Polyolefin producers report third-quarter earnings
Dow Chemical Company
Dow Chemical announced third-quarter sales of more than $10 billion. The sales for the quarter were the highest for the first time in Dow’s history, up 26% from the same period last year, reflecting a 19 percent increase in price and a 7% increase in volume. Net income of $617 million was 86% higher than the third quarter 2003.
Plastic sales climbed to $2.6 billion for the third quarter, 38% higher than the same period last year, driven by a 31% increase in price. Volume for the quarter grew by 7% year-over-year. Polyethylene demand was strong across all geographic areas, including Europe, where volume remained high. Double-digit price increases reflected solid worldwide polyethylene demand, particularly for packaging and stretch film applications. Polystyrene continued to face a substantial challenge from escalating raw materials costs; despite healthy volume increases in most geographic areas and prices more than 40% higher overall than 3rd quarter last year, polystyrene margins remained severely compressed. EBIT for the Plastics segment more than doubled compared with the third quarter of 2003, rising to $428 million from $155 million in the same quarter last year.
Chemicals sales rose to $1.3 billion. Price increased 22% compared with the same quarter of 2003 while volume remained flat. Chlorine and caustic soda industry operating rates were high worldwide, with continuing strong demand and low inventories. Vinyl chloride monomer sales were strong in the quarter with revenues up more than 40% compared with a year ago, driven primarily by price, as robust demand from the PVC industry in both North America and Europe. The Chemicals segment reported EBIT for the quarter of $292 million, over three times the same period last year.
ExxonMobil Chemical Company
ExxonMobil Corporation reported third-quarter results. Net income of $5,680 million ($0.88 per share), after a special charge of $550 million for the Allapattah lawsuit provision, increased $2,030 million from the third quarter of 2003. Third quarter earnings, excluding the special charge, of $6,230 million ($0.96 per share) were the highest quarter ever.
Revenues and other income for the third quarter of 2004 totaled $76,375 million compared with $59,841 million in 2003. Capital and exploration expenditures of $3,634 million in the third quarter of 2004 were down $204 million compared with last year.
Downstream earnings, excluding the $550 million special charge in 2004, were $3,912 million, an increase of $1,132 million from the first nine months of 2003 reflecting stronger worldwide refining margins and higher refinery throughput partly offset by weak marketing margins. Petroleum product sales of 8,131 kbd compared with 7,862 kbd in the first nine months of 2003.
U.S. downstream earnings, excluding the special charge, were $1,860 million, up $896 million. Non-U.S. downstream earnings of $2,052 million were $236 million higher than last year.
Chemical earnings of $2,180 million were up $1,224 million from the first nine months of 2003 due to improved margins, higher volumes, and favorable foreign exchange effects. Prime product sales were 20,839 KT up 5%, reflecting higher demand.
Nova Chemicals
We had reported Nova Chemical’s third-quarter earnings in the previous issue of Polyolefins & Elastomers.
Westlake Chemical Corporation
Westlake Chemical Corporation reported a third-quarter net income of $28.3 million or $0.50 per diluted share and an operating income of $68.9 million on net sales of $572.0 million for the third quarter of 2004. The improvement in net sales and operating income was a result of increased selling prices and higher sales volumes, which outpaced higher feedstock and energy costs.
Income from operations for the Olefins segment increased by $35.7 million to $44.7 million in the third quarter of 2004 from $9.0 million in the third quarter of 2003. This increase was primarily due to higher selling prices and higher sales volumes in polyethylene and styrene, which were partially offset by higher raw material costs for ethane, propane, and benzene.
Income from operations for the vinyl segment increased by $26.5 million to $26.3 million in the third quarter of 2004 from a $0.2 million loss in the third quarter of 2003. This increase was primarily due to higher selling prices for PVC pipe, PVC resin, and VCM and higher sales volumes for PVC pipe and VCM. These increases were partially offset by higher energy costs and higher raw material costs for propane.
