Happy New Year to all our readers of Global Polyolefins & Elastomers – Strategic New Analysis from Chemical Market Resources, Inc.
We greatly appreciate all the comments, suggestions, and ideas for improvement. Our goal is to assist you in “making sense” of the news items by relating them to past industry events, and strategic inferences and relate them to continuing strategic industry analysis.
Welcome to the Second Volume – The first Issue of the biweekly news analysis filled with the latest news, strategic analysis, and lots of humor. We are also pleased to announce that Global PO&E is now available online at our website – www.CMRHouTex.Com – in addition to multiple intranet sites at major polyolefins and elastomers organizations worldwide. The contents of the past issues are archived and searchable. Kindly contact us to receive your subscriber name and password to access the content online.
We are looking forward to lots of new ideas and improvements to the Strategic News Analysis this year – just watch us go!
Thanks for making our 2003 a grand success with over 20% growth and successful Polyolefins & Elastomers Strategic News Analysis – A testament to our commitment to helping you succeed! – You Don’t Look Good – We Don’t Look Good – Vidal Sasson Principle!
Westlake licenses BP’s Innovene technology for polyethylene expansion
Westlake Polymers LP has purchased expansion rights at its high and linear low-density polyethylene plant in Lake Charles, LA, from BP Chemicals.
The rights will allow Westlake to increase annual HDPE/LLDPE capacity in Lake Charles by almost 90 million pounds, taking it from about 485 million to almost 575 million.
According to the company, the new capacity probably will be used for a future debottlenecking project, but Westlake has no timetable for such work. The additional 90 million pounds could be added in a single move or smaller increments.
Westlake needed to acquire expansion rights from BP because production at the site is based on BP’s Innovene-brand catalyst technology.
Comments: The Westlake Group is a member of Chao Group, which also includes its sister company, the Titan Group in Malaysia. Chao Group is a global manufacturer of petrochemicals and plastics and entered the North American market as Westlake Group with the acquisition of a polyethylene plant in Sulphur, LA. Westlake Group headquartered in Houston, TX has 16 operating facilities in North America. The Westlake Group owns and operates facilities for the manufacture of petrochemicals, plastics, and fabricated plastic products in North America, with sales on a global basis. The Westlake Group is comprised of companies in chemicals/petrochemicals and companies in fabricated products. The companies in chemicals/petrochemicals include (1) Westlake Petrochemical Corporation, (2) Westlake Polymers Corporation, (3) Westlake Monomers Corporation, (4) Westlake PVC Corporation, (5) Westlake Styrene Corporation, and (6) Westlake CA & O.
The polyethylene operations of Westlake Group are a part of its Westlake Polymers Corporation. Until the mid-1990s, Westlake’s participation in the North American polyolefins market was limited to high-pressure low-density polyethylene. Westlake Polymers began its operations in 1986 with an HP-LDPE capacity of 220 million pounds. Capacity was expanded in 1988 and then again in 1993. Westlake has a total LDPE capacity of 750 million pounds. In the mid-1990s, Westlake decided to expand its polyethylene offering and licensed BP’s Innovene process. As the markets for enhanced polyethylenes such as superhexenes, and metallocenes continue to experience healthy growth, the gas-phase technology allows Westlake to keep pace with the market needs, especially with converters who are switching from LDPE to LLDPE. Furthermore, the technology enables Westlake to produce both LLDPE and HDPE resins.
Reliance Industries considers building a 280,000 MT/year PP plant in India
Reliance Industries plans to build a 280,000 MT/year polypropylene (PP) plant in Jamnagar, Gujarat, India. The plant is due onstream in December 2004 or early 2005.
The company is also constructing another 400,000 MT/year PP plant in Jamnagar scheduled for commissioning in 2006.
The planned additions to capacity at Jamnagar are linked to an expansion of Reliance’s refinery at the same site. The 570,000 bbl/day refinery is to be expanded to 600,000 barrels per day by February 2004.
