, back to Napaerville, and now to Houston.
Kraton Polymers announces global plant expansions
KRATON Polymers is increasing production capacity for KRATON G polymers at its Belpre, Ohio, and Berre, France, plants The Company said these expansions were in response to rising demand from customers in the adhesives, compounding, packaging, and polymer modification sectors.
The Company is implementing capacity increases for KRATON G polymers by nearly 10 KT. These debottleneck are a series of low-cost capital investments, which will primarily allow capacity growth to support global growth in some of the important market segments.
KRATON polymers are a range of versatile, high-performance materials. They offer a variety of processing and application advantages, such as increased processing stability, oxidation, and weather resistance, high-temperature performance, and ‘soft-touch’ over-molding. KRATON Polymers, the market leader in styrene-ethylene-butylene-styrene (SEBS) products, and styrene-ethylene-propylene-styrene (SEPS) products commercialized the first grades of these products in 1972. Consumer goods, automotive parts, rigid and flexible packaging materials, roofing materials, sealants, and polymer modification are among the diverse applications that can benefit from KRATON G polymers.
Comments: Kraton is the largest manufacturer of hydrogenated Styrenic block copolymer in North America with over 70% of the market share. Shell Chemical Company (Kraton Polymers) was the first company to introduce SBCs to the industry in the early 1960s. Shell as an alternative to rubbers invented SB copolymers during the Second World War. Shell commercialized the SB copolymers in 1965.
The North American demand for hydrogenated SBC in 2004 was close to 150 million pounds and grew at 5%. The most common applications for hydrogenated SB copolymers include (1) polymer modification, (2) viscosity index modification (3) fibers (4) film (5) automotive, (6) adhesives, (7) wire and cable, and (8) consumer products. The fastest-growing market for hydrogenated SBC is in automotive applications.
Styrene-Ethylene-Butadiene-Styrene (SEBS & SEPS) copolymers are saturated polymers manufactured by hydrogenating SBS and SIS polymers. These copolymers have higher tensile strength and service temperatures than SBS and SIS. Hydrogenated SBC most commonly compete with polypropylene/EPDM blends (TPO) on a manufacturing cost economics basis where there is an inter-material competition.
The increase in capacity will allow Kraton polymers to meet the increase in demand for hydrogenated SB copolymers as more consumers opt for softer touch-and-feel applications.
Bidders line up to acquire Qenos
Seven companies or consortia have been short-listed to bid for Qenos (Melbourne). Bidders include both chemical companies and private equity firms. Final bids are due by the end of April. Bids so far exceed A$400 million ($317 million) including debt.
Comments: Qenos is a 50-50 joint venture between ExxonMobil Chemical and Orica. The companies have been planning to divest Qenos for some time, but they have waited until the current upturn in the petrochemical and plastics markets to put the business on the block.
ExxonMobil and Orica last year concluded a debt restructuring agreement for Qenos with various Australian and international banks and agreed to inject a combined A$15 million into Qenos in preparation for the divestment.
The partners sold Qenos’s polypropylene business to Basell earlier this year. ExxonMobil and Orica plan to complete the divestment of Qenos by the end of May.
Qenos is Australia’s only producer of polyethylene and the company operates olefins and PE plants at Altona and Botany, Australia with a combined capacity for 500 KT/year of ethylene and 370 KT/year of PE.
DuPont opens first ethylene copolymer operations in China – Resin production facility for Bynel & Fusabond
DuPont Packaging and Industrial Polymers opened a new DuPont(TM) Bynel® and DuPont(TM) Fusabond® adhesive resins production facility in Shenzhen, China, in mid-March 2005. It constitutes the business’s first ethylene copolymer operation in the Asia Pacific and is intended to meet the burgeoning demands of adhesive resins in China and across the region.
The new facility in China is part of the company’s business growth plan and represents the continued commitment of DuPont to the adhesive resins market. It replicates existing facilities in North America with the same process equipment, standard operating procedures, specifications, and quality control processes. Although the Bynel® and Fusabond® adhesive resins produced in Shenzhen will mainly supply China and the Asia Pacific market, the materials used in their production will be those approved for global use. Such an approach allows DuPont to fully interchange products globally, as well as establish Shenzhen as a fully ISO 9001 certified site only a few months after completion of the construction.
Comments: The trend to move production to China started with commodities and the same trend has started for differentiated commodities and specialties. DuPont will be among the trend starters for moving the production of specialties to China.