BP to acquire Solvay’s share of BP Solvay polyethylene joint venture
BP announced that it has reached an agreement with Solvay to acquire Solvay’s share of the BP Solvay joint ventures which were established in 2001. This marks the completion of an asset exchange deal announced in December 2000 in which BP transferred engineering polymer assets to Solvay,
Solvay transferred polypropylene assets to BP, and two high-density polyethylene (HDPE) joint ventures were set up in the US and Europe.
Subject to regulatory approvals, BP will purchase Solvay’s share of the HDPE manufacturing plant and businesses. The joint ventures will be terminated in early 2005.
Comments: BP and Solvay have announced that an agreement for BP to acquire full ownership of the BP Solvay Polyethylene joint venture has been reached. Perhaps this move can be viewed as one of formal “housekeeping” to strategically consolidate more of BP’s polyolefins position before the upcoming spin-off of BP polyolefins business into a new stand-alone company to be based in Chicago, IL.
The joint venture with Solvay originally significantly strengthened BP’s HDPE and polypropylene business and it makes sense for Solvay to be bought out before the spin-off of BP’s total business. If Solvay had not been bought out, they would have remained a minority partner in a much larger independent polyolefins venture “NUCO” and this type of position could be viewed as not strategic for the future interests of Solvay, both financially unattractive and a noncore holding in polymers.
Dow Chemical to construct new specialty polyethylene plant in Tarragona, Spain
Dow Chemical announced its plans to construct a new specialty polyethylene train at its production facilities in Tarragona, Spain. The new production facility is expected to come on stream in the second quarter of 2006 and will support the growing demand for differentiated, high-value polymers for enhanced, high-performance films, consumer products, and industrial applications.
Incorporating Dow’s most advanced catalyst and process technology, the new train will have the unique flexibility to produce a broad range of high-value polyethylene resins spanning the performance continuum, from Dow’s specialty linear low-density resins, and ultra-low density resins to highly differentiated polyolefin elastomers and elastomers.
Upon completion, the new plant will be a world-scale facility with the capability to produce in excess of 300 KMT (661,4 million lbs) per year. The new train will provide direct employment for 18 people and indirect employment for around 72 people due to the increase in activity planned at the Tarragona site.
Comments: Dow remains committed to increasing its profitability in the polyolefins industry by leveraging value-added products, particularly ones based on metallocene and other single-site technologies. Tarragona has been a key site for Dow’s INSITE-based product lines as well as its next-generation catalyst technologies. In the mid-1990s, Dow converted a 125 million-pound plant to produce metallocene-based products. Since then Dow has upgraded the Tarragona facilities by constructing a plant to produce DOW XLA fibers and more recently VERSIFY Plastomer & Elastomer product lines. It is expected that the new plant will benefit from shared infrastructure and resources and become a strategic location for supplying value-added polyethylene products to the European markets.
Funny article in “Investor’s Business Daily” – Chemical Industry Squeeze Play Is On, – Friday, November 5, 7:00 pm ET by Monica Showalter
As petrochemical industry insiders, we always wonder what the general public thinks about us. Indeed, some of the general public’s opinions are heavily influenced by the general investment reports.
Here is a classic example of petrochemical industry analysis as written by generalists. The following article was paraphrased with some of our comments in red.
The article appeared in Investor’s Business Daily; Wire Newsletter on November 5, 2004, at 7:00 PM written by Monica Showalter.
“………In the chemical industry, the more ways a company can process raw material, the more things of value it can extract. Take Nova Chemical (NYSE: NCX – News). Pemex, Mexico’s state-owned oil company, recently tapped Nova to help plan its first petrochemical investment in 10 years. The reason: Nova had more ways to turn Mexico’s many grades of petroleum into polyethylene than at least a half-dozen rivals……” Interesting to know…
“We had the range of technology and experience the Mexican government sought,” said Beth Eckenrode, vice president for investor relations at Nova. To help seal the deal, company executives showed off Pemex officials Nova’s gigantic plant in Canada, which takes a range of chemicals and converts them into polyethylene……. Really???…..
