Borealis joint venture Borouge to expand polyethylene capacity to 580,000 MT/year
Borouge, Borealis’ joint venture with ADNOC has announced its plans to expand its existing Borstar capacity and that is considering further expansion to form a world-scale petrochemical complex at Ruwais, Abu Dhabi in the UAE. Building on the successful start-up and first two years of operation, increasing market demand for enhanced polyolefins and more feedstock becoming available, the next steps are underway to expand the Borouge petrochemical complex.
Borouge will invest $40 million to debottleneck the existing Borstar-enhanced polyethylene (PE) capacity from 450,000 to 580,000 MT/year. The project, which includes the expansion of material handling facilities, is to be completed by Q2 2005. In addition, Borouge will utilize all of the existing 600,000 MT/year ethylene cracker capacity.
To further develop Borouge, its owners, ADNOC and Borealis, earlier this year signed a Memorandum of Understanding and are proceeding with a feasibility study for a new world-scale cracker and downstream polyolefin plants. The expansion is based on two ADNOC natural gas developments in Abu Dhabi, equivalent to approximately 1.4 million tons of ethylene. Conclusions are likely to be made during 2004 with the expected start-up of the new plants in 2008.
Comments: The demand for polyolefins in the Middle East and Asia is expected to grow annually between 6% and 8% until the year 2010. By expanding olefins and polyolefins production, Borouge will achieve greater cost efficiency and will be able to keep pace with domestic and export demand.
Borouge has an added advantage since ADNOC, one of the joint venture partners has a strong position in feedstocks and local markets know-how.
Borealis’ Borstar process was a major contribution to the polyolefin industry. Borstar’s primary attribute is that it is a two-stage process that enables the operator to tailor the components made in each stage. Unique products including bimodal molecular weight distribution can be produced. Borstar polyethylene, which has been in the market since 1996, has proven to be an excellent pipe resin (i.e., PE100s). We have covered it several times before in New Generation Polyolefins Bimonthly Review.
Univation Technologies to license metallocene polyethylene to Braskem
Univation Technologies has signed an agreement to supply metallocene technology and catalysts to Brazilian petrochemical company Braskem.
Braskem will introduce Univation’s XCAT metallocene catalysts and retrofit one reactor at its Unipol-process polyethylene (PE) plant at Camaçari, Brazil to linear low- and very low-density PE. The total investment will be $3.5 million, and that the project will allow the company to produce 100,000 MT/year of metallocene-grade PE. Completion is scheduled for the first quarter of 2004.
Comments: Univation is playing a key role in advancing polyethylene technologies in Latin and South America, having licensed the catalyst and process technologies to produce gas-phase metallocene to PEMOSA and now to Braskem. In 2003, Univation also licensed metallocene technology to Nippon Unicar in Japan.
On a per capita basis, Brazil consumes 15 pounds of polyethylene, Argentina about 24 pounds, while the United States and Europe consume in excess of 80 pounds. Although the demand for polyethylene, especially metallocene-based, in South America is currently much lower compared to North America, Europe, and Japan, it is anticipated that the consumer base will increase significantly in the next few years. The consumption of metallocene polyethylene is estimated to close out at approximately 125 million pounds in 2003. Primarily applications for m-LLDPE include packaging for meat & poultry, cheese, frozen foods, and fresh-cut produce bags. Demand for plastomers and elastomers has been limited. Metallocene LLDPEs have been growing at rates in excess of 25% per year since 2000 and are expected to remain high (roughly 22-23%) for the next few years.
Dow realigns its global business groups and Liveris names three senior vice presidents to lead business portfolios
Andrew N. Liveris, President, and Chief Operating Officer, announced a new organization with three global business portfolios including (1) Plastics, (2) Chemicals and Intermediates, and (3) Performance Chemicals & Thermosets, and the appointment of the senior vice presidents who will lead them.
The three global business portfolios – and their leaders who report to Liveris – include the following:
Plastics, headed by Romeo Kreinberg, which includes Polyethylene (PE), Polypropylene (PP), Polyethylene Terephthalate (PET), Polystyrene, Engineering Thermoplastics (ETP), Fabricated Products; Automotive, Wire and Cable; and Rubber and Elastomers.
Chemicals and Intermediates, headed by Michael R. Gambrell, which includes Organic Intermediates, Solvents and Monomers (OISM), Oxide Derivatives, Chlor-Vinyls, Chlorinated Organics, Cal/Mag, Propylene Oxide/Propylene Glycol (PO/PG), and Acrylates.