Reliance has the option of placing the additional C3s available from the refinery in the liquefied petroleum gas pool. However, economics favored its use in the production of PP despite the current surplus in the Indian market and lower realization in exports when compared with domestic sales, according to the company.
Comments: The total capacity for PP in India in 2002 was 1,185 KT. The major suppliers of PP in India include (1) Haldia Petrochemicals, (2) IPCL, and (3) Reliance Industries. Reliance Industries is by far the biggest supplier of PP in India with a total capacity of 800 KT.
The total demand for PP in India in 2002 was 1,190 KT. The major markets for PP in India include (1) injection molding, (2) woven sacks, (3) TQ Film, (4) BOPP Film, and others. Injection molding and woven sacks are the two largest end-use markets for PP in India accounting for 31% and 30% of the total PP demand respectively.
The projected growth rate for PP in India is 13.7% annually, reaching 2,277 KT by 2007. Injection molding is the fastest-growing market with a projected growth rate of 17.5% annually. All other markets are also projected to experience robust double-digit growth.
Reliance is the fastest-growing private sector company in India and will be among the top 10 petrochemical producers in the world in a few years. In the last three decades, Reliance has grown at an exponential pace and become the largest private-sector industrial house in India in terms of assets, turnover, and profits. Reliance built its first polymer cracker complex in 1992 and has been expanding ever since. The company has technical joint ventures with several major US manufacturers for manufacturing a range of commodity plastics. Some of its US collaborators include DuPont, Dow, ExxonMobil (through Mobil), Stone and Webster, and Bechtel.
Reliance has petrochemical complexes at Hazira, Patalganga, and Jamnagar. At Hazira complex, the company manufactures PVC, PP, HDPE, LLDPE, and MEG. At Patalganga complex it manufactures PSF/PFY and LAB. At Jamnagar complex, it manufactures Paraxylene and PP. At Naroda, the company has spinning mills and weaving mills to manufacture fabric, yarn, and textile products.
Reliance is the domestic market leader in most of the markets it competes. The company has a 60% market share in HDPE, 70% in PP, and 40% share in PVC. The company also has interests in various other sectors. It has a joint venture with ONGC and Enron for oil and gas. It operates 750MW of captive power facilities. Reliance also has a presence in the telecom sector and rights for cellular in seven circles covering almost 30% of the Indian population.
SABIC announces 3.15 million metric tons per year plant increases in Yanbu including 350,000 MT/year PP
Saudi Basic Industries Corporation (SABIC) has announced the construction of a new plant complex to be located at the Yanbu industrial site, on the Red Sea coast of Saudi Arabia.
The new cracker, which is expected to come on-stream in 2007, will have an annual production capacity of 1.3 million mt. In addition, other new plants will be constructed with capacities of 800,000 mt/y of Polyethylene; 700,000 mt/y of Ethylene Glycol; and 350,000 mt/y of Polypropylene.
The new complex reaffirms SABIC’s commitment to growing its core business and moving closer to achieving its vision of becoming one of the world’s leading global petrochemical companies.
For 2004, the Board has committed to increase capacities; develop SABIC’s contribution to the National Development Programme; and enhance SABIC’s competitiveness in the global petrochemicals industry.
Comments: SABIC is a leading international petrochemical company and the largest non-oil-producing company in the Middle East. Headquartered in Riyadh, Saudi Arabia, the company is 70% state-owned, and 30% privately owned (20% private sector; 10% Gulf Cooperation Council). Since its foundation in 1976, it has been concentrated mainly in the Middle East. However, SABIC’s overall strategy is to become a leading global supplier. SABIC has a large manufacturing network within Saudi Arabia and Bahrain through its 16 affiliated companies and 18 industrial complexes.
Global SABIC’s main businesses are segmented into five principal sectors: (1) Basic Chemicals, (2) Intermediates, (3) Polymers, (4) Fertilizers, and (5) Metals. In the polyolefins sector, SABIC has five main complexes, including (1) Saudi-Yanbu Petrochemical Co., (2) Al Jubail Petrochemical Co., (3) Arabian Petrochemical Co., (4) Sharq Eastern Petrochemical Company, and (5) IBN ZAHR.