The chemical industry takes raw materials and turns them into basic or specialty products for industrial use. “The industry is somewhere downstream of refineries and upstream of Wal-Mart,” said Kevin McCarthy, a senior chemical analyst at Bank of America. …….. we were always looking for where we are… now we know…
Four leading commodity chemicals comprise the building blocks of industrial production, says Donald Carson, a chief chemical analyst at Merrill Lynch. They are polyethylene, a petroleum derivative used to make items like plastic bottles and trash bags; styrene, a material used in plastic foam cups; ethylene glycol, a substance used to make polyester; and the chlor alkali group of chemicals, which are used in detergents and cleaners. … and to think, we were chasing the six basic building blocks unnecessarily…..
Chemical companies are prodigious consumers of petroleum in Europe and natural gas in the U.S. The fuel is mainly used to fire up plants to process the chemical creation, even if the end products themselves are made from other bases. … ?????…
About 7% of all energy consumed in the U.S. goes to chemical companies. This makes the industry highly sensitive to energy prices………. But in a booming economy, companies are generally able to pass on those costs to consumers….. What are we complaining about????
In the U.S., most chemical companies are near the big refineries on the Gulf Coast. And since the most competitively produced chemicals are located near the cheap, high-quality oil in the Middle East, there is a huge industry in that vicinity. Saudi Arabia and Iran are the top two producers, but there also are important operations in Kuwait, Oman, and Qatar, Carson says. ….. Europe doesn’t exist ?????…
“We’re still seeing companies put money into the Middle East,” he said, citing Dow Chemical’s recent expansion in the region.
…… Asia also produces chemicals at good prices, but there are efficiency problems in some parts of China. That’s led to some supply shortages and forced Chinese companies to import some chemicals… The real reason for Chinese growth…
…………The industry includes many sectors but often is divided into commodity chemicals and specialty chemicals. Commodity chemical makers are by far the bigger player because there is broad demand for their versatile products. Companies using high-priced commodity feedstocks often pass those costs on to customers. That helps keep their earnings strong vs. those of specialty chemicals companies………
……….Thanks to consolidation during the last recession, capacity is tight in all major commodity markets. The growing economy has fueled demand, but it takes about three to four years to get a new chemical plant online. Companies must confront lengthy permit processes and regulations in the U.S., not to mention the threat of protests……
Many chemical companies prefer to take their business offshore to avoid potential U.S. lawsuits as well…
Terrorism is also impacting the supply of chemicals. In May, al-Qaida-backed terrorists in Saudi Arabia killed five Western petroleum engineers. That stymied anticipated increases in chemical output and was enough to drive world ethylene prices higher. … and we thought it had to do with the oil prices…
“The five engineers were involved in petrochemical development, expanding capacity,” said Frank Mitsch, an analyst at Fulcrum Global Partners. Forty engineers were working on a contract with ExxonMobil to expand capacity there. But they all opted to leave the region rather than risk another massacre. And they haven’t been easy to replace. “There are some things you cannot pay enough salary for,” said Carson….. No ExxonMobil people left Saudi Arabia after the forty engineers quit????…. that’s very sad…..
Technology
The importance of technology and research and development varies from sector to sector. “For commodity chemicals, it’s important but not critical,” said Fulcrum’s Mitsch. The greatest research and development costs are in pharmaceuticals and biotechnology. The chemical company with the largest R&D budget is Monsanto (NYSE: MON – News), which spends 10% of its research budget on innovating new products. Nova also takes R&D seriously….. we knew that…
One example of a new chemical product is a resin called IntegRex from Eastman Chemical (NYSE: EMN- News), McCarthy notes. This chemical is used in making the new kinds of light plastic soft drink bottles now appearing in U.S. supermarkets…… IntegRex… the next major chemical product….?????… Thank God, we thought he was talking about INTEGREX.. the PET process…..”
Basell to close three HDPE plants
Basell plans to close three high-density polyethylene (HDPE) plants in Europe with a total capacity of more than 300,000 MT/year after the end of 2004. These plants are located in (1) Frankfurt, Germany, (2) Knapsack, Germany, and (3) Tarragona, Spain.
