Dow to idle 900 million pounds of polyethylene capacity
Dow Chemical announced that it had begun the process of idling about 900 million pounds of North American PE capacity due to low polyethylene demand, higher feedstock costs and eroding polyethylene margins.
Dow began the idling process Aug. 14, and the company said that most of the impact will be at the plants in the United States. The company also said that less than 10 jobs will be lost due to the shutdowns. Dow has already idled 600 million pounds of PE capacity since mid-2001 because of poor market conditions. This cut-back including the previous will bring Dow’s total idled capacity to 1.5billion pounds in North America.
Dow’s North American PE manufacturing sites are located at Freeport and Seadrift, Texas; Plaquemine, LA; Fort Saskatchewan, Alberta; and Sarnia, Ontario.
Comments: Rising natural gas and related feedstock cost is the primary reason for the general erosion of polyolefin margins much more so than low market growth and softening demand. The impact of natural gas operations felt the highest on ammonia industry followed by the polyolefins industry.
In the early to mid 1990s the United States had the advantage of access to cheaper natural gas as a feedstock for the petrochemical industry compared to countries that are more dependent on other feedstocks such as naphtha. Due to this advantage the United States was a leading supplier of chemicals to the world, with exports at 13% to 15% and net exports over 5%.
However, recent increase in the price of natural gas has eroded the comparative feedstock advantage that the United States had compared to other countries.
The main reasons for increase of natural gas generally mentioned include: (1) lower emphasis on natural gas drilling and production in the last decade, (2) increased demand for natural gas for transportation and consumers, and (3) general economic turmoil.
The participants of the chemical industry across the value chain are coping with the increased threat from higher natural gas prices in different ways. Resin producers, converters, and all other participants across the value chain are evaluating the impact of higher natural gas prices on the industry.
Resin producers are evaluating options such as idling capacity, shifting production facilities overseas, and permanent shutdowns. Some producers are exposed more compared to others and have to take actions sooner than others. Dow has decided to idle sizable amount of capacity to increase its utilization rates and thereby counter the effects of increasing natural gas prices. In future months we will see many more such announcements depending on the producer’s exposure to natural gas and their hedging activities.
CMR has monitored this situation closely and will shortly issue its report on the impact of natural gas on the plastics industry. This will be an extensive reportdetailing all the relevant issues related to natural gas pricing and its impact on the plastics industry.
Force majeure on two polyolefin plants operated by BP & BP Solvay Polyethylene joint venture
The interruption of polyolefin production due to technical difficulties at two plants operated by BP and BP Solvay has prompteda force majeure on two polymer streams. Two grades BP Solvay’s HDPEproduction was affected by a reactor blockage at its Lavera site in France. Normal production is expected to resume at the end of this month.
BP’s Innovene 4 LLDPE plant at Grangemouth, UKhas been offstream for two weeks because of technical problems. The plant had resumed production but will be taken off stream towards the end of August for a maintenance shutdown.
Japan Polyethylene to boost LLDPE capacity
New joint venture Japan PolyethyleneCorp. set to be established in September, 2003 is looking at increasing the gas phase linear low density polyethylene (LLDPE) capacity at Kashima, Japan. Japan Polyethylene is a joint venture between Japan Polyolefins & Japan PolyChem.
The increase in capacity will cut production costs and put Japan Polyethylene in a better position to compete.
Comments: Japan Polychem Corporation (JPC) was formed in 1996 as a joint venture company between Mitsubishi Chemical Corporation with 65% share and Tonen Chemical Corporation with 35% to integrate their polyolefin (polyethylene and polypropylene) business.
On June 2, 2003 Mitsubishi Chemical owned 100% after buying Tonen Chemicals’ shares in JPC. Japan Polyolefins Corporation is a joint venture between Showa Denko K.K with 65% of the share and Nippon Petrochemicals Co.with 35% share.