SABIC has been steadily increasing its capacity and its global presence. The acquisition of DSM’s petrochemical operations has provided the critical mass for SABIC to become a true market and technology leader. While many of the other polyolefins producers, especially North American, have been severely impacted by high feedstock prices, SABIC is able to leverage its low feedstock position to increase its presence in export markets. The Middle East has a clear cost advantage compared to all other regions. The cost of producing a ton of ethylene in the Middle East using natural gas-based ethane is almost half compared to the cost in North America.
Sinopec to expand HDPE capacity under the ethylene expansion program at Sinopec Maoming Co.
Sinopec announced the signing of three contracts under the ethylene expansion program for China Petroleum & Chemical Corp. Maoming Company (Sinopec Maoming Co.). The three projects include (1) high-density polyethylene (HDPE) production, (2) ethylene cracking heaters, and (3) ethylene recovery.
The high-density polyethylene (HDPE) capacity will be increased from 440,000 MT/year to 1,020,000 MT/year. Under the ethylene expansion program, the ethylene capacity will be increased from 380,000 MT/year to 800,000 MT/year.
Among the three technology contracts, ethylene cracking heater and recovery adopt the advanced technology jointly developed by Sinopec and ABB Lummus Global, and HDPE employs the loop slurry process from Chevron Phillips.
The overall schedule of the Maoming ethylene expansion program is 32 Months. The scheduled completion date for the project is July 2006.
Comments: Sinopec’s purpose of expansion is two-fold. The company will not only gain several advantages such as optimization of ethylene & derivatives product portfolio, and benefits due to economies of scale but also strengthen the overall competitiveness by increasing the company’s market share in South China.
Petroleum Authority of Thailand seeks partners for the PP project in Thailand
Petroleum Authority of Thailand (PTT) announced its plans to build a polypropylene (PP) plant and that it is negotiating with potential joint venture partners for the project. The plant will be built at Map Ta Phut, Thailand having a capacity of 300,000 MT/year and cost an estimated $210 million.
PTT plans to build the plant alone if it cannot find a partner, and is scheduled for completion by 2007.
Comments: This PP plant will be the second plant to be built by PTT. PTT affiliate, National Petrochemical Company (NPC) operates a 350,000 MT/year plant at Map Ta Phut, Thailand.
Basell to build PP compounding plant in China
Basell announced its plans to build a polypropylene compounding plant in China at the Suzhou Industrial Park. Construction is scheduled to begin next month, with the start-up planned for early 2005. The facility will be completed in several phases to achieve the targeted capacity of 55,000-60,000MT/year.
Basell, together with its joint venture partners, currently has a PP compounding business presence in 14 countries: Australia, India, Japan, Malaysia, South Korea, Taiwan, and Thailand in Asia Pacific; Germany, Italy, Spain, and the United Kingdom in Europe, and Argentina, Brazil and the United States in the Americas.
Comments: This a first for the major polyolefin company to expand into both resin and compounding operations in China. Basell has been actively involved in establishing advanced polyolefins and compounding operations on a global basis. Due to its heritage in the polypropylene industry, Basell has been quite successful in leveraging in-reactor and post-reactor technology to produce polypropylene compounded products. Basell also participates in advanced polyolefins and compounded materials via its various joint ventures. Some of the joint ventures involve the production of polypropylene and downstream compounding of products, while other joint ventures are established solely for the production of compounded products including (1) Machino-Basell Another Unique Service FromChemical Market Resources, Inc. 1120 NASA Rd 1, Ste 340, Houston, TX 77058 USA; Tel: 281-333-3313Email: POE-SNA@CMRHouTex.Com Copyright © 2003Page 10/22of Issue 1 – Volume 2India Ltd., (2) PolyPacific Pty. Ltd., and (3) MBJ Advanced Polymers Co. Ltd.