Bynel and Fusabond are DuPont’s tie layer resins used in a variety of applications such as packaging, impact modification of nylon, coupling agent for PP, wood composites, and others.
As the Chinese packaging industry develops there will be a need for tie-layer resins for multilayer structures. Fusabond markets may take longer to develop in China due to the higher cost and specialized nature of the end-user applications.
The other players in the industry include Crompton, Dow, Eastman, Equistar, Mitsui, and others.
Sumitomo establishes a new company in China for the production of polypropylene compounds
Sumitomo Chemicals has announced plans to establish a new company in the southern region of China to manufacture and sell polypropylene compounds for automotive applications.
The new company will be named Sumika Polymer Compounds (Zhuhai) Co. Ltd. Sumitomo Chemical will own 55% of the company while Toyo Ink will own the remaining 45% of the new company. The new company will be located in Zhuhai, Guangdong Province, People’s Republic of China Main. The company will initially have a production capacity of 10,000 tons/year with a plan to double it in the future. The company will be incorporated in May 2005 and the plant is expected to start up by mid-2006.
Sumitomo Chemical produces polypropylene, based on its proprietary technology, in Japan, Singapore, and the U.S.A. to meet the requirements of customers globally, particularly those of automobile manufacturers.
Comments: China’s automotive industry has experienced remarkable growth in recent years and is expected to do so in the future. This trend is especially visible in the south where Japanese automakers have proposed a number of projects to newly construct or expand car production facilities. This will significantly boost the demand for polypropylene compounds in China. To promptly meet this rapidly rising demand and satisfy customers’ need for higher quality products, Sumitomo Chemical has decided to set up a production and marketing base for polypropylene compounds in southern China. Sumitomo will also supply some of the polypropylene resins from the company’s production complex in Singapore.
SABIC to lead an industrial group to build a huge petrochemical complex in Yanbu – KSA
The Saudi Basic Industries Corporation (SABIC) intends to lead a group of Saudi industrialists to establish one of the largest petrochemical complexes in Yanbu Industrial City. The investments in the complex have been estimated to be around SR 11 billion.
SABIC is reported to have contacted some Saudi Arabian companies to participate as stockholders in the Yanbu National Petrochemical Co., which will establish the complex aimed at producing 3.8 million tons of petrochemicals such as ethylene, ethylene glycol, polyethylene, and polypropylene. SABIC plans to offer at least 30% of the stock of Yanbu National Petrochemical Co. for general public subscription, which would amount to about SR 1 billion.
Now the wait is for SABIC to initiate the process of formally establishing the Yanbu National Petrochemical Co. as a Saudi Arabian public shareholding company. After the procedures for the formation of the company are completed, construction work would begin for building the petrochemical complex on a 50,000 sq. meter plot of land, scheduled in the second half of the current year. Production at the complex is expected to begin sometime in the year 2007, according to the time frame devised by SABIC.
Comments: As far as projects go for SABIC, the new large complex announced for Yanbu, on the coast of the Red Sea, is big and will more than double the size of petrochemicals at the site. Yanbu already has the existing Yanpet 1&2 facilities; the new project base loaded by Sabic will make it one of the largest integrated petrochemical sites in the world.
Currently at Yanbu is Yanpet, a 50/50 joint venture with ExxonMobil and SABIC. Yanpet’s total investment is approximately $3B which includes ethylene, polyethylene, ethylene glycol, polypropylene, and pyrolysis gasoline. With Yanpet 1 & 2 plants, the site ranks as perhaps the largest single polyethylene production location in the world.
SABIC currently produces about 40 million metric tons/year of petrochemicals and the new Yanbu complex at 3.8 million metric tons will increase overall production companywide by about 10%. This is a big project by anyone’s estimate but that’s the way that SABIC has been doing projects for some time. They started in September 1976 and now are easily in the top 10 producers of chemicals globally; the third largest in polyethylene and 6th largest in polypropylene.
The new Yanbu production facility will cost more than $3B and have a capitalization reportedly of about 30% with 70% of the shares owned by SABIC and 30% of shares offered to other partners. This mix of equity is generally standard for most SABIC projects. The new Yanbu project will be a partnership; the concept of partnerships is at the core of the growth and business strategy of SABIC. SABIC currently (with the new Yanbu project) has over 20 affiliates.
The new facility at Yanbu will include the same components as the existing Yanpet operations; ethylene, ethylene glycol, polyethylene, and polypropylene.
