Indian Oil Corporation selects NOVA Chemicals’ SCLAIRTECH™ technology for LLDPE/HDPE Swing plant in India
NOVA Chemicals announced its proprietary SCLAIRTECH™ technology has been selected by Indian Oil Corporation Limited (IOCL) for a new linear-low density/high-density polyethylene (LLDPE/HDPE) plant in India.
Scheduled for completion in the third quarter of 2007, the facility is designed to produce 350 thousand metric tons (770 million pounds) of polyethylene per year using NOVA Chemicals’ SCLAIRTECH solution-phase technology. The plant will be located in Panipat, Haryana. NOVA Chemicals and IOCL expect to sign a license agreement for the plant, pending approval of the Indian Ministry of Industry, before the end of 2004.
Comments: The first Sclairtech line with a capacity of 220 million pounds (A-Line at Nova Chemical which is now shut down) was built in the 1960s. Since that time, over 4.5 billion pounds of Sclairtech capacity have been installed. The new capacity at IOCL’s facility will increase that total to 5.3 billion pounds. From a regional perspective, North America accounts for 20% of the capacity, Europe 9%, Asia-Pacific 45%, and the rest of the world (South America and Africa) 26%. India alone accounts for 34% of the global capacity. With the addition of the IOCL plant, NOVA Chemicals’ Sclairtech technology will be utilized in manufacturing nearly 50% of all polyethylene produced in India. Between 1990 and 1998, the Sclairtech process had several licensing successes with installed capacity growing at an average annual rate of 11%. Most of this capacity was installed in Asia-Pacific and South America. The IOCL plant represents the first new capacity expansion since 1998.
BASF & Shell to decide on Basell’s future first quarter of 2005 while Basell receives more bids
BASF and Shell announced their plans to make a final decision in the first quarter of 2005 if Basell will be floated via an initial public offering (IPO) or sold.
The companies also mentioned that interest from chemical and private equity capital companies is high, and a second round of bids is expected by the end of 2004. A third-round may not be necessary “if the price offered is right,” according to the companies.
Comments: Basell Polyolefins has two options: (1) IPO –the first choice and (2) sale to an independent group – the second choice. The lower-than-expected performance of the polyolefins industry in the past has cast doubts on the potential success of an IPO. However, the general improvement in the polyolefins industry sector performance in the past three quarters (profits generated by Dow, ExxonMobil, Nova, Huntsman, Westlake, and Basell) has re-invigorated interest in IPOs.
The successful IPO by Westlake including the dividends is viewed as very good news. So far there have been several rumors about potential acquirers of Basell including Russian oil firms to Iranian National Oil. As of this newsletter, there were more than 10 organizations interested in Basell. Basell will decide the actions next year after the consistently successful quarters.
GAIL in talks with Mitsubishi Chemical to buy Mitsubishi’s LDPE plant in Japan
Gail India Ltd is negotiating with Japanese polyolefin producer Mitsubishi Chemical to buy a part of the latter`s petrochemical assets — a 75,000 MT/year low-density polyethylene (LDPE) plant in Japan.
The two sides had an extensive round of discussions. Recently, GAIL sent a technical team to Japan to get first-hand information on Mitsubishi Chemical’s assets. The team will now prepare a feasibility report, following which GAIL will decide on investing in the plant. The company has said that this opportunity would be pursued based on the recommendation of the technical team regarding Mitsubishi’s petrochemical asset which is a LDPE plant.
Comments: The Gas Authority of India (GAIL) is one of the leading polyolefin producers in India. The company announced earlier this year, its plans to construct a swing LLDPE/HDPE plant and also increase ethylene capacity to 440 KT per year. The company does not have any manufacturing facilities located outside India. If the company’s talks with Mitsubishi Chemical result in the purchase of its LDPE plant, GAIL will gain a stronger presence in the Asian region.