Machino Plastics Ltd. started as an alliance between the Machino Group, Maruti Udyog Limited, and Suzuki Motor Corporation, Japan. A plant was set up in 1987 within the Maruti Udyog Limited Joint Venture complex for molding large components like Bumpers, Instrument Panels, and Radiator Grills for the entire range of Maruti cars. The company grew rapidly and Machino Polymers Ltd. was set up in 1995. A joint venture with Himont led to the establishment of Machino Montell India Ltd., currently known as Machino-Basell India Ltd situated in Gurgaon, India for manufacturing advanced PP compounds serving the automotive and appliance industry. PolyPacific was established in 1980 to manufacture and market polypropylene compounds including BOPP/CPP film additive masterbatches. The compounding facility is a 50:50 joint venture and primarily serves the automotive, appliance, masterbatch, and furniture sectors. PolyPacific’s manufacturing base and technical center is in Dandenong, near Melbourne in Victoria, Australia. In 1997, PolyPacific also commenced manufacturing in Malaysia under the name PolyPacific Polymers Sdn. Bhd., and both Malaysia and Singapore are serviced by that operation. MBJ Advanced Polymers Co., Ltd. is jointly owned by Basell and SunAllomer. The company was established in 1999 with a 10,000-ton PP compounding facility in Rayong Province and produces polypropylene compounds for the automotive, appliance, packaging, and related industries.
This new compounding facility in China is in line with Basell’s strategy to develop, produce, and market advanced polyolefins primarily to the automotive& appliance markets concentrated in the Far East as well as South America.
DSM Engineering Plastics expands compounding facility & opens R&D center in China
DSM increased capacity at its manufacturing and compounding plant in Jiangyin, Jiangsu Province. The facility produces Akulon® polyamide 6 and 66, Arnite® thermoplastic polyester, and Stanyl® polyamide 46 materials, both for the domestic China market and also to support the increasing export to other markets in the Asia Pacific region.
DSM has also opened a new Regional Research and Development Center for engineering plastics in Jiangyin. The facility has state-of-the-art equipment to test and characterize materials and enables grade and application development to be carried out.
Over the next five years, the main strategic cornerstone of global growth for DSM Engineering Plastics is forecasted to be Asia. Significantly, DSM Engineering Plastics, a business group within DSM Performance Materials, has identified a number of key factors to help achieve this medium-term success across Asia, and in particular in China.
DSM compounds engineering plastics locally in China, India, Japan, and Singapore. This provides proximity to the key markets for reliable supply, short lead times, and flexibility when needed. With DSM’s joint ventures for the production of Caprolactam in Nanjing and polymerization of polyamide 6 in Xinhui, DSM is fully backward integrated in China in the highly important polyamide 6 supply chain. Together with other strategic sourcing agreements in China, the company has the capability to act as a competitive local supplier in the China market, while at the same time leveraging its global capabilities.
Comments: The market for engineering plastics in Asia is expected to grow at about 20-25% per annum. To locally meet the growing demand, DSM increased the production capacity at its facility in China. The advantages of local manufacturing and technical support include reduced downtime, faster response, and better application support.
In China, both the compounding facilities and the new Regional Research and Development Center represent a competitive advantage for DSM logistically, as well as a demonstration of the company’s long-term commitment to the Chinese market. To support its domestic customers in China, DSM operates sales centers in Shenzhen and Beijing, as well as at its Asia Pacific headquarters in Shanghai.
ExxonMobil develops Nexxstar® resin structures as stretch hood packaging solutions
ExxonMobil Chemical developed an advanced, custom-designed, co-extrusion packaging solution, Nexxstar™ resin structures, which present considerable benefits for converters and end-users. The Nexxstar stretch hood resin offers several advantages including (1) cost benefits, (2) outstanding toughness, and (3) exceptional optical properties for end-of-line packaging applications compared with current packaging options.
Working with Lachenmeier A/S, a leading manufacturer of end-of-line packaging machinery, including stretch hood equipment, enabled ExxonMobil Chemical to apply this new solution (co-extruded structures utilizing a new high-performance Escorene™ Ultra copolymer and Exceed™ metallocene PE) on the latest commercial stretch hood machinery for different end-user applications
Comments: Stretch hood wrap, a film product was first made in Europe and then found commercial applications in North America in recent years. The stretch hooding method has gained substantial ground on conventional stretch wrapping and thermal shrink wrapping. Stretch hooders utilized to cover pallet loads are going to be one of the fastest-growing industrial packaging film products amounting to 10-12% per annum over the next five years.