The plant closures will coincide with the start-up of a 320,000 MT/year HDPE plant at Plock, Poland that forms part of a polyolefins joint venture between Basell and PKN Orlen, and of a similar-sized unit at Basell’s Wesseling, Germany site.
Comments: Earlier this year, Basell announced that it planned to improve polyethylene profits by focusing on three central strategies: (1) Pursuing low feedstock options, (2) Restructuring European operations by leveraging integrated positions, and (3) focusing on premium margin PE products. The plans to close the above three facilities are part of Basell’s initiatives to improve margins by closing older and less efficient capacities. Also as a part of this effort, Basell has invested in the construction of two world-scale HDPE facilities based on the Hostalen technology, one in Poland and another in Germany, that are back-integrated into crackers and refineries. It is anticipated that the newer facilities will be online by Q3 2005.
Dow and Propilco sign agreement to expand plant capacity with UNIPOL™ PP process
The Dow Chemical Company and Polipropileno del Caribe S.A. (Propilco) announced that they have reached an agreement for Propilco to expand its plant in Cartagena, Columbia, that uses UNIPOL™ PP Process technology. The expansion will take the Propilco plant from its original design capacity of 120 KTA to 200 KTA.
In addition to the plant expansion, Propilco will also purchase Dow’s proprietary UNIPOL™ UNIPPAC™Advanced Process Control package. This new Windows NT-based automated process control package is specifically designed and configured for plants that operate the UNIPOL™ PP process technology and represents a major advance over third-party-developed advanced process control systems.
The Propilco Cartagena facility started production in 1990. The expansion project is expected to be completed in early 2006. Propilco currently produces a broad slate of polypropylene homopolymers, random copolymers, and impact copolymers that find uses in fiber, BOPP film, cast film, tubular water quench film, heat seal film, spun-bond, blow molding, injection molding, and extrusion blow molding applications.
Comments: Propilco was formed in July 1989 by Petroquímica Colombiana and Bavaria Group to take advantage of the growing need for polyolefins in South America. Propilco commenced operations in 1990 with Unipol PP Technology with an annual capacity of 140,000 MT.
Due to increased demand for polypropylene, a second plant polypropylene plant was added in 2001. The second plant was based on Novolen Technology with a capacity of 180,000 MT/year. As of today, Propilco manufactures over 80 different grades of polypropylene. The Unipol PP technology is used for the production of homo, random, and impact copolymers, while the Novolen Technology is used for homo and random copolymers. This latest expansion is once again driven by increased demand for polypropylene in the region.
Mitsui Chemicals to increase production of PP automotive compounds in Thailand
Mitsui Chemicals, Inc. announced its plans to increase the production capacity of polypropylene (PP) compounds for automotive applications at its Thai affiliate, Grand Siam Composites Co. (GSC).
GSC is a joint venture company established in February 1996, among MCI and Thailand’s Cementhai Chemicals Co., Ltd. (CCC), the petrochemicals arm of the country’s largest conglomerate Siam Cement Group, as well as other shareholders, with the major shareholders MCI and CCC holding a 48% and 46% interest, respectively.
In the latest move, GSC is scheduled to ramp up its automotive PP compounds capacity by 8,000 tons, to 48,000 tons/yr. Construction work for the expansion is to start in February 2005, for completion in June of the same year.
MCI positions the automotive PP compounds business as one of the core businesses in its Petrochemicals sector. MCI expects that the demand for PP material in Thailand will continue to increase significantly in the future. As Japanese automotive manufacturers are accelerating their globalization, Thailand is on its way to playing an extremely significant role in Southeast Asia. Because Thailand is not only enlarging its domestic automobile supply but also serving as the exporting base for the ASEAN countries, automotive production in the country is projected to continue growing, to exceed 1 million units in 2005, and hit 1.8 million units by 2010.