Japan Polyethylene Corporation will commence business on September 1, 2003. The share distribution will be JPC with 50%, Japan PolyolefinsCo.with 42% and Mitsubishi Shoji Plastic Corporation with 8%. The annual production capacity of JapanPolyethylene Corporation will be LDPE417,400MT/year, LLDPE 374,700MT/year and HDPE 475,600 MT/year.
Japan is setting the standards for the consolidations in Korea and other Asian countries.
Sumitomo Chemical in final development stage for gas-phase LDPE process
Sumitomo Chemical is in the final development stage of a gas phase process for the production of a new class of polyethylenes. The company claims that the new polyethylenes will offer both high strength and excellent processability, and will allow further value creation.
Comments: The company is converting a C4 based LLDPE plant at Chiba to produce material with similar properties to high–pressure LDPE, or in otherwords a LDPE look-alike, using its newly developed catalyst.
LDPE look-alike is a term employed in the polyolefins industry to describe the goal of designing andmanufacturing ethylene-based polymers having the desirable attributes of conventional high-pressure LDPE– easy processability plus excellent optical properties – along with those of more modern linear polyethylenes – puncture resistance, strength, stiffness, etc.
The goal of an LDPE look-alike is to produce an ethylene-based copolymer using a coordination catalyst that at least mimics if not improves the rheological behavior of conventional LDPE.
Example improvements might include a polyethylene with the bubble stability of LDPE plus the draw down of LLDPE without concomitant melt fracture.
Although many organizations continue to work on bridging the gap between high pressure LDPE and gas-phase LLDPE, no one as of yet has succeeded in producing a true LDPE-alike. To learn more about LDPE look-alikes, please refer to CMR’s newly published multiclient entitled Worldwide HP-LDPE 2002-2007.
KRATON Polymers announces Latin America capacity expansion
KRATON Polymers announced its plans to expand capacity of KRATON® D polymers at its Paulinia, Brazil, plant. The increase in production capability is in response to increasing demand from the adhesives, compounding, footwear and asphalt industries in the Latin American, U.S. and European markets.
The completion of this expansion, scheduled for the end of 2004, will increase capacity by 25 percent in Latin America. According to KRATON, this expansion reflects its commitment to bring innovative, high-performance products to market quickly to maintain supply and meet customer needs on a global scale.
The expansion at Paulinia will be achieved through a series of debottlenecks in selected units of the plant. The first phase will begin with installation of a natural gas powered boiler which will increase steam generation at the plant. The new boiler is expected to be online by the end of 2003. Detailed engineering began in Q2 2003.
Other plant modifications required to make room for the expansion have been started as separate projects and will be integrated to achieve the expansion in Paulinia’s capacity. Included are modifications to the process, as well as to ancillary equipment.
Comments: KRATON Polymer is the sole manufacturer of SIS and a major producer SBS in South America. The Paulinia plant supplies both SBS and SIS for the South American market. The current capacity of Paulinia plant is 25,000 MT/year which will be expanded by 25%.
The company has a very broad range of SB copolymer portfolio including: (1) KRATON D (SBS & SIS), (2) KRATON G (SEBS, SEPS), (3) KRATON FG (maleic anhydride modified SEBS), (4) KRATON IR (polyisoprene rubber), (5) KRATON A and (6) KRATON Liquid.Ripplewood Holdings LLC, the owner of KRATON Polymers is exploring the opportunities for the sale of KRATON Polymers.
NOVA Chemicals impacted by power outage
As a result of the massive Northeast power outage, NOVA Chemicals shut down its plants at Corunna, Mooretown, Sarnia and St. Clair River Site, in Ontario, Canada, and its Painesville site in Ohio.
All plants were shut down safely. Plants remained down pending stabilization of electrical power. The shutdowns resulted in minor loss of production. NOVA Chemicals is in the process of conducting equipment assessments to confirm the financial impact and a plan for the safe start-up of its operations.