The benefits that stretch hood technology provides include (1) low wrapping costs per pallet, (2) high speed, (3) optimum protection, (4) reduced stocking and inventory levels which results in the freeing of storage space, operational friendly (i.e. simple to operate) and (5) reliable piece of equipment. Also in hood stretching film stays flexible adapting to load as it settles during the transport. This is particularly the case with bagged products.
ExxonMobil has been very progressive in the industrial packaging industry. With close to 40% of the market share in stretch films, excellent distribution channels, and strong regional sales efforts, this news toward optimum stretch hood packaging was a logical step forward.
Stretch hood equipment manufacturers have started to promote this technology (primarily in Europe). Equipment manufacturer plays a critical role in the supply chain. Some of the large progressive stretch hood suppliers include (1) Lachenmeier, (2) Muller, (3) Best Pack, (4) Stelluti Kerr, and (5) Beumer Corporation.
By far the largest growth for stretch hood packaging in the next five years is expected in North America. Currently, 80% of the installed stretch hood equipment is targeting the construction industry, namely including cement, gravel, and stone mix packaging and we see the construction industry to be one of the largest consumers of stretch hood packaging.
Home improvement centers will be the next largest end users requiring the optimum packaging. Stretch hood technology resembles shrink wrap utilizing blown tubular monolayer LDPE. The typical film thickness in the stretch hood is 4 mils (30-40% pre-stretch). One of the unmet needs for the stretch hood includes even snap-back/elasticity memory. EVA copolymers can and do optimize the amount of snap-back. Other very important properties are (1) tear strength, (2) clarity, and (3) puncture resistance.
A new type of plastic called “Baroplastic” developed
Scientists from the Massachusetts Institute of Technology (MIT) have demonstrated that certain block copolymers can be reshaped under pressure at normal temperatures. These so-called “bioplastics” have several advantages including (1) lower energy consumption in manufacturing and processing, (2) reduced use of additives, (3) improved recyclability, and could be alternatives to current thermoplastic elastomers, rubber-modified plastics, and semicrystalline polymers.
Melt-like behavior has been shown by certain block copolymers under pressure, but only at temperatures far exceeding the glass transition temperature (Tg)—the point at which polymers change from rigid to flexible. The MIT researchers found that by combining one high-Tg component and one low-Tg component, an apparent semi-solid partial mixing takes place, preserving the high-Tg phase. In this case, the scientists used polystyrene, which has a high Tg, with either poly (n-butyl acrylate) or poly (2-ethyl hexyl acrylate).
The ability to process the block copolymers was demonstrated by compression-molding equipment to make rigid transparent objects using a standard hydraulic press without any degradation. Conventional melt processing at high temperatures, by comparison, can cause substantial degradation of polymers and additives such as flame retardants and ultraviolet stabilizers.
DuPont Dow granted a patent for discovery that improves the processing of extrudable polyolefins
DuPont Dow Elastomers announced that it was granted U.S. Patent No. 6,642,310 B2 to its researchers for their invention called “Process Aid for Melt Processible Polymers.” This discovery represents a breakthrough in extrudable product manufacturing using process aid technology.
The patent claims that extrudable compositions that contain predominantly large-particle, fluoropolymer process aid improve processability, have fewer melt defects, and condition faster. ‘Large particle size fluoroelastomer is defined as greater than 2 microns and less than 10 microns. Prior art recommends using a small particle size fluoropolymer process aid and that it be well dispersed in the polymer for the best processability. This patent redefines the operational parameters of extrusions that will help reduce cost and minimize waste through a short conditioning time.