Performance Chemicals and Thermosets, headed by Phillip H. Cook, which includes Polyurethanes, Polyurethane Systems, Epoxy, Dow Latex (Emulsion Polymers & UCAR Emulsion Systems), Industrial Chemicals, Specialty Polymers (excludes Acrylates), Water Soluble Polymers, Custom and Fine Chemicals, and Licensing.
The three senior vice presidents will be accountable for their portfolios’ profitability and related business measurements; working with Liveris and the Office of the CEO on allocating resources based on the needs of the overall company; and operating at the corporate level on strategy and portfolio management.
Liveris also appointed Lee P. McMaster to work full-time on a special project assessing Dow’s opportunities in China and the Middle East. His job will be to develop the company’s ability to access globally-competitive sources of raw material for feedstocks and energy.
Comments: The major significant developments of reorganization are (1) consolidation of selected market sectors into – plastics, Chemicals & Intermediates, Performance Chemicals and Thermosets, and (2) Lee McMaster to handle China opportunities. The reorganization will optimize Dow’s future direction.
Dow Chemical Company evolved as one of the first organizations to embrace the newest trend in planning and analysis – Focus on Share Holder Value Based Management. The goal is to protect, maintain and enhance the shareholder value at the corporate level through business portfolio optimization, using Equity Spread and Economic Profit as the preferred metrics.
In the last 40 years organizational planning went through a dominance by various business functions – Accounting and Finance – during the 50s, Production and Operations Management – during the 60s and 70s, followed by Marketing & Strategic Planning during the 80s. The second half of the 90s represented a time when most of the chemical industry had to compete with information technology on a shareholder value basis and turned to Value Based Management. – an accounting/finance function – essentially completing a full circle.
Emphasis on shareholder value will temporarily compromise the stakeholder (employees, suppliers, and customers) value – but in the long run, will be beneficial.
Eni SpA sells Polimeri Europa’s SB copolymers plant in Texas to Lee Chang Yung Chemical
Italian oil and gas group Eni SpA announced that its Polimeri Europa unit had sold an elastomers plant in the United States for $41 million to Lee Chang Yung Chemical Industry Corp. of Taiwan.
The plant in Baytown, Texas has a total manufacturing capacity of 50,000 MT/year of styrenic block copolymers which are used in covering systems, adhesive sticks, footwear, and other products.
It was the first asset sale for Polimeri Europa, whose petrochemical assets have been up for sale for years.
The sale of the chemical assets is part of its strategy to refocus Europe’s fourth-largest energy company on its core oil and gas business.
Comments: There are two major issues related to this sale: (1) Enichem’s broad plan to divest selected polymer areas – related to Italian government issues and (2) Lee Chang Yung (LCY) group’s plastics plans.
Enichem Elastomers is a part of Polimeri Europa and had an excellent market/technology position during the decades of the 70s and 80s. The Italian government wanted to divest selected downstream operations. For a long time, SABIC evaluated the possibility of acquiring Polimeri Europa including all of its operations. SABIC chose instead to go with DSM Polymers. Following the SABIC’s acquisition of DSM, Enichem Elastomers essentially attempted to sell the businesses as a unit to a functional organization (instead of venture capitalists) – due to quasi-governmental involvement. This sale to LCY would meet a lot of the requirements.
Historically, Enichem Elastomers has been active in EP-based and SB-based elastomers, even though they were more known in their SB-based elastomers. This sale involves SB copolymers only. Enichem had been a force to reckon with in Europe with their SB copolymers. They did not succeed in entering the U.S. markets until the late 80s after several attempts including the failed JV with Arco Chemical Company – Enarco. Enichem finally entered the SB copolymer business in North America in the early 90s. It was one of the organizations that benefited the most in addition to Dexco from Shell’s explosion in SB copolymer facilities.
At present time the Enichem plant in the US is sold out to North American customers. LCY was established in 1965 as a manufacturer of basic chemicals in Taiwan. The first foray into TPEs (or any plastics) for LCY was in 1996. The TPE plant, based on technology from INSA (Industrial Negromex), now part of Dynasol for SB copolymers is the first plastics plant for LCY. Within a short period from 1996 to 2003, LCY also built a second TPE plant at their Kaohsiung location.