It is with such a backdrop that MCI plans to upgrade the production setup and boost capacity at GSC this time. Having already executed an 8,000-ton/yr expansion in July this year, MCI expects that the new capacity addition would further strengthen GSC’s presence in Thailand as the top automotive PP compounds manufacturer. Already proceeding separately with its plans to begin commercial operation of another automotive PP compounds plant of 15,000 ton/yr capacity in April 2005, at its 100% subsidiary “Mitsui Advanced Composites (Zhongshan) Co., Ltd.”, located in Zhongshan, Guangdong Province, China, MCI is hoping to further reinforce its set up to provide high-quality products in the four major markets of the world, namely, Japan, North America, Europe, and Asia.
Comments: Polypropylene-based materials are more widely used in automotive applications because of the trend towards homogenization of plastic materials in automotive applications and the recyclability issues associated with PVC. In the last few years, this trend has been visible in North America and other Western countries. As some Asian automotive manufacturers are increasing exports to Western countries this trend of moving towards polypropylene-based materials is becoming global. Increasing exports and inter-material substitution have translated into high growth rates for polypropylene automotive compounds in Asia.
Mitsui Chemicals to gain the advantage of the conditions favoring PP automotive compounds is increasing the capacity of its affiliate Grand Siam Composites Co. Mitsui Advanced Composites (Zhongshan) Co, located in Zhongshan, China is also planning to begin commercial operation of another automotive PP compounds plant of 15 KT capacity in 2005. All these initiatives will strengthen Mitsui Chemical’s position in the automotive market.
Dupont Dow Elastomers introduce new Tyrin® grade
DuPont Dow Elastomers introduced new Tyrin® 7000 and 2500 CPE products offering broader processing and better economics in impact modification of PVC for window profiles, vinyl siding, plastic fencing, and specialty pipes. The company also revealed Enlite™modified polyolefin elastomer – a new developmental family of low-density, cost-efficient PVC impact modifiers.
According to the company, its aim with new Tyrin® 7000 and Tyrin® 2500 chlorinated polyethylene grades is to help processors meet two seemingly opposing requirements – easier, more cost-efficient processing while maintaining end-user impact performance in thermoplastic applications. Both new products offer wider processing windows yet retain essential characteristics such as low-temperature ductility.
Tyrin® chlorinated polyethylene can be used in many thermoplastic or elastomer applications. In thermoplastics, Tyrin® is used as an impact modifier for PVC-based window profiles, sidings, pipes, and other profiles for interior use. When used in thermosets, Tyrin® provides an excellent balance of chemical and heat resistance with good flame-retardant properties, in automotive, wire and cable, and general rubber applications.
Comments: Chlorinated polyethylenes (CPEs) are produced by the chlorination of high-density polyethylene. The major applications of CPEs include (1) wire and cable, (2) construction, (3) automotive parts, (4) industrial, and others. CPE is mainly used as an impact modifier for hard polyvinyl chloride.
The global major suppliers of CPEs are DuPont Dow, (North America & Europe), Denki Kagaku Kogyo (Japan), Toyo Soda (Japan), Yaxing Chemical (China), and others.
Chevron Phillips to construct a new polyphenylene sulfide plant
Chevron Phillips Chemical announced its plans to build a new 22 million pound-per-year capacity polyphenylene sulfide (PPS) plant. The startup is anticipated in early 2007. The company has not yet decided on the location of the new plant.
Ryton® PPS is Chevron Phillips Chemical’s high-performance engineering resin known for its dimensional stability and resistance to corrosive and high-temperature environments. Ryton® PPS is used in injection molding and extrusion applications for computer components, automobile parts, and various electrical appliances.
Comments: Polyphenylene sulfide (PPS) is a semicrystalline material that offers an excellent balance of high-temperature resistance, chemical resistance, flowability, dimensional stability, and electrical properties. PPS can be loaded with reinforcement fibers and fillers for injection molding. Because of its low melt viscosity, PPS can be loaded as high as 70% with a variety of fillers and reinforcements. PPS, which can be compounded or reinforced, is usually injection molded. Polyphenylene Sulfides provide good heat resistance, chemical resistance, dimensional stability, impact strength, and electrical properties. PPS is inherently flame-resistant because of its chemical structure of 70% aromatic compounds and 30% sulfur.