Texas Pacific Group to acquire British Vita
The boards of TPG UK and British Vita announced the acquisition of British Vita. The companies have reached an agreement on the terms of recommended proposals for the acquisition for cash of the whole of the issued and to be issued share capital of British Vita, to be implemented by way of a Scheme of Arrangement under section 425 of the Companies Act.
Under the terms of the Scheme, which the directors of British Vita intend unanimously to recommend, British Vita Shareholders will receive 360 pence in cash for each British Vita Share (ex the final dividend of 6.25 pence per British Vita Share for the year ended 31 December 2004, which shall be payable to British Vita Shareholders on the basis previously announced by British Vita) valuing the existing issued share capital of British Vita at approximately £668 million.
TPG UK has received irrevocable undertakings and letters of intent to vote in favor of Proposals from the directors and certain large shareholders in respect of approximately 23.6 per cent of British Vita’s issued share capital.
Comments: In the last year private equity firms have significantly increased their investment in the chemical industry. This trend is expected to continue in 2005. Last year TPG group bought Kraton Polymers from Ripplewood Holding Company. TPG is continuing to look for options to invest in the chemical industry.
The company has over 110 manufacturing sites across 22 countries. British Vita participates in the foam, plastics, and nonwovens area of the polymer industry. The company processes materials that are used to manufacture everyday products including automotive components, foam for furniture, and nonwovens used in disposable nappies.
Basell introduces new grade for high-performance Clyrell PP resin
Basell has introduced a new Clyrell Polypropylene grade that provides aesthetic and mechanical properties for food packaging, consumer products, and other applications.
The new resin — Clyrell EC140R – is designed to achieve a unique combination of high fluidity, clarity, high gloss, stiffness, and low temperature impact. These properties should make the material ideal for frozen food packaging and consumer products applications such as luggage and toys.
Comments: The Holy Grail for polypropylene is to achieve superior clarity and melt strength. Polypropylene will be able to compete effectively with polystyrene if it could improve these two properties in a cost-effective manner.
Participants at different levels in the value chain have tried to achieve this goal in different ways such as additive development, equipment modification, catalyst development, and others. None of these methods have been completely successful in achieving the desired results at a reasonable cost.
Polypropylene suppliers have been content with incremental improvement in the absence of radical innovations in the area of clarified and high melt-strength polypropylene.
The introduction of this new grade is yet another incremental improvement that will allow Basell to compete in the food packaging and consumer products market.
Clyrell EC140R is a nucleated polyolefinic resin combining the typical advantages of polypropylene random and heterophasic copolymers and is designed for injection molding applications. Clyrell EC140R has good impact resistance at room and sub-zero temperatures, good transparency, and good resistance to stress whitening. In addition, it exhibits a high fluidity.
DSM to construct a compounding plant in China
DSM Engineering Plastics announced its plans to expand its compounding capacity. This project includes new compounding lines, which will double the total capacity for their Stanyl® PA46, Akulon® PA6, and Arnite® polyesters. These high-performance engineering plastics are used for instance in LCDs, computers, games, mobile phones, and cars. The existing facilities in Zhouzhuang in Jiangyin, Jiangsu province in China will be relocated to a new state-of-the-art plant in Jiangyin Hitech Development Zone. The total investment at the new site will be some tens of millions USD. Operations at the new site will start in 2006.
DSM Composite Resins AG will build a Sizing plant on one of DSM’s existing production sites. DSM Composite Resins AG is the world market leader in Sizings & Binders and is entirely focused on serving the glass fiber market worldwide under the brand name NEOXIL®. In building a new plant, DSM Composite Resins is anticipating market growth in this area. DSM plans to start up the new facility in the second half of 2006. The capital budget is estimated at around USD 7 million.
Comments: Like others, DSM is also trying to capture a part of the fast-growing Chinese market. DSM has set a goal to double its sales in China between 2003 and 2008. To reach this goal, DSM is expanding its existence in China across the board,
(1) In the nutritional products area
In Jan. 2005, DSM (Nutritional Products) bought out Shanghai Pharmaceutical Group (SPG)‘s 36% share in their joint venture of Roche (Shanghai) Vitamins Limited (RSVL) and thus became the full owner of RSVL. RSVL will soon be renamed DSM Vitamins (Shanghai) Ltd.
In Nov. 2004, DSM signed agreement with North China Pharmaceutical Company, Ltd. (NCPC) to buy USD 25 million worth of NCPC’s shares.