Comments: This of course was an industry wide problem and affected all the facilities in the Sarnia area, though not specific to polyolefins.
Borealis reports second quarter profit in weak market
Borealis announced its second quarter result, showing an operating profit before restructuring charges of €21 million and a net profit of €4 million after tax. Operating profit before restructuring charges increased to €21 million from €5 million in the first quarter, but was well below the €78 million in the second quarter of 2002.
According to Borealis, in the second quarter thepolyolefin prices collapsed at an alarming rate, squeezing the margins as feedstock costs remained high. The company expects the challenging business environment to continue through 2003. Borealis recently announced its plan to invest €200 million to expand its Borstar polyolefin capacity in Austria.
Comments: The rising feedstock prices and the supply demand dynamics have squeezed the margins across the industry and impacted the resin suppliers. Borealis has also been affected by the general slow-down in the industry and reported a loss in the second quarter. Borealis like the rest of the industry will be planning to restructure and streamline its operations while waiting for the market to improve. Combination of the above factors should help Borealis improve its bottom-line in subsequent quarters.
Borealis is one of the most innovative of the current European based polyolefin producers.
Koch negotiating to buy DuPont Textiles & Interiors
Koch Industries is negotiating with DuPont for the purchase of DuPont Textiles & Interiors (DTI).
According to Koch, the combination of DTI and Koch’s polyester production subsidiaryKoSa will be a huge step in realizing vision for Koch Industries.
Given the ongoing nature of the discussions, DuPont said it would not provide any additional information at this time. There can be no assurance that the negotiations will result in an agreement being reached or, if an agreement is reached, of the terms, conditions or timing of any potential transaction.
If the talks were successful, Koch would combine DuPont Textiles & Interior business with KoSa. The company would combine the polyester resins & fibers business of KoSa with nylon business of DuPont, the company said.
Comments: Headquartered in Houston, TX, KoSa was originally formed as a 50:50 joint venture between Koch Industries & a Mexican company Isaac Saba. However, in 2001, Koch bought remaining 50% of KoSa making it a wholly owned subsidiary.
DuPont, as a part of the re-organization couple of years ago, divested most of the plastic related applications and the textiles group was consolidated to included their commodity and specialty plastic fiber groups.
Koch Industries is a family owned business from Kansas. They have been very successful in upstream businesses including refineries, asphalt, and isomerization. This will be Koch’s initial foray into downstream businesses.
Koch industries is most often compared to Huntsman Holdings. Huntsman Holdings’ businesses grew through extensive financial dealings, while Koch had been active in oil and gas businesses from the beginning.
Ground-breaking for the world’s largest PVC plant with 500,000 MT/year capacity in China commenced
The ground breaking ceremony marks the progress in the construction of the world’s largest PVC plant in China. The plant will have a capacity of 500,000MT/year located at Shizuishan City of western Ningxia Autonomous Region.
The PVC plant is being built for Ningxia Western Polyvinyl Chloride Co. The company is a joint venture of Ningxia National Group (40%), Shanghai Chlor Alkali Chemical (30%) and Ningxia National Electric Power Company(30%).
Completion of the first phase is scheduled in May 2005 and the second phase will be completed in 2008.
Comments: China remains amongst one of the few markets in the world where f-PVC has a significant growth rate estimated in the range of 8-10%. The domestic demand has outstripped supply and has resulted in large imports of f-PVC and upstream raw materialsEDC & VCM. The ratio of domestic production to imports has changed from 100:10 in the early 90’s to 100:100 by 2001, owing to the construction boom of the 90s.
China’s dependency on imports is expected to be less severe in the future due to the current construction of large petrochemical plants on the mainland by some of the major PVC players. The tariffs are slowly decreasing due to China’s entrance into the World Trade Organization. The import tariff of PVC at 12.8% in 2002 is scheduled to drop about 1 percentage point each year until hitting 6.5% in 2008.