The total demand for PPS in North America in 2003 was 40 million pounds. Injection molding constitutes almost 95% of the total PPS demand. The biggest application for PPS is in electrical and electronic parts. The electrical parts constitute 45% of the total demand while automotive applications account for 35% of the PPS demand. The primary use of PPS is electrical connectors and compounds because of the material’s high heat deflection temperature, flame retardancy, and ability to fill long, thin sections. PPS is also used in automotive applications such as engine sensors and halogen lamp sockets. Other applications for PPS include appliance applications such as small switches, heater internal housings, electric motors, end bells, and brush holders.
Chevron Phillips, Ticona, and Dainippon Int. and Chemicals (DIG) are the global suppliers for PPS. Chevron Phillips controls 44% of the global capacity followed by Ticona and DIG. Chevron Phillips sells its PPS resin under the trade name Ryton®. PPS has seen very high growth rates of 10% to 12%. Suppliers have continuously increased their capacity to meet this high demand.
Firestone Building Products to construct the TPO plant
Firestone Building Products Co. announced its plans to build a second thermoplastic olefin roofing membrane plant. In conjunction with its expansion of TPO membrane production, the Carmel-based division of BFS Diversified Products L.L.C. has decided to phase out its polyvinyl chloride roofing offerings by mid-2005.
The company is in the initial stages of site selection for the new manufacturing operation, which would increase its number of UltraPly TPO membrane production lines to three. The other two lines are based at the company’s Wellford, SC, facility, which it obtained in 2002 and expanded in 2003 after purchasing the roofing assets of Serrot International Inc.
The phase-out of PVC is based on recent demand figures and the benefits of TPO roofing materials. During the last seven years, the commercial roofing industry has seen greater interest in TPO vs. PVC.
Comments: Thermoplastic polyolefin (TPO) has continued to gain acceptance in single-ply roofing systems since its introduction in the late 1980s. The high growth in TPO is attributed to growth in the construction industry as well as inter-material competition with the main advantages being weldability and ease of installation.
The major technical requirements for TPOs in single-ply roofing applications include (1) durability, (2) ease of installation, (3) ability to form tight seams when two sheets are bonded, (4) abrasion resistance, (5) high- and low-temperature properties, (6) sunlight and UV resistance, (7) adhesion to the substrate, (8) low VOC emissions while installation and (9) low shrinkage.
The North American demand for TPOs in roofing membrane applications was 56 million pounds in 2003. TPO in roofing applications normally compete with (1) EP(D)M, (2) f-PVC, (3) chlorosulfonated polyethylene, (4) chlorinated polyethylene, (4) neoprene, and others. TPOs compete with thermoset rubbers such as EP(D)M, neoprene, nitrile, and others. The major advantages of TPO over EP(D)M include (1) lightweight, (2) better aesthetics, (3) low VOC emissions during installation, (4) stronger seam strength, (5) lower shrinkage, and (6) ease of application.
The advantages of TPOs over f-PVC include (1) aesthetics, (2) lower VOC emissions during installation, (3) ease of application, and (4) lower shrinkage. Flexible PVC is largely used in this application because of its good seam strength and lower cost. TPOs also compete with CPE and CSPE-based roofing systems in specialized applications.
Firestone and Carlisle are the major players in manufacturing TPO membranes for the roofing industry and have been increasing their capacity to meet the growing demand.
Solvay licenses its vinyl chloride monomer to Singpu Chemical in China
Solvay SA announced the signing of a license agreement to supply its vinyl chloride monomer technology to Singpu Chemical Industries Co., Ltd. for the construction of a new production unit in Taixing (Jiangsu Province, People’s Republic of China). The plant is scheduled to be operational in the first half of 2006, with an annual production capacity of 200 kilotons.