DuPont Dow Elastomers announced new-to-the-industry polymer process additives based on this discovery. The new Viton® FreeFlow™ Z fluoroelastomer process aids are used in the production of blown film, cast film, and extruded pipe, wire, and cable. The new products – Viton® FreeFlow™ Z-100 and Viton® FreeFlow™ Z-200 – use an optimal combination of rheology-modified fluoroelastomer and interfacial agents to make them work more efficiently and effectively than products currently on the market. They can significantly improve product quality without increasing costs, as well as provide exceptional performance in the most challenging resins.
Viton® FreeFlow™ Z is based on this technology that controls the size of the fluoroelastomer particles. The larger particles coat more of the die surface, enlarging the boundary layer on the die wall thus increasing the probability a particle will reach and coat the die. The result is a higher quality product produced quickly and at a lower cost.
Comments: Processing aids have become increasingly more important to the polyolefins & elastomers industries due to the advent of metallocene technology. Due to (1) narrower molecular weight distribution, (2) uniform comonomer distribution, and (3) the ability to avidly incorporate comonomer, metallocene-based resins have enhanced performance benefits compared to traditional polyolefins. However, the narrower MWD has also placed increased demand on the operation of the extruder (poor processability). Processors have relied on various methods to enhance the processability of metallocene polyethylenes including, but not limited to, (1) Blending with HP-LDPE, (2) Processing aids such as fluoroelastomers and boron nitrides, and (3) Lubricants.
Fluoroelastomers have become quite popular and are widely used to improve the processability of a great range of polymers in extrusion processes. These polymers have been shown to reduce melt fracture, limits die lip build-up, and increased throughput. Although quite effective, fluoroelastomers are extremely expensive ($15-20/Lb) and are used at low levels to reduce system costs. Boron nitrides are the latest type of processing aid based on solid-phase technology that is also being investigated. The performance of this processing aid is shown to be promising, but the cost is even higher than fluoroelastomers. The increased demand for metallocene resins coupled with end-users’ desire to use existing equipment continues to drive the growth of processing aids. Processing aids typically add 1 cent per pound of resin processed to the final cost.
China reduces import duties on PVC, VCM, and EDC from 2004
China reduced its import duty on PVC resin by 1.1% to 10.7% in 2004. VCM duties were reduced by 3.5% to 2% and EDC duties were cut in half to 1%.
Comments: In May 2003, China’s Ministry of Commerce imposed antidumping duties of up to 115% for polyvinyl chloride (PVC) imports from Japan, Korea, Russia, Taiwan, and the US. The Chinese officials found that PVC from these countries was sold at unfairly low prices in China.
US PVC producers have imposed duties of 83%, except Formosa Plastics, which is subject to a 25% duty. Shintech’s parent Shin-Etsu Chemical faced a 54% duty. Korean PVC producers Hanwha Chemical and LG Chem were subjected to 10%-13% duties, and all other Korean producers, 76%. Duties on Russian PVC imports were 34%-82%, and Taiwanese producers, including Formosa Plastics, were slapped with duties of 10%-27%.
Crompton granted amnesty in nitrile rubber investigation
Crompton Corporation announced that it is cooperating with competition authorities in the US, Canada, and the European Union that are investigating possible anticompetitive activities by manufacturers of nitrile rubber.
Crompton Corporation and its relevant affiliates have received assurances of conditional amnesty from each of these authorities about criminal prosecution and fines concerning nitrile rubber. Amnesty is conditioned upon several factors, including the company’s continued cooperation with the authorities.
Crompton acquired its nitrile rubber business in 1996 when it merged with Uniroyal Chemical. Crompton put its nitrile rubber business into a joint venture with Girsa (Mexico City) in 1998 and sold its interest in the joint venture to Girsa (Mexico City) in December 2001.
Wood composites maker Trex Company to build extrusion plant in Olive Branch, MS
Composite lumber maker Trex Company selected Olive Branch, MS as the site for its third extrusion facility.
The manufacturing facility at this site is expected to become the company’s largest, and current plans call for operations to commence in mid-2005. It will supply the manufacturing and distribution capacity Trex Company needs to fulfill the demand for its Trex® decking and railing products, which has grown 30% per year during the last five years.