Japan PolyChem, Mitsubishi’s 100% owned subsidiary is involved in the production of LDPE. The company operates 3 LDPE facilities in Japan with a total annual capacity of about 203 KT. These include (1) Kashima plant (62 KT with BASF’s tubular process), (2) Mizushima (66 KT with Chevron’s autoclave process), and (3) Yokkaichi (75 KT with BASF’s tubular process). Japan PolyChem was originally formed as a joint venture between Mitsubishi (65% stake) and Tonen (35% stake). Later, Mitsubishi Chemical acquired Tonen’s 35% stake in the company. Other LDPE producers in Japan include (1) Asahi Chemical, (2) Japan Polyolefins, (3) Mitsui DuPont, (4) Nippon Unicar, (5) Sumitomo, and others.
Basell acquires INEOS Silicas high pore-volume chromium catalyst business
INEOS Silicas Limited and Basell Polyolefine GmbH announced the signing of an agreement for the sale of INEOS Silicas’ high-pore-volume chromium catalyst business to Basell.
Effective immediately, Basell is the manufacturer and supplier of a family of chromium catalysts developed by INEOS Silicas, including EP350, EP350HiTi, and EP241A. This range of chromium catalysts is used in both slurry loop and gas phase processes to manufacture high-density polyethylene (HDPE) polymers for applications involving high environmental stress crack resistance (ESCR) and high stiffness, such as blow molding and pipe.
The newly acquired family of chromium catalysts will be manufactured by Basell at its Ludwigshafen, Germany facility, where Basell manufactures its Avant C chromium catalysts. The Avant C catalysts are sold to third parties and used in the manufacture of Basell products.
Comments: INEOS Silicas, a subsidiary of the INEOS Group, Romsey, U.K., is the former Crosfield arm of ICI. INEOS acquired Crosfield, along with ICI’s Chlor-Chemicals and Klea businesses, early in 2001 for $471MM.
INEOS Silicas is the major competitor for Grace Davison in the Phillips chrome catalyst arena. It also produces silicas and zeolites.
INEOS Silicas will continue to produce other chromium catalysts and silica support at its Warrington manufacturing facility in England.
The addition of the EP350, EP350HiTi, and EP241A will complement Basell’s current chromium catalyst offerings and provide a strategic fit for its licensing business.
BP & Nova to merge European styrenics business
BP and NOVA Chemicals announced that they have reached an agreement in principle to combine their European interests in Styrene Polymers to create one of the largest polystyrene and expandable polystyrene manufacturers and marketers in Europe. BP and NOVA Chemicals will each have a 50 per cent stake.
The proposed joint venture, which is subject to a number of regulatory and other consents, is expected to commence in early 2005 and be headquartered in Fribourg, Switzerland.
The products will be produced at seven manufacturing locations across Europe: NOVA Chemicals’ existing sites at Carrington, UK; Breda, Holland; Ribecourt, France; Berre, France and the current BP sites at Marl, Germany; Wingles, France; and Trelleborg, Sweden.
NOVA Chemicals will retain its styrenics business across the Americas whilst BP’s Olefins and Derivatives business will retain its styrene monomer production facilities and interest in the polystyrene production facilities in the SECCO joint venture in China and will continue to offer licensing packages to other parties.
Comments: Polystyrene is a very tough and underperforming business. Polystyrene as a polymer tends to be generic and not differentiated in any way like polyolefins.
The result is that it is a basic commodity with a transparent cost structure and no one can get ahead. That is of course until the people at NOVA (and BP) weigh in with some of their latest creative moves. The new European venture reportedly will generate sales of $ 1 billion annually.
NOVA already has close relations with BP in polyethylene through catalyst and process technology licensing. BP is already setting apart its polymers businesses to allow better cost control and operating return.
What can be done to improve profitability in polystyrene? The drive for NOVA (and BP’s polymer NewCo) is huge since in NOVA’s case alone a $20/ton increase in styrenics margin means a $1.00/share operations impact. The options are either merge and spread one’s cost base or differentiate. NOVA is a leader in polystyrene higher value-added, their sales of blends, alloys, copolymers, and interpolymers will more than double by 2005 according to analysts. By spreading this technology onto the increased European combined BP/NOVA polystyrene base (7 facilities with over 1,000 KT capacity), major gains can be made.