This spectacular growth has been met, for the most part, by increased imports. As demand is set to continue rising, China is expected to curb its current deficit through a significant number of capacity expansion plans in its domestic vinyl production chain.
Comments: Singpu Chemical Industries is a 100% subsidiary of Singapore-based Singpu Chemicals. Singaporean company, Singpu Chemicals Ltd was formed in 1990 and consists of 2 operating companies both in the People’s Republic of China.
Singpu Chemicals manufactures and sells chemical raw materials, including chloralkali products and related downstream products such as aniline. The company is the second-largest producer of aniline in the PRC.
The demand for PVC in China is increasing rapidly. The Chinese market for vinyl polymers has grown by an average of 15% over the past five years and is expected to reach a total volume of some 7 million tons of PVC in 2004 – which accounts for almost one-quarter of the world market. About 40% of the PVC consumed in China is imported. Construction of this VCM and hence PVC plant should ease some of the domestic requirements through local supply.
EVAL Europe completes capacity expansion of EVOH resin making it the largest EVOH production site
EVAL Europe N.V. announced the completion of the manufacturing capacity expansion of its EVAL® ethylene vinyl-alcohol (EVOH) copolymer resin plant in Antwerp. The total capacity of the site is now 24,000 MT/year. The site is the largest EVOH plant in the world.
Mechanical completion was completed in September 2004. The additional manufacturing capacity represents an investment of approximately 80 million euros.
The new capacity ensures Kuraray’s position as the leading manufacturer of EVOH resins and demonstrates its continued confidence in the future growth of EVOH markets worldwide. The average annual growth rate of demand for EVAL(TM) EVOH copolymer resins is expected to be 10% over the next decade. Growth is centered in Europe, North America, and Japan, but new demand growth is predicted in Eastern Europe, the Middle East, South Africa, Asia, and Latin America.
Comments: EVOH is most widely used as a permeable barrier and is mostly used with other plastics as a barrier resistance. These barrier properties of EVOH extend the shelf life of food items in food packaging applications. EVOH has excellent gas barrier properties, resistance to solvents, chemicals, and hydrocarbons, and an excellent barrier to odor and flavor.
EVOH’s barrier properties are increased when combined with other polyolefin and adhesive layers to produce a multi-layered film. The film is customized according to packaging requirements and therefore EVOH copolymer has found applications in packing many food products, especially fruit juices. The use of EVOH as one of the layers in packaging reduces the permeability of oxygen and other gases drastically, increasing the shelf life.
The most common applications for EVOH include (1) packages that require preservation of fragrances and aroma of contents, (2) packing agriculture chemicals, pharmaceuticals, cosmetics, and gasoline (3) due to its resistance to oil and organic solvents, it is used in the manufacture of fuel tank. EVOH is also suitable for packaging oily foods, edible oils, mineral oils, and organic solvents. (4) It is used in the manufacturing of floor-heating pipes as it offers weather resistance and high gas barrier suitable for construction materials.
In 2003 the consumption of EVOH was close to 65 KT growing at close to 5% with close to 95% of the demand being concentrated in North America, Europe, and Japan. The new capacity will allow Eval Europe to meet the growing demand for EVOH in packaging applications and further strengthen Kuraray’s position in the EVOH markets.
Blackstone Group, Celanese parent to acquire Acetex Corporation
Blackstone Crystal Holdings Capital Partners (Cayman) IV Ltd. (BCP Crystal) and Acetex Corporation (Acetex) announced the signing of an Arrangement Agreement for BCP Crystal to acquire Acetex in a transaction valued at approximately CDN $600 million (USD 492 million). Under the terms of the Arrangement Agreement, BCP Crystal will acquire all of the issued and outstanding common shares of Acetex for CDN $9.00 (USD 7.38) cash per share.
Acetex will be operated as part of BCP Crystal’s global Celanese chemicals business.