In order to meet domestic demand most of the major players are increasing their production capacities. LG is investing heavily in China and tripling PVC output capacityby 2005 at its Tianjin plant.
Cangzhou Chemical Industry which currently has a capacity of 230 KT has planned to add 200 KT capacity by 2004 and 240 KT more to be added by 2006/7.
U.S. bankruptcy court approvesISP takeover of Ameripol Synpol
U.S. bankruptcy court has cleared Wayne, NJ based International Specialty Products Inc.’s(ISP) acquisition of certain emulsion SBR assets of Ameripol Synpol Corp. ISP took control of Ameripol Synpol’s Port Neches, Texas, plant on July 31, 2003 and the production is scheduled to start by mid-August in time for early September shipments. ISP bid $1 million and assumed $4.6 million in tax obligations for the Ameripol Synpol assets. Ameripol Synpol had filed for Chapter 11 bankruptcy protection in December 2002. Ameripol Synpol has been renamed ISP Elastomers.
ISP will invest up to $60 million over three years to modernize the 60-year-old unit. ISP has had no experience in synthetic rubber industry but its expertise in polymer research and development will aid manufacturing and improve the processes at Port Neches.
ISP had also acquired Ameripol Synpol’s 50-percent ownership stake in some related assets, including operating rights to a deepwater shipping dock, used primarily for loading and off-loading styrene and butadiene from barges and ships. Huntsman L.L.C. owns the other half. ISP makes specialty chemicals and mineral products, with manufacturing and technical service centers located around the world.
Comments: Ameripol Synpol organization had undergone financial problems for a long time. The company declared bankruptcy in 2002.
Ameripol Synpol had also temporarily shut down its Port Neches, TX emulsion SBR plant.
ISP produces performance and industrial specialty chemicals, as well as specialty chemicals for consumer, pharmaceutical, and food and beverage segments. The acquisition of Ameripol Synpol is an entry point for ISP into the synthetic rubber industry.
Formosa Plastics Corp. plans to add super-absorbent polymers capacity in China
Formosa Plastics Corp (FPC) plans to produce super-absorbent polymers (SAP) at its Ningbo site in Zhejiang, China. The capacity of the proposed plant has not been decided yet.
The company is planning an integrated 210,000 MT/year acrylic acid plant and a 230,000 MT/year acrylic ester unit at the same site. Acrylic acid is a feedstock for SAP and acrylic ester.
The acrylic acid and acrylic ester units were approved by the Taiwanese government in July, 2003. FPC plans to next seek approval from the Chinese government. Startup of the two units is due for end-2005.Propylene feedstock for the acrylic acid plant would be shipped from Taiwan.
Comments: Super Absorbent Polymers (SAPs) are crosslinked polyacrylate powdered granules which are capable of absorbing large amounts of solution (30-50 times its own weight). This property makes them ideally suited for end use applications that include: (1) baby diapers, (2) adult incontinence products (3) feminine care products, (4) medical and miscellaneous applications.SAPs have shown global growth rates close to 8%.
These have been attributed to two main reasons namely (1) significant growth in the baby diaper markets in most developing countries and (2) increased trend in making thinner lightweight products which increases the amount of SAPs used in a diaper. Adult and feminine care products have shown steady moderate growth in these regions. Stockhausen, BASF, Dow and Nippon are the leading suppliers of SAP globally.
Mitsui Chemicals expands capacity for its performance polymers intends to de-commoditize the polyolefin operations
Mitsui Chemicals is expanding the capacity of methyl pentene copolymer and cyclic olefin copolymer. The expansion for both products will be at its Iwakuni site. The capacity of methylpentene copolymer will increased from 6,000 MT/year to 7,000 MT/year and cyclic olefin copolymer to 5000 MT/year.
Mitsui Chemicals markets the methyl pentane copolymer under the trade name TPX®, and cyclic olefin copolymer under APL®.One of the long-term goals of Mitsui Chemicals is to de-commoditize the Japanese polyolefin industry.