The acquisition of Enichem Elastomeri will provide LCY excellent opportunities to enter the European and North American markets and compete effectively against Dynasol the major technology contributor to LCY in the initial stages. In addition, LCY has proximity and presence in Chiina – the major market for SB copolymers for the next few years.
New York-based investment firm Blackstone announces intention to launch a friendly takeover offer for Celanese AG
BCP Crystal Acquisition GmbH & Co. KG, a German limited partnership controlled by a group of funds advised by The Blackstone Group, New York, has made an offer to buy German chemicals maker Celanese AG for €3.1 billion ($3.8 billion).
The deal would consist of Ticona, Celanese’s technical polymers business. Ticona ranks as the world’s largest acetal maker and also produces other engineering resins.
BCP Crystal Acquisition GmbH & Co. KG intends to offer a price per share of EUR 32.50. This is above the all-time-high closing price and represents a premium of 46% over the average daily volume-weighted price per share of Celanese in 2003 and a premium of 13% over the three-month volume-weighted average daily closing share price of EUR 28.66.
Celanese AG’s largest shareholder, Kuwait Petroleum Corporation, holding approximately 29% of the shares of Celanese AG (excluding treasury shares), has undertaken to accept the tender offer.
The takeover offer will be conditioned on the receipt of antitrust clearances and will contain further conditions that will be described in the offering materials. BCP Crystal Acquisition GmbH & Co. KG expects that these conditions will include a minimum acceptance condition of 85% of the issued ordinary shares (excluding the treasury shares), the absence of any material adverse change with respect to Celanese AG and other, mostly customary, conditions. Blackstone will provide the equity funding for the transaction and Morgan Stanley and Deutsche Bank have provided firm financing commitments for the remaining funds required to complete the transaction.
Comments: First of all, this is a tender proposal, not a deal…yet. Blackstone is an adept buyer and restructurer with very creative exit strategies. They also have some very powerful and wealthy capital alliances with an orientation toward the Chemical Industry. Blackstone was one of the ringleaders who helped Huntsman.
Celanese has been on a shrinkage and valuation kick of its own, with some success. Contacts within the company say the party line is business as usual which may hold for a time but doesn’t fit the notion of optimizing Celanese. The contact would not comment about multiples but said the purchase was at about 75% of sales and if some “rules of thumb” were used against this you could see that a healthy but not stellar multiple has been offered. The central question therefore is; how does Blackstone maximize its value opportunity?
Although pure speculation at this time; this could go two ways. First, Celanese has boiled down its holdings to a majority of core franchise businesses with the perhaps more strategic value alone than together. This is not all that surprising a conclusion. The second and less clear opportunity emerges if you dig into some recent deal patterns of these players. These capital firms want to acquire but don’t want to operate, therefore they need a solid operations base on which to place Celanese. One of their joint partners recently bought a group of chemical businesses in Europe and immediately merged it with a demonstrated operation platform in which Blackstone also has an interest. If Blackstone did the same, it would be an immediate way to jack the EBITDA performance without internal bootstrapping and extensive activities in piecemeal divesture. So, although this may sound like fiction, there are some precedents. In an uncertain situation or world, often the best predictor of the future is past performance or methodology. We believe the chances of re-selling Celanese are minimal but if the company can be immediately incrementalized onto an existing operations base, huge returns can be seen with less disruption in a shorter period than any other strategy.
More on EPDM price-fixing investigation
Dow Chemical and DuPont announced that in separate regulatory filings, the companies expect their 50-50 DuPont Dow Elastomers joint venture to incur losses as a result of an investigation by European and U.S. officials into possible anticompetitive in synthetic rubber markets.
DuPont Dow Elastomers has been subpoenaed in connection with the probe. The companies said that they are unable to estimate the range of losses due to the investigation at this point. The filing did not disclose whether the losses would be incurred as a result of fines, civil judgments, or both.
Crompton, a leading ethylene-diene propylene monomer (EPDM) manufacturer, said last year that it notified antitrust authorities about possible antitrust violations and has been granted conditional amnesty from criminal prosecution and fines that may result in the U.S., Europe, and Canada. Bayer and DSM say their offices in Europe have been raided in connection with the probe.
Comments: The antitrust class-action lawsuit is filed by end users of EPDM from January 1, 1999, through May 2003. The lawsuit is filed against EPDM producers including (1) Crompton Corp., (2) DuPont Dow Elastomers, and (3) Bayer Corp.
The end users allege that the EPDM producers conspired to fix, raise, maintain, or stabilize the price for EPDM above the level and violated the Sherman Anti-Trust Act.