The offer to acquire approximately 35.4 million fully diluted shares at a purchase price of CDN $9.00 per share equivalent implies a total value for the equity of Acetex of CDN $318 million (USD 261 million). Acetex’s net financial debt of approximately CDN $282 million (USD 231 million) will be assumed in the transaction. The acquisition will be financed through an amendment and expansion of the senior credit facility of a BCP Crystal subsidiary.
Comments: Celanese has historically been the global leader in acetyl products followed by BP and others. This move combining Acetex with Celanese (now BCP) makes global strategic sense in the acetic acid chemistry branch of petrochemicals. Acetex and BCP further comment on the strategic nature of this joining.
Celanese brings to the table a globally recognized brand name, proprietary technology, and expertise that will strengthen our acetyls operations. Those qualities also make Celanese an ideal partner for the Saudi Arabia acetyls project and one that appreciates its potential value. Acetyl products, which include acetic acid, vinyl acetate monomer, and others, are the building block chemicals used to produce such products as paints, coatings, adhesives, and textiles.
In 2003, Acetex and AT Plastics merged their operations to create an integrated chemical company focusing on specialty plastics and intermediate chemicals. Under the agreement, AT Plastics had become a wholly-owned subsidiary of Acetex.
This acquisition should allow Acetex (and AT Plastics) to take advantage of raw material integration and other product line synergy to strengthen its polyolefins and related plastics businesses.
Ashland purchases Dow’s DERAKANE® epoxy vinyl ester resin business
Ashland Composite Polymers, a business group of Ashland Specialty Chemical, a division of Ashland Inc. announced the signing of an agreement to purchase the DERAKANE® epoxy vinyl ester resin business from Dow Chemical in a cash transaction valued at approximately $92 million (USD). Annual sales of DERAKANE resins are approximated at $70 million (USD).
The proven performance of DERAKANE and DERAKANE MOMENTUM technologies for use in fiber-reinforced plastics (FRP) applications requiring outstanding corrosion resistance and structural strength complements Ashland’s current product portfolio of thermoset resins.
The purchase includes all technology assets associated with the DERAKANE business. No physical assets will transfer to Ashland. The closing, which is anticipated to take place in late 2004 or early 2005, is conditional upon a number of standard closing conditions, including several regulatory reviews.
Comments: Ashland’s purchase of epoxy vinyl ester business from Dow fits well with the company’s overall product portfolio. Ashland supplies epoxy vinyl ester products under the trade name Hetron®. Over the past two years, Ashland has spent a significant amount of time refining its portfolio of businesses and focusing on technologies – such as thermoset chemistries and this acquisition is a significant advancement in its product offerings.
Dow developed Derakane Momentum technology in 1999 and commercialized it in 2000. In order for Dow to broaden its epoxy vinyl ester business, it meant the company to invest in polyesters that are outside the company’s core capabilities. Hence the acquisition of this business by Ashland is a successful transaction for both companies.
Ethylene Pipeline Planned in Germany
A consortium of producers and users announced their plan to construct an ethylene pipeline that would link BP’s and OMV’s (Vienna) respective crackers at Münchmünster and Burghausen in the German state of Bavaria, to BASF’s cracker at Ludwigshafen, where it would be connected to the ARG pipeline network.
The consortium consists of the three cracker operators, and four firms that consume ethylene in Bavaria — Borealis, Clariant, Vinnolit, and Wacker.
The proposed pipeline, dubbed the Ethylene Pipeline System (EPS), is expected to cost more than EUR100 million ($124 million).
Comments: The Aethylen Rohrleitungs Gesellschaft mbH & Co. KG (ARG) pipeline is currently the main one connecting the major petrochemical sites in Northwest Europe. Before September 2002, the pipeline was tightly controlled until the acquisitions by BP and Shell of Veba and DEA, respectively. BP and Shell made concessions due to anti-competitiveness concerns by the European Commission at that time, which opened the ARG pipeline to more third-party trade. The linkage to Austria will extend the pipeline further South and East and enable the ethylene and derivative business in Central Europe to operate more efficiently and allow OMV to be more competitive in its relatively “land-locked” location as far as raw materials flow is concerned.
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