Comments: Although there are well over 100 companies participating in the WPC markets, the market is dominated by a few large players, with Trex holding roughly 45% market share. The top five players account for approximately 80-90% of the market.
Trex Company Inc was formed in 1998 by acquiring 100% assets of TREX Company LLC. TREX Company LLC became a wholly owned subsidiary of Trex Company Inc. in 1998. TREX Company LLC was formed in 1996 when it acquired all the assets and assumed some of the liabilities of the Composite Products Division of Mobil Oil Corporation. Trex Company Inc. is the largest manufacturer of non-wood alternative products that are marketed under the trade name Trex®. Products are manufactured via a proprietary, partially patented process that combines waste wood fibers and reclaimed polyethylene. It is primarily used for commercial and residential decking. In 2002 Trex recycled nearly 200 million pounds of plastic material. Trex Company is the largest manufacturer of alternative decking in North America.
Trex decking and railing is manufactured in a process that combines waste wood fibers and reclaimed polyethylene and is used primarily for residential and commercial decking. The Company sells its products through approximately 90 wholesale distribution locations, which in turn sell Trex decking to approximately 3,300 independent contractor-oriented retail lumberyards across the United States.
Products are currently manufactured in two facilities: (1) Winchester, VA – 10 lines, and (2) Fernley, NV – 7 lines.
DuPont to eliminate jobs and reduce costs by $900 million under its restructuring program
DuPont Co. announced that it would cut its workforce, eliminate some products and take other steps to reduce costs by $900 million as it struggles with high raw material prices and the sale of its key clothing and carpet fiber business. The company said that half the cost cuts would come in 2004 and the rest in 2005.
DuPont will take the following actions:
- Reduce Costs from INVISTA Separation –DuPont will realize a total of $200 million in fixed cost reductions to offset residual costs from the anticipated separation of INVISTA.
- Leverage and Strengthen Infrastructure –DuPont will leverage and center its staff functions, support services, and manufacturing operations broadly, including corporate costs. Infrastructure actions are expected to achieve $250 million in fixed cost reduction in 2004, and the full $500 million in 2005.
- Improve variable margins –Actions to improve variable margins include consolidating product lines by at least 20%. These actions are expected to realize a $100 million variable margin improvement in 2004, and a full $200 million improvement in 2005 – mainly through cost reduction.
- Improve Growth Capabilities –DuPont will rebalance resources toward emerging markets, where much of its growth will occur in the coming years. The initial focus will be on China, where the company already has a strong base. Other areas of interest include Central & Eastern Europe and Brazil.
Rubbermaid to close Wooster, OH plant and lay off 850 workers
Newell Rubbermaid Inc. announced that it will shut down the Rubbermaid Home Products factory in Wooster, OH at the end of June 2004. About 400 associates may be relocated and 850 manufacturing and distribution jobs will be eliminated.
Rubbermaid Home Organization Products division will eliminate items that represent 70% of the Wooster plant production volume. Those items include totes, refuse cans, and clear storage containers.
The company has shut down many plants since 2002, at locations including (1) Cleburne, TX (transferred production to another Home Products factory in Greenville, TX), (2) Greer, SC (consolidated all Graco and Century baby-product production in Macedonia, OH), and (3) Canton, OH (baby-seat production plant).
Comments: Rubbermaid is Wooster’s largest employer, providing $600,000 in payroll taxes annually. The company is closing the plant for several reasons including (1) excess production and distribution capacity, (2) higher plant operating costs, and (3) a highly intense competitive environment.
Rubbermaid’s plastics manufacturing business includes several companies including (1) Rubbermaid Home Products, (2) Commercial Products, (3) Graco & Century Baby Products, (4) Little Tikes Toys, (5) Goody Combs & Brushes, and (6) Sharpie pens.
Akzo to eliminate jobs in the polymer chemicals business
Akzo Nobel announced that it will cut 100 jobs worldwide in its polymer chemical business, between 2004 and 2006 to improve its financial performance. The job cuts will account for about 5% of its total workforce in the unit.