For details on Sherman Antitrust Act – please see our analysis of the Antitrust and Pricing issues in the New Generation Polyolefins – Bimonthly Review.
ExxonMobil withdraws from China refinery-petrochemical joint venture
ExxonMobil has pulled out of negotiations on a proposed $3.2-billion refinery and petrochemical joint venture project planned by Fujian Petrochemical Co. at Hui An, China. The project was originally an alliance between four companies including (1) ExxonMobil, (2) the Fujian Province, (3) Saudi Aramco, and (4) Sinopec where each had a 25% stake.
The upstream part of the project includes a 12-million MT/year oil refinery. The refinery would provide feedstock for an 800,000 MT/year cracker, which in turn would feed downstream units producing 400,000 MT/year of polyethylene and 300,000 MT/year of polypropylene. The project is scheduled for completion in 2007.
According to Sinopec, invitations to bid for the cracker will be sent out to contractors within the next three months. The technologies for the downstream units will also be selected via competitive bids. The remaining partners would welcome ExxonMobil’s decision to rejoin the project and have given the company a time frame of about 18 months. The remaining partners have sufficient financing to complete the project without ExxonMobil’s participation.
New high-density polyethylene (HDPE) license in China by Chevron Phillips
Sources at Chevron Phillips Chemical have provided CMR with an exclusive press release regarding a new 350,000 MT/year HDPE license for a facility to be built in Maoming, China.
This project has been under study for some time and we understand from Sinopec that the excellence of the Chevron Phillips’ resin in pipe applications was a major factor. This is the second HDPE plant in China for Chevron Phillips, the other is a joint venture in Shanghai. The original technology presentation to Sinopec was made in March at a private technical conference arranged by CMR. Watch for more details in future editions of PO&E when the formal press announcement is made.
Vietnamese firm PetroVietnam to build refinery & polypropylene complex
State-owned oil firm PetroVietnam announced that it is going ahead with previously announced plans to build a refinery that will also manufacture polymer-grade propylene and polypropylene (PP). The company has awarded a project management consultancy contract to Stone & Webster to supervise construction.
A consortium of engineering contractors led by Technip including JGC and Tecnicas Reunidas (Madrid) has been awarded the contract.
The complex will be built at the Dzhung Quat industrial zone, and it will use domestic crude from the Bachho offshore field. It will have crude oil refining throughput of 6.5 million MT/year and will include a splitter that will produce 150,000 MT/year propylene.
PetroVietnam is in discussions with Basell and BP to obtain technology for the PP plant, which is likely to have the capacity for 150,000 MT/year. The complex will cost an estimated $1.5 billion and is scheduled for completion by the end of 2007.
Comments: The refinery was initially planned as a joint venture set in 1998 between PetroVietnam and Russian firm Zarubezhneft. The Russian partner then delayed the project by two years and eventually pulled out due to funding difficulties. It will be Vietnam’s first refinery. PetroVietnam is also planning refineries at Nghi Son and Long Son that could include petrochemical production.
PetroVietnam recently started the construction of a PVC plant having a capacity of 100,000 MT/year by 2005.
Solutia and its 14 subsidiaries file for Chapter 11 bankruptcy protection
Solutia Inc., a leading manufacturer and provider of performance films, specialty chemicals, and an integrated family of nylon products, announced that it and 14 of its U.S. subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. Solutia’s affiliates outside the United States were not included in the Chapter 11 filing. Solutia has approximately 6,700 employees worldwide.
During the Chapter 11 proceedings, Solutia’s worldwide operations will operate without interruption. The Company has taken steps to ensure continued supply of goods and services to its customers. In that regard, Solutia has received a commitment for up to $500 million in new debtor-in-possession (DIP) financing, $350 million of which will replace Solutia’s current senior credit facility. Upon Court approval, the DIP financing, combined with the Company’s cash from operations, will provide sufficient funding for operations during the Chapter 11 process. Vendors will be paid in full for all goods furnished and services provided after the filing date as required by the Bankruptcy Code. The Company has requested Court approval to continue to pay employees without disruption and in the same manner as before the filing and expects the request to be granted as part of the Court’s “first-day” orders.