BP and NOVA should be able to recapture well in the range of $20/ton cost improvement through redundant costs in Europe alone. This is significant assuming the merger is approved. Add to this the product line potential from higher value-added styrenic polymers on the larger base and justification for this combination is evident. The combined position of BP and NOVA in Europe’s polystyrene market will move them from being tied separately for third place to a strong rival for 2nd place with BASF. Only Dow will remain larger. The merger also opens the opportunity for raw material integration.
Pemex head – Raul Munoz resigns
Raül Muñoz Leos has stepped down as head of the state oil company Petroleos Mexicanos (Pemex). The departure is attributed in part to controversy over his dealings with the country’s oil workers union for a generous $700-million benefits package.
Muñoz’s resignation demands had intensified after reports surfaced that he had also used company health benefits to pay for his wife’s plastic surgery.
Mexico’s Energy Department announced that Luís Ramirez Corzo, who previously was head of Pemex’s exploration and production division, will take over as Pemex’s director general. Mexican officials said that Muñoz’s ability to manage Pemex had “deteriorated,” and that the appointment of Ramirez Corzo would strengthen Pemex’s leadership. Government officials had criticized the deal with the oil industry union as possibly illegal.
Muñoz in 2000 appointed Rafael Beverido, formerly the head of Grupo Desc’s synthetic rubber unit Negromex (Mexico City), to head Pemex’s petrochemical division Pemex Petroquimica (PPQ). Muñoz’s departure has raised questions about what changes, if any, will be made at PPQ.
Comments: Mr. Beverido represents a breath of fresh air into the traditional bureaucracy of the PEMEX, because of his extensive private sector background. PEMEX is still the arm of Government and is not immune to any of the bureaucratic developments of any free democratic nation.
BP to include two European refineries in the new petrochemical entity
BP announced its plans to include two European oil refineries in its new olefins and derivatives (O&D) petrochemicals entity. O&D is due to be sold, possibly through an initial public offering (IPO), in the second half of 2005, subject to market conditions and necessary approvals.
The refineries at Grangemouth, Scotland, and Lavéra, southern France, are closely integrated with their neighboring chemicals plants which take refinery products as feedstock and together they form competitively advantaged manufacturing sites.
Grangemouth and Lavéra refineries have a combined crude oil capacity of 21 million tons per year (425,000 barrels per day) and a chemical feedstock output of 2.2 million tons per year. As integrated refining and petrochemical sites, they will have single site-wide management and will provide the new O&D company with secure and competitive feedstock and product optimization flexibility.
Comments: The BP “disposal” is not as much a disposal as it is spinning off the BP olefins business with a platform for growth. At the same time, the refineries will make the BP assets more attractive to oil-integrated majors, such as Atofina or ExxonMobil. Also, since Shell is combining its own base chemicals operations with its refining operations, perhaps, if they settle on the intent to stay in the chemicals business, this would make the assets attractive for them as well. Moreover, the refining business has been undergoing its own upcycle in recent years and independent investors may find the BP package attractive. The new company will also be able to utilize refinery-derived feedstocks, such as naphtha, for further expansion and integration synergies.
Dow to decrease VCM & EDC production at Freeport, TX
Dow Chemical announced its plans to reduce the production of vinyl chloride monomer (VCM) at Freeport, TX by 700 million lbs/year, about 4% of North American VCM capacity, by the end of 2005. The company says it will eliminate 10-20 jobs, and redeploy the employees affected where possible.
According to Dow, it will meet its contract commitments from its remaining VCM units and via commercial agreements. Dow has another 1.8 billion lbs/year of VCM capacity at the site and 1.4 billion lbs/year of VCM capacity at Plaquemine, LA Dow will continue to operate the 4.3-million ton/year chloralkali plant at Freeport.