Comments: The Japanese polyolefin industry always insisted on smaller capacities, larger number of players with production/technology synergies. This concept helped the Japanese polyolefin industry in the 80s and 90s to stay competitive in Asia. All of the Japanese polyolefins were always sold at premium prices as specialties. The Japanese polyolefin industry was relatively safe from North American and European intrusions because of: (1) close knit Asian Soga Sosha distribution system, (2) relatively low polyolefin capabilities of rest of the Asian countries and (3) export opportunities to rest of Asia.
The development of polyolefin industry in Asia, especially in far eastern countries like India, Taiwan and Singapore have had a devastating impact on Japanese Polyolefin industry in terms of: (1) lowered export opportunities and (2) commoditization of polyolefins through fast growing imports.
The Japanese polyolefin leaders like Mitsui Chemicals realized early on that they cannot compete on a cost/commodity basis. Thus,theincentive to de-commoditize by Mitsui Chemicals.
Methylpentene copolymer, also known as polymethylpentene is used in a wide variety of applications, including: medical equipment, laboratoryware, small appliances, ovenware, baking cartons, release paper, wire and cable coating, and others. It has a specific gravity of 0.83g/cm, the lowest of all commercially available thermoplastics.
Cyclic Olefin homopolymers and copolymers are engineering thermoplastics derived from norbornene molecule. Norbornene is made from dicyclopentadiene (DCPD) and ethylene. These resins have glass-like transparency, low dielectric loss, low moisture absorption, dimensional stability, high heat resistance, and high melt-flow rates.
There are currently four major suppliers of these resins: (1) Nippon Zeon, (2) Mitsui, (3) JSR, and (4) Ticona. Cyclic olefin copolymers are used in flexible packaging industry as a blend component or as a discreet layer in multi-layer polyolefin films. They enhance the stiffness and heat resistance in food packaging applications.
DuPont to retain DuPont Canada’s packaging business, Liquibox
Wilmington, DE based DuPont plans to retain DuPont Canada Inc.’s packaging business Liquibox. The company is in the process of restructuring DuPont Canada. Liquibox (Canada) will be kept under a new business unit called E.I. duPont Canada in Mississauga.
Liquibox business also includes the former Enhance Packaging business, a manufacturer of plastic milk pouches and other plastic packaging.
Most of theDuPont Canada Inc’s assets will be merged into DuPont Textiles & Interiors (DTI). According to DuPont Canada, DTI will acquire four extrusion lines in Sarnia, Ontario, that make various industrial compounds, assets in Maitland, Ontario, making engineering polymers, nylon intermediates, fluorochemicals and Lycra fibers. DTI has contracted to make Sarnia’s industrial polymers, and Maitland’s engineering polymers and fluorochemicals, exclusively for E.I. du Pont Canada. DuPont is negotiating the acquisition of DTI with Koch Industries.
E.I. du Pont Canada also will include a research and development and customer technical center in Kingston, Ontario, and a customer training facility and product development center in Ajax, Ontario, and the Granirex and Brookdale businesses. The reorganization will be complete by Oct. 1
Comments: Liquibox along with Scholle Corporation are the names familiar to everyone developing newer polyolefin resins since mid-80s. They were the organizations that pioneered the concept of bag-in-box and raised the bar for polyolefin resin standards.
The DuPont business unit has an additional complication to look forward to depending upon their Koch operations in future.
BASF employees laid off due to rising natural gas prices
BASF laid off 17 employees in the Baton Rouge area due to rising natural gas prices. The decision to lay-off was based on the seniority basis.
BASF cited the rising cost of natural gas as the main reason for the lay-offs. The profits of chemical companies have reduced due to the increasing costs of natural gas which is used as fuel and feedstock.