The decision to file was made to obtain relief from the negative impact on the Company caused by legacy liabilities, which include litigation and settlement costs, environmental remediation, and Monsanto retiree healthcare obligations, Solutia was required to assume when the Company was spun off from the former Monsanto Company, which is now known as Pharmacia, a wholly owned subsidiary of Pfizer. These legal liabilities have been an obstacle to Solutia’s financial stability and success. Under the U.S. Bankruptcy Code, these liabilities will be discharged as pre-petition liabilities pursuant to a plan of reorganization.
Comments: Solutia was formed as an independent group from Monsanto’s re-organization to focus on biotechnology operations.
Solutia has been struggling with debt restructuring for a long time now. The company sold $223 million in senior secured notes via a private placement as part of debt restructuring. The proceeds were used to repay a $150-million bond due in October 2002 and to pay down part of an $800-million credit facility that expired in August 2002.
Solutia is one the largest producers of nylon 6,6 resin. It has two major business units namely: (1) Performance Products and Services, and (2) Integrated Nylon.
In 2002, the company sold its resins, additives, and adhesives businesses to UCB S.A. for $500 million in cash. Solutia has also sold its share in Advanced Elastomer Systems LP — a thermoplastic elastomer maker in Akron, Ohio — to Exxon Mobil Chemical Co., which had been Solutia’s partner in the 50-50 joint venture.
Sumitomo Chemical to begin North American production of TPE
Sumitomo Chemical Company announced its plans to build a new Sumitomo® TPE (TPV and TPO) thermoplastic olefin elastomer manufacturing facility in Georgia, through its wholly-owned U.S. subsidiary Sumitomo Chemical America, Inc. (SCAI) The plant is scheduled to begin operation in the 2nd half of 2004, with a production capacity of approximately 5,000 tons (10 million pounds) per year.
At the new Georgia facility, SCAI plans to produce automobile body seal materials, in addition to the airbag cover resins and interior sheet resins currently manufactured on commission in Texas. SCAI will then have a complete lineup of Sumitomo® TPE products.
Polypropylene suitable for automotive parts like bumpers and instrument panels is currently produced in the US, using Sumitomo Chemical technology, by Phillips Sumika Polypropylene Co. (PSPC), a Texas-based joint venture with an American partner. TPE based on Sumitomo-equivalent polypropylene produced by PSPC, SCAI will become able to supply customers with an extensive line of olefins-based products.
Comments: Thermoplastic Elastomers (TPEs) can be broadly classified into (1) Olefinic (TPOs & TPVs), (2) Styrenics (SBS, SEBS & SIS), and (3) Specialty (TPUs, COPEs & PAEs).
Olefinic TPEs have shown higher growth rates in North America compared to other TPE families primarily due to their acceptance in automotive applications where their cost performance and recyclability is an advantages. The current North American demand for olefinic TPE is estimated at 540 MM Lbs. The new plant will complement Sumitomo’s polypropylene offering for automotive applications through the joint venture with Phillips Sumika.
The target applications for Sumitomo include (1) Automotive (IP skins & airbags), (2) Hoses & Tubing, (3) Stationery Products, and (4) Synthetic Leather applications.
Kuraray develops new EVOH barrier resin with plasticity and superior gas-barrier functionality
Kuraray Co., Ltd. announced that it has developed and begun construction of production facilities for a new, as-yet-unnamed barrier resin possessing exceptional flexibility, elasticity, and orientation characteristics by keeping good barrier performance.
The barrier resin newly developed by Kuraray is based on EVAL®. Using proprietary polymer modification technology, the company can control the crystallization behavior to show significant flexibility and orientation characteristics with minimum sacrifice of the excellent barrier performance of EVAL.
The company plans to build a plant having a capacity of 5,000 MT/year of the new resin at its Okayama plant in Japan. The start-up of the plant is scheduled for September 2004. The investment for the new project will be ¥1.0 billion.
Kuraray plans to target the new resin in several applications including (1) food packaging (shrink film, shrink bags), and (2) industrial materials (elastomer-related applications, automotive-peripheral applications).
Comments: In 1972 Kuraray developed the ethylene vinyl alcohol (EVOH) copolymer resin EVAL and commercialized it. EVAL has the most effective gas barrier performance among all plastics and is regarded as a superior barrier material for plastic food packaging to extend its shelf life.
With the new resin that is based on EVAL, Kuraray has been able to improve the flexibility and elasticity properties along with the excellent barrier properties. The new resin will compete with PVDC in shrink film and bags application where Kuraray plans to utilize its flexibility properties. In the case of PET barrier bottles, the company plans to market the new resin because of the material’s resistance to delamination.