(2) In caprolactam and melamine area
In July 2004, DSM and China National Offshore Oil Corp. Chemical Ltd. (CNOOCC) signed a letter of intent to build a world-scale melamine plant in Hainan, China. The plant has a capacity of 120 KT, which will be the largest melamine plant in the world.
In August 2002, DSM started DSM Nanjing Chemical Company, a joint venture with Sinopec to expand the caprolactam business in China. DSM has 60% of the JV, and Sinopec Nanjing Chemical Industries Co. Ltd. holds the remaining 40% of the shares. DSM’s relationship with Sinopec dates back to 1996 when it bought over BASF’s 50% share from a JV between Sinopec and BASF. That was the Jinling DSM Resins Ltd (JDR). In Dec. 2002, DSM bought another 25% of the shares from Sinopec.
With all these expansions, DSM is well on its way to reaching its target to double its sales in China in five years from 2003.
BASF increases capacity for copolymers of vinyl chloride in Ludwigshafen, Germany
BASF is increasing its production capacity for copolymers of vinyl chloride to 12,000 tons/year at its Ludwigshafen, Germany, site. The company will invest 6 million to increase this capacity in response to increasing demand for special coating systems.
Vinyl chloride copolymers are employed as binders in solvent-based coatings applied to iron, steel, non-ferrous metals, plastics, and mineral substrates like concrete as well as for solvent-based printing inks and marking paints. Their most important applications are in anti-corrosion coatings such as shipbuilding and in packaging printing.
Comments: Vinyl chloride copolymers are most commonly used for coating applications due to their good adhesion properties to metals. The main area of application is in paints for anticorrosive coatings for industrial equipment including industrial plants, shipping containers, ships, and storage tanks. The coating protects the steel from freshwater immersion, saltwater immersion, exposure to chemical fumes, and exposure to chemical spillage.
The major applications for vinyl chloride include (1) marine, (2) industrial and rural environments (3) pumps, (4) sumps, (5) water tanks, (6) chemical process plants (7) tanks, (8) ships, (9) dams, and locks.
BASF markets its vinyl chloride copolymers under the Laroflex® trademark.
BP and Metabolix to jointly develop renewable plastics
Metabolix, Inc. of Cambridge, Massachusetts, and BP announced their plans to jointly develop renewable and biodegradable plastics.
The two-year collaboration will include BP’s newly formed olefins and derivatives (O&D) petrochemical subsidiary, Innovene. The agreement will research and develop grass crops containing high levels of naturally grown polymers which can be used to produce biodegrading plastic materials. A co-product of the process would be advantaged biomass material which can be converted to energy.
BP will provide financial support for the program as well as full-time staff over the two years starting 14th February 2005. In addition, the companies will explore commercial options to exploit any technology that results from the collaboration.
Comments: Metabolix was founded in 1992 and it uses sophisticated biotechnology to produce performance plastics from renewable resources. The company applies the advanced tools of metabolic engineering and molecular biology to produce PHA Natural Plastics and other industrial products in microbial systems and directly on non-food plant crops.
PHA Natural Plastics is a broad and versatile family of plastics that are highly functional and biodegradable and produced from readily grown crops. Similar in use to synthetic petrochemical plastics, they range in properties from rigid to highly elastic and can be converted into films, fibers, adhesives, coatings, molded goods, and other products. They biodegrade in aquatic and soil environments, even under anaerobic conditions, and can be composted.
This collaboration is BP’s attempt to continue research and innovation in developing new sources of energy and novel plastics products. This falls in line with the “green” image that BP has been trying to promote in recent years.
BP’s ethylene joint venture in China starts operations
Shanghai SECCO Petrochemical Co Ltd, an ethylene joint venture between BP, China Petrochemical Group Corp (Sinopec Group), and Sinopec Shanghai Petrochemical Co Ltd, has begun initial operations, and full commercial operations are expected by the middle of 2005.
Shanghai SECCO Petrochemical Co Ltd, based in Shanghai Chemical Industry Park, was set up in 2002 with BP holding a 50 pct stake, Sinopec Group a 30 pct stake, and Sinopec Shanghai the remaining 20 pct. Total investment in SECCO is 2.7 billion USD, and it has an annual ethylene production capacity of 900,000 tons.
Shanghai SECCO will also produce polythene, styrene, polypropylene, and other petrochemical products after full operations are launched.