It is the latest in a series of job cuts in its polymer chemicals business. The company reduced its headcount by about 150 in August 2003.
Comments: This is the third round of restructuring announced by Akzo Nobel’s polymer chemicals business. In 2003, it eliminated over 200 jobs representing about 10% of its workforce. The company also shut down two plants at Burt, NY, and at Gillingham, UK.
The business’ products include polymerization catalysts, metal alkyls, organic peroxides, initiators, and antifouling agents.
Huntsman to make Advanced Materials a separate business unit
Huntsman Corporation announced that Huntsman Advanced Materials (formerly Vantico) will become a separate business unit of the Huntsman Companies.
Immediately after acquiring Vantico in July 2003, Huntsman renamed the Huntsman Advanced Materials business and began managing it as part of Huntsman Polyurethanes.
The company announced the appointment of Paul Hulme to the position of President of Huntsman Advanced Materials.
Huntsman Advanced Materials is a leading global manufacturer and marketer of advanced of epoxy resins, adhesives, coating systems, electrical insulating materials, optronics, pre-production solutions, and structural composites. Its end-use markets include the aerospace, automotive, electronics, electrical generation, recreation, and appliance industries.
Comments: This move has shades of the former Huntsman Packaging only bigger and more exciting. In the packaging area, Huntsman combined several smaller generic and high-technology packaging firms that are now one of the industry leaders, Pliant.
The difference with Huntsman Advanced Materials is that they have a bigger head start, a global business, and prospects for accelerated growth through this high-growth area. And they already have critical mass, especially with the recent addition of Vantico, a leading worldwide epoxy systems maker. According to public filings, the Advanced Materials Group already has a worldwide sales base of over $1B (US), or a certain critical mass with over 15% of the market and climbing in share. Ahead of Huntsman is Dow and Resolution with a combined share of about 50%.
The magic is that in this market, multiple systems offerings count and Huntsman has a significant base to offer. Focus markets are innovative coatings, structural composites, adhesives, tooling materials, and electric/electronic insulation components. Epoxy systems are the core, but Huntsman can also offer epoxy-urethane hybrids for flexibility. Huntsman also has the full line; accelerators, catalysts, curing agents, plasticizers, resins, surfactants, and fillers from other divisions like their Titanium Dioxide Business. They also have a leading foothold in emerging nano applications.
This business collective has been a long road including components from Texaco (Jefferson), CIBA (Vantico), Dow, Quenos, ICI, and others. CMR believes with this strong multifaceted base, a superb distributor, and customer support (a Huntsman specialty) systems, Huntsman Advanced Materials could easily double its market share in a short period of years. And don’t forget, they’re integrated into many of the feedstocks also. This is a development to watch with keen interest.
Halliburton unit, Kellogg Brown & Root (KBR) files for Chapter 11 bankruptcy
The Halliburton subsidiaries Kellogg Brown & Root (KBR) and DII Industries filed for bankruptcy protection to gain court approval of a $4.2 billion settlement with more than 400,000 people claiming injuries caused by asbestos or silica exposure.
Halliburton agreed to pay at least $2.78 billion in cash, 59.5 million shares of common stock, and notes worth about $100 million to settle 435,000 existing claims and any future claims. The company also announced that it would record pretax costs of $1 billion in the fourth quarter related to the settlement.
The companies will continue normal operations while reorganizing under Chapter 11 of the US bankruptcy code. The parent company and Kellogg Brown Root’sgovernment services business, which provides services in Iraq, are not part of the bankruptcy.
Comments: In 1998 Halliburton purchased Dresser Industries for $6.2 billion, which was then renamed to DII Industries. Most of the company’s asbestos lawsuits stemmed from this purchase.
A company forced into insolvency by asbestos liability must gain support from at least 75% of those with injury claims before it can ask a federal judge for permission to come out of bankruptcy.
Halliburton has settled or contested 236,000 asbestos claims since 1976 at a cost of $220 million, regulatory filings show. It was paid or expected to be reimbursed by insurers for costs of $107 million.
Contact us at ADI Chemical Market Resources to learn how we can help.