The industrial applications that the company plans to target for the new resin include (1) gaskets, (2) cap liners, (3) pharmaceutical seals, (4) automotive peripherals, (5) coating materials, (6) heat-seal materials, and others.
Noveon to construct TPU plant in China
Noveon, Inc. announced plans to construct a thermoplastic polyurethane (TPU) manufacturing facility near Shanghai, China. Currently, Noveon supplies Estane® TPU to customers in Asia from production plants in Belgium and the United States.
The new polyurethanes manufacturing facility is being put in place to add global capacity and improve service levels to its customers in China and the Asia Pacific Region. The new Greenfield plant is expected to start up in the fourth quarter of 2004.
Comments: Noveon (Formerly B.F. Goodrich) is headquartered in Cleveland, Ohio, with regional centers in Brussels, Belgium, and Hong Kong. Noveon’s business units are classified as (1) Consumer Specialties, (2) Performance Coatings, and (3) Specialty Materials which include thermoplastic polyurethanes (TPUs). Noveon markets TPUs under the trade name Estane®, Estaloc®, and EstaGrip® for various applications which include but are not limited to (1) Wire and Cable, (2) Textile Coatings, (3) Hoses and Tubing, (4) Film and Sheet, (5) Adhesives and (6) Molding Applications. Noveon recently expanded its TPU offering by acquiring aliphatic TPU producer Thermedics Polymers (For more information, refer to PO&E Vol. 1, Issue 22).
Currently, Noveon supplies Estane TPU to customers in Asia from production plants in Belgium and the United States and the growing demand in the Asia-Pacific region has prompted this expansion. The Shanghai facility is expected to start up by the end of 2004.
PolyOne to shut down its films manufacturing plant in Burlington, NJ
PolyOne Corporation announced that it will close the Burlington, NJ, manufacturing plant within its Engineered Films business segment in mid-February 2004, resulting in the elimination of approximately 115 positions.
According to the company, its engineered films business unit felt the effects of raw material inflation and offshore competition in some of its key markets, and PolyOne is restructuring to bring capacity in line with sales demand and reduce cost structure to improve profitability.
The Burlington plant manufactures a variety of vinyl-calendered film products for end-use applications such as decals, window shades, and wallcoverings, as well as other thin-film products. PolyOne intends to transition many of these products to its other film manufacturing facilities with excess capacity in Lebanon, Pennsylvania, and Winchester, Virginia.
PolyOne projects that this restructuring action will yield an annualized pre-tax earnings improvement of $5.5 million. The Company anticipates a total restructuring expense of approximately $15.5 million, of which approximately $7 million will be non-cash and related to asset write-offs. The estimated fourth-quarter 2003 restructuring expense is $14 million, with minimal funding of the cash closure costs anticipated in 2003.
Employees affected by the plant closings will be eligible for severance benefits and outplacement services.
Comments: On October 21, 2003, PolyOne announced that Engineered Films was among three business operations being considered for divestment. The Company has set no deadline for divesting the business. Engineered Films had 2002 sales of nearly $155 million, representing approximately 6 percent of total Company sales.
Tyco International to close four film plants
Tyco Plastics, a division of Tyco International has announced its plans to shut down four film extrusion plants at four locations including (1) Woodland, CA, (2) Thomasville, NC, (3) Mansfield, OH, and (4) Fairmount, MN.
The manufacturing conglomerate immediately is shuttering facilities in California, and North Carolina and by Feb. 8, 2004, will close plants in Ohio, and Minnesota.
The closings are part of a re-evaluation Tyco announced in March and set into action in November. The company, based in Pembroke, Bermuda, but operated from Princeton, NJ, said it would close 30 plastics and adhesives plants and lay off 1,900 workers in that unit.
Comments: Tyco International had put its division Tyco Plastics in 2002, but then withdrew its decision. The plastics business includes a commodity flexible film operation with annual sales of close to $2 billion, and A&E Products Group LP, a dominant maker of injection molded hangers.
The company is using the strategy to get rid of the plants and products that do not fit into its core strategy.
Bayer and DuPont expand leading position in engineering thermoplastics
DuBay Polymer GmbH, a joint venture between Bayer Polymers and DuPont announced its plans to construct a world-scale plant for the production of polybutylene terephthalate (PBT) in Hamm-Uentrop, Germany.