Comments: On March 19, 2005, Shanghai SECCO’s 900 KT/yr ethylene plant produced on-specification ethylene for the first time. According to project sources, it took only about 10 hours from feedstock into ethylene production which indicates the SECCO facility is surely one of the world’s most advanced facilities and a tribute to the dedicated startup and operations staff. This has been a very fast-tracked project. The project’s partnership was only initiated in November 2001. The complex is located at the Shanghai Chemical Industrial Park (SCPI) which is about 12 km from the industrial base of the Shanghai Petrochemical Company. The plant only broke ground on March 28, 2002, and reportedly is ahead of schedule for mechanical completion and startup. The 900 KT/yr naphtha-fed ethylene unit complex also includes derivative plants. The complex includes a total of 10 major units, the main derivative units are; polyethylene (600 KT/yr), polypropylene (250 KTyr), styrene monomer (500,000 mt/yr), polystyrene (300 KT/yr), acrylonitrile (260 KT/yr), aromatics (200 KT/yr) and butadiene (90 KT/yr).
The BP Shanghai SECCO joint venture is the first of China’s three ethylene cracker-based “mega-projects” to startup in 2005. The three “mega-projects” are at the centerpieces of China’s program to support the country’s booming petrochemical growth. The “Big-3” projects are BP’s Shanghai SECCO, BASF-YPC, and Shell’s CSPC Nanhai. BASF–YPC is scheduled to startup in mid-2005 and CSPC Nanhai is scheduled to start late in the year.
All the project complexes have similar characteristics. They are all integrated multiple plants on one site and all are joint ventures between major western and Chinese entities. They all have world-class ethylene crackers as the core of their complexes. In total, the three projects will produce approximately 6 million metric tons/yr of ethylene and derivatives and required a total investment of $10B.
Borealis to decide by year-end on a new PP plant in Germany
Borealis will decide by year-end whether to go ahead with a previously announced 330 KT polypropylene plant in Berghausen, Germany. If Borealis goes ahead with the plans the plant will use Borealis’s Borstar technology and come on-stream in 2007-08.
Comments: Borealis is among the large polypropylene producers with an approximate global capacity of 1,500,000 tons. Borealis has polypropylene capacity in European countries such as Austria, Belgium, Finland, Germany, and others. Borealis currently has 190 KT of polypropylene capacity in Germany.
Germany has a total polypropylene capacity of 1,850 KT. If Borealis decides to add the new capacity it will increase Germany’s polypropylene capacity by 18%.
On a global basis the demand for polypropylene is projected to increase at 5% to 6% while the capacity growth is expected to average around 4% to 5%. As the capacity additions lag the demand growth the operating rates are projected to reach in excess of 90%.
The supply demand economics suggest that the industry may be able to absorb the additional capacity without impacting the price. However the constraint for the new plant maybe on the raw material side. The ethane-based ethylene crackers produce much less propylene as by-product. The capacity growth for propylene is expected to average around 3% while the demand for propylene is expected to be in the range of 4% to 5%. This may lead to a supply crunch for propylene by 2011.
Explosion in BP Refinery
Fifteen people lost their lives and more than 70 were injured on Wednesday in an explosion and subsequent fire at the refinery, a 1,200-acre plant south of Houston, Texas. All 15 people who died were contractors involved in maintenance work. All personnel working at the refinery at the time of Wednesday’s incident have now been accounted for.
Comments: The refinery produces 30% of BP’s supply of petroleum products in North America, and 3% of the US supply. It processes about 430,000 barrels of crude oil a day. There was a surge in the oil prices immediately after the explosion. The oil prices stabilized subsequently after BP gave assurances that the explosion will not affect the overall supply.
The impact of this explosion on the downstream industry will be minimal to none. The downstream operations of BP (now innovene) may not be affected after the spin –off. The issues related to liability and insurance will linger for some time.
Marcus Oil PE waxes facility to be shut-down
The Marcus Oil and Chemical plant, where an explosion occurred in southwest Houston in December, will not be allowed to resume production. Marcus Oil and Chemical manufactures polyethylene waxes used in products such as paints, asphalt, polishes, printing inks and high-gloss fruit coatings. The plant had been operating at a reduced level for a few weeks. An earlier announcement said that “as of February 10th, 2005, U.S. production of polyethylene waxes has resumed.”
Comments: A storage tank explosion at Marcus Oil and Chemicals had caused a major damage to the plant operations in December 2004.
It took Marcus Oil almost two months to restart the operations after the explosion. Now it seems that the facility might be shutdown permanently. Marcus Oil has over 250 million pounds of capacity at the location. At this point it is unknown how much of the capacity will be affected by the closure of the plant. Other suppliers of polyethylene wax include Honeywell, Eastman, and others.
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