Dow is also closing its 1.2-billion lbs/year VCM plant at Fort Saskatchewan, AB next year.
Comments: North America lost some of its competitive advantage in producing the vinyl chain (chloralkali/EDC/VCM/PVC) between 2000 and 2003 because of the increase in natural gas prices, making producers cautious about future investments. Significant future capacity additions are expected to be mainly in Asia (especially China) and the Middle East (mainly Iran). The current North American capacity is sufficient to meet domestic demand which has been growing at close to 3% annually. The growth is in line with the growth in the construction industry.
In 2001, Dow expanded VCM capacity at its Freeport plant by 500 million pounds reaching 2.7 billion pounds. By shutting down part of the VCM capacity, Dow will be able to utilize the remainder of its capacity efficiently. This would also save the company from investing the required capital to keep the entire facility running.
Vinythai PCL to double VCM capacity
Vinythai PCL (VNT) announced its plan to double the capacity of its vinyl chloride monomer (VCM) production at its plant in Map Ta Phut, Thailand. The project, which is based on Solvay’s latest VCM technology, is estimated to cost roughly Baht 2,300 million (EUR 44 million) and would be debt-financed locally. Construction will begin in 2005 with production expected to commence in September 2006. The expansion will increase Vinythai’s current VCM capacity of 200,000 tons per annum (tpa) to 400,000 tpa.
VCM is the major feedstock for PVC production. Of the additional VCM capacity, the Company will sell 150,000 tpa under a long-term contract to a local producer of PVC, APEX Petrochemical Co., Ltd. (APEX) which currently imports VCM for its own PVC production. The remaining 50,000 tpa will be exported or sold domestically. The Company also has a tolling agreement with APEX on the production of 48,000 tpa of PVC produced by APEX, which VNT will market in its name.
The main raw material required for the expanded capacity, Ethylene Dichloride (EDC), will be sourced by imports from the international markets. The Company is pursuing the study of an upstream integration into a chlorine and caustic soda production facility. The decision will be taken after finalizing whether ethylene would be sourced either locally or from abroad.
Comments: Vinythai PCL is Thailand’s second-largest and South East Asia’s third-largest producer of polyvinyl chloride (PVC). The recent increase in capacities shown in Asia is mainly due to the growth in the PVC market in China. Thailand exports over 40% of its PVC production to China. The driving force for PVC demand can be attributed to China improving its infrastructure. The rapid growth of PVC markets has been led by construction and wire and cable applications. Other factors such as government interference like banning the use of wood for window seal application due to fire hazards have helped the growth of this industry.
Vinylthai was formed in 1989 through the Board of Investment, for the production of polyvinyl chloride (PVC), vinyl chloride monomer (VCM), chlorine, and other co-products such as caustic soda. The company’s major shareholders are the Thai group Charoen Pokphan Group & Solvay.
Kuraray to acquire Trosifol’s polyvinyl butyral business
Kuraray announced the signing of a contract with Rütgers AG, Germany, to acquire the polyvinyl butyral (PVB) film business of HT Troplast AG, a subsidiary of Rütgers.
The business, located in Troisdorf, Germany, has a 13% share of the global market of interlayer films for safety laminated glass, and seats in a leading position especially in the field of architectural application in Europe.
This transaction is deemed as a business development downstream of the “Vinyl Acetate Chemical Chains Business”, which will enable Kuraray to establish a consistent production flow from PVA resin to PVB resin and PVB film.
Comments: Kuraray entered the PVB business through the acquisition of Clariant’s polyvinyl alcohol & PVB business in 2001. Kuraray had acquired Clariant’s plants at Hochst-Sulzbach, Germany having the capacity for 50,000 MT/year of PVOH and 16,000 MT/year of PVB. These businesses are now operated by Kuraray Specialities Europe GmbH. This transaction is consistent with Kuraray’s strategy to focus on and expand the “Vinyl Acetate Chemical Chains Business”.
Polyvinyl butyral is mainly used as an interlayer for automotive safety laminated glass and other architectural applications. The other major producers of PVB are DuPont, Solutia, and Sekisui.