Bayer and DuPont are building on their position as leading manufacturers of engineering thermoplastics. With an initial capacity of 80,000 tons per year, the plant is the biggest of its kind in the world.
It will be operated by DuBay Polymer GmbH, a joint venture between Bayer and DuPont. The two companies have together invested some €50 million in the plant, in which 61 people are employed.
Both companies use the straight resin from the production facility and compound it into products for their PBT ranges – Crastin® in the case of DuPont, and Pocan® in Bayer’s case.
Comments: The global demand for polybutylene terephthalate is expected to grow at about 6% per annum for the next five years. In order to optimize cost positions, benefit from economies of scale, and further strengthen its position in the PBT market, DuPont and Bayer have decided on constructing a world-scale PBT plant.
The several advantages of PBT include: (1) good heat resistance, (2) high stiffness, (3) ease of processing, (4) outstanding electrical insulating properties, (5) excellent surface finish, (6) chemical resistance, and others.
The major application of PBT is in the automotive and electrical/electronic industries, accounting for about 80% of the demand. Other applications include products for medical, sports, and leisure applications.
GE Plastics to add production capacity and film extrusion capabilities in Nansha, China
GE Plastics, a division of General Electric Company, announced an expansion plan for its production capacity in Nansha, Guangdong Province.
The new expansion of the Nansha plant will be worth approximately US$60 million, primarily for building up eight new production lines. The project is scheduled for completion in November 2004.
The construction of the current Nansha plant began in 1994, and it was put into production in July 1996. Total investment reached US$70 million. The plant facility covers an area of 80,000 square meters and employs over 200 people. In 1999, the Nansha plant passed the ISO 14001 certification audit by Lloyd Register Quality Assurance.
The GE Plastics Nansha plant specializes in plastics compounding and film extrusion. Using raw materials such as PC, ABS, additives, and pigments, the plant produces various plastic products ranging from LEXAN® resin, CYCOLOY® resin, NORYL® resin, and CYCOLAC® resin to 8010 and 8B35 Graphic Film.
Comments: GE Plastics is a leading producer of engineering thermoplastics. GE Plastics materials, including LEXAN® polycarbonate, are used in several applications such as CDs and DVDs, automobile parts, computer housings, cookware, outdoor signage, cell phones, bullet-resistant shielding, and building materials.
Through its LNP Engineering Plastics business, the company is a worldwide leader in the custom compounding of engineering thermoplastics. GE Plastics is also a global distributor of sheet, film, rod, and tube products through GE Polymershapes and GE Structured Products.
Toy manufacturer Hasbro to close injection molding site in Spain and move work to China
Toy giant Hasbro Inc. announced its plans to close its MB España plant in Valencia and shift plastic molding to China and a Hasbro operation in Ireland.
The move will cut up to 515 manufacturing jobs, 289 of them full-time and 226 part-timers. The Spanish plant has 48 injection presses, six blow molding machines, and vacuum forming capabilities.
According to the company, the decision to cease operations in Valencia was taken due to the excess capacity at the plant vs. the current demand in the marketplace for the type of products in which the plant is competitive.
Apart from producing its toy range, MB España diversified into contract molding for customers in and outside the toy sector. Hasbro promised a “seamless transfer of [these] activities” for its customers to the company’s plant in Waterford, Ireland. The company expects to move 80 percent of the work from Spain to China, and the rest to Waterford.
BASF to acquire Ticona’s nylon 6,6 engineering plastics business
BASF and Ticona, the technical polymers business of Celanese AG, have reached an agreement under which BASF will acquire the nylon 6,6 business of Ticona, effective December 31, 2003. In 2002, Ticona’s nylon business generated sales of around €45 million.
BASF will not acquire any manufacturing sites, equipment, or related assets as part of the transaction. For a period of time, Ticona will compound Celanese® nylon 6,6 products for BASF from its Bishop, TX, and Florence, KY, sites.
Through the acquisition, BASF will strengthen its position in nylon 6,6, particularly in the important North American market. Through the divestiture, Ticona will focus on its core businesses, where they command a strong leadership role.
Comments: BASF’s acquisition of Ticona’s nylon business will strengthen BASF’s position in the business. Earlier this year, BASF completed swapping its nylon fibers business with Honeywell’s global engineering plastics business.
The major producers of nylon 6,6 resins include (1) DuPont, (2) BASF, (3) Rhodia, (4) Dow, and others.