Other chemical companies have recently made similar moves including: (1) ExxonMobil has cut 74 jobs which is the beginning of the planned 200 job cuts, (2) Formosa Plastics reduced its workforce by 89 jobs in North Baton Rouge area, and (3) DSM is planning to 180 jobs with the closure of its Addis plant. BASF had made a decision to lay off 1,000 human resources & communications workers in the United States.
Comments: See our comments on Dow Chemical Company polyolefin plant closures.
BP to evaluate its linear alpha olefins (LAO) business due to rising feedstock prices
BP is currently evaluating its linear alpha olefins (LAO) operations for viability of continued operation due to the increasing feedstock prices. The company has 3 LAO plants operating globally at different locations including: (1) Pasadena, TX, (2) Joffre, Alberta, and (3) Feluy, Belgium.
The major applications of alpha olefins include: (1) polyethylene comonomers, (2)detergent alcohols, (3) plasticizer alcohols, (4) fatty amines, (5) polybutene-1, (6)surfactants, and others.
Comments: Natural gas strikes again! BP, Shell, ChevronPhillips, Idemitsu and Sasol are the world’s largest producers of alphaolefins. All of them use their proprietary process for ethylene oligomerization.
Ethylene is the basic raw material for alpha olefins and directly impacted by the natural gas prices right behind ammonia and polyolefins. See our comments on Dow’s polyolefin plan closures for further information.
ExxonMobil Chemical’s film businessearns supplier of the year award from Frito-Lay
For the third consecutive year, the films business of ExxonMobil Chemical Company has received a Supplier of the Year Award from Frito-Lay, a division of PepsiCo. Inc. ExxonMobil works closely with Frito-Lay in developing custom specifications for clear, opaque, and metallized Oriented Polypropylene (OPP) films. The films are converted into packaging materials for a variety of Frito-Lay brands, such as Lay’s, Fritos, Doritos, Rold Gold, Grandma’s Cookies, Cheetos and Sun Chips.
The films business of ExxonMobil Chemical is one of the world’s leading suppliers of a full range of oriented polypropylene (OPP) film for flexible packaging and labeling applications. ExxonMobil has seven affiliated production plants: three in Europe (Virton, Belgium; Kerkrade (the Netherlands) and Brindisi, Italy) and four in North America (LaGrange, Georgia; Stratford, Connecticut; Shawnee, Oklahoma and Belleville, Ontario, Canada). Its European head office is located in Luxembourg and its United States head office is in Macedon, New York.
Comments: Food packaging is one of the largest markets for BOPP films in North America and Frito Lay is one of the largest end users for BOPP films. In recent years there has been lot of development in the specialty BOPP film market.
The white opaque and metallized BOPP film applications have experienced higher growth rates and relatively premium pricing. ExxonMobil being one of the largest suppliers of BOPP films has continuously worked with Frito Lay for developing applications for these specialty BOPP films.
Frito Lay being a dominant player in the food packaging industry has significant influence in the new trends of the flexible food packaging industry.
Frio Lay’s basic potato chip bag structure based on MBOPP/glassine/OPP is considered the world standard. Frito-Lay, with its market power successfully kept the glassine industry alive and prevented acid copolymer and ionomer based structures from taking hold in the market.
Sumitomo Chemical reorganizes agricultural polyolefin films business
Sumitomo Chemical has transferred the agricultural polyolefin films (PO agro-film) business of its subsidiary Sumika Plastech Co., Ltd. to another subsidiary Sanzen Kako Co., Ltd., where it was integrated with Sanzen’s PO agro-film business.
Sanzen Kako is one of the leaders in this industry and markets its PO agro-film products under the trade nameKLINTATE®.
PO agro-film is used in horticultural farming as an insulative coating material for greenhouses. While polyvinyl chloride films for agricultural use (PVC agro-film) have long been the mainstream material for this application, PO agro-film is enjoying growing demand as the preferred alternative. There are several reasons for this shift