Lanxess spin-off approved by stockholders
The stockholders of Bayer AG have cleared the way for the spin-off of Lanxess. At the Extraordinary Stockholders’ Meeting on November 17, 2004, in Essen, they voted by a majority of 99.66 percent of the capital stock represented to approve the Spin-Off and Acquisition Agreement between Bayer AG and Lanxess AG as proposed by the Board of Management and the Supervisory Board. The Lanxess unit, which is currently operating as a Bayer subgroup, can thus be spun off. Lanxess comprises most of Bayer’s chemical activities and about one-third of its polymers business. Bayer will thereafter concentrate on the primary innovation- and technology-driven core businesses of health care, nutrition, and high-tech materials.
Following this decision by Bayer’s stockholders, Lanxess can now be placed on the stock market as an independent company by way of a spin-off as planned. For every 10 shares he or she holds in Bayer, each stockholder will receive one Lanxess share in addition. It is intended to list Lanxess shares on the stock market in early 2005.
Approximately 42.86 percent of the EUR 1.87 billion capital stock was represented when the vote was taken at the Extraordinary Stockholders’ Meeting.
Comments: In late 2003, Bayer combined Bayer Chemicals with certain parts of the polymers business in a new company with the provisional name “NewCo”. This was done mainly to provide NewCo with several benefits including (1) efficient utilization of capital resources for the enhancement of its competitiveness, (2) easy-to-focus management resources on the specific needs of the chemicals business, and activate niche markets utilizing new business models. The company was then named Lanxess.
Bayer has a broad strategy to focus on non-cyclical businesses, which naturally excludes Lanxess. The main product lines impacted by this sale include polybutadiene rubber, ABS and alloys, butyl rubber, and a large variety of specialty chemicals serving many other industrial and chemical businesses. Bayer is following the path of the former Hoechst and other giants who have failed to meet the challenge of profitability in the chemicals business. Bayer has had some success in its Levitra and Cipro brand drugs and is using the recent uptick in chemical profits to attract buyers for Lanxess.
The Hoechst and Bayer strategies are in sharp contrast to the BASF strategy of verb und and leading new product development. Entering the drug market does have its risks (liability, high R&D expenses, R&D-based competition), however, which can counterbalance the rewards of reduced cyclicality. Since Bayer spends most of its R&D on pharmaceuticals and crop sciences, Lanxess will likely fair better in the hands of another owner; one who is focused on the business and willing to take on the industry’s challenges.
DuPont merges all fluoropolymers into a new division
DuPont announced that its Fluoropolymers and FluoroSurfaces business units, representing market segmentation of its DuPont™ Teflon® fluoropolymer products, have been consolidated into one business under the name, Fluoropolymer Solutions. The new organization comprises five market-specialized businesses — Electronics and Fine Chemicals, Communication Cabling (Cabling Solutions), Consumer, DuPont™ Nafion® Choralkali, and Industrials.
According to DuPont, establishing DuPont Fluoropolymer Solutions will enable the company to strengthen and simplify its organizational structure, allowing us to focus more fully on specific market and customer needs. This will also help the company to exploit synergies more effectively across the five industrial businesses within the new organization, including easier access to new technologies that will ultimately benefit its customers for Teflon® fluoro products.
Comments: DuPont Fluoropolymer Solutions is one of the major producers of fluoropolymer resins, additives, films, finishes, and dispersions, PTFE (polytetrafluoroethylene), PFA (perfluoroalkoxy), FEP (fluorinated ethylene propylene), ETFE (ethylene-tetrafluoroethylene) and PVF (polyvinyl fluoride).
The company markets its products under the registered trademarks DuPont™ Teflon®, DuPont™Tefzel®, DuPont™ Tedlar®, and DuPont™ Zonyl®. Major applications for these fluoropolymer products include the automotive, chemical processing, semiconductor, oil exploration, chemical handling, data communication, aerospace, electronics, housewares, and building industries.
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