Nylon 6,6 resins have several advantages including (1) toughness at high and low temperatures, (2) good impact resistance, (3) mechanical property retention, and (4) chemical and abrasion resistance. The major applications of nylon 6,6 include (1) automotive components such as manifolds, connectors, cooling systems, transmission components, power steering, and brake fluid reservoirs, (2) consumer products, (3) housewares, (4) toys, (5) appliances, and others.
Dow Chemical uses chemical shipping companies over price fixing
Dow Chemical Company and its subsidiary, Union Carbide, have filed suit against four chemical shipping companies, accusing them of smothering competition through price fixing and bid rigging. The lawsuit, filed in US District Court in New Haven, CT, names Stolt-Nielsen SA, Odfjell ASA, Jo Tankers BV, and Tokyo Marine Company of Japan as defendants.
According to Dow, the four defendants held talks to discuss customers and fix the prices of chemicals shipped to and from the US and elsewhere.
In September, Odfjell reached a plea agreement with the US Department of Justice over price-fixing allegations against it and other chemical shippers.
Odfjell paid a $42.5 million fine and saw two top executives receive jail sentences. Earlier this year, European anti-trust authorities raided the offices of the four companies in Norway, the UK, and the Netherlands. A US investigation soon followed. According to Odfjell, if a plaintiff can prove it has suffered a loss from an illegal action, US law sets the maximum compensation at three times the proven loss.
Regarding the lawsuit, Odfjell claims its customers have not suffered any losses because of the antitrust violations, and consequently, there is no basis for the claims from Dow Chemical and Union Carbide. Stolt-Nielsen also believes Dow’s claims are without merit and plans to defend itself vigorously.
Comments: The international ocean freight shipping business on the market scale (open trade to monopolistic) is in the boundary region of an oligopoly about to cross into the cartel/monopoly region. It is a powerful, pan-global business that has a direct impact on everyone. Family dynasties play a role, as do governmental franchises and every sort of structure imaginable.
Dow Chemical is a leading company that doesn’t take matters such as lawsuits lightly so this is probably a noteworthy case. Most of the press announcements mention “millions of dollars” but if we look at some averages, this particular suit could easily relate to somewhat more than $75,000,000 (Dow and the former UCC)…..before any treble damages – for one year! This little freight cartel thing has been going on for years.
Buried in a very good WSJ piece within the last several years is an explanation of the system. “The cartel – a series of cartels, one for each major shipping route – can tell importers and exporters when contracts begin and end, favor one port over another, – enough to swing trade away from an entire city! This is all because the shipping industry has an anti-trust exemption from Congress; all of this is legal backroom stuff.” Several government studies have shown cartels increase the cost of goods (and feedstocks) by as much as 20%. Senator Kay Bailey Hutchinson of Texas sponsored a bill in the late 1990s that started the ball rolling towards breaking this system but there remains much to do. Write the Honorable Senator with your support.
Look at this another way, the chemical industry is dying under the crunch of sky-rocketing BTU costs. On average BTUs have more than doubled to an incremental level of between $3.50-$4.50 (or more)/MM BTU. Per several governmental studies, the freight impact could be as high as 20% or $.80/mm BTUs. Now, the impact is probably not exactly this high but directionally it is significant.
Our industry’s BTU crisis doesn’t have a single solution but even freight has an impact that if brought under control would make a meaningful contribution to the solution(s) portfolio approach necessary to solve our dilemma. No single item will solve the problem; it’s going to take a portfolio.
SpecialChem acquires the Omnexus content resource platform
SpecialChem, a service company for the global chemical industry and its industrial clients, announced the acquisition of the Omnexus online content resource platform.
SpecialChem successfully operates three online service platforms since 2000, dedicated to Plastic Additives & Colors, Adhesives & Sealants, and Paints, Coatings & Inks. More than 40,000 industry professionals worldwide already benefit from a large range of information and technical support services, allowing them to solve technical problems, accelerate their new product development cycles, and dramatically enhance their innovation processes.
Comments: The major issue in e-commerce in chemicals and plastics is that the organizations failed to realize that e-commerce is a new way of doing business – not a new business and invested resources without careful evaluation.
CMR Inc. presented an analysis of the e-Commerce trend in 1999 and predicted that only e-commerce models that will succeed will be the ones with their platform to improve the customer service for existing clients and develop new clients through service differentiation.
Email us at BSingh@CMRHouTex.Com for a copy of the 1999 article.
Contact us at ADI Chemical Market Resources to learn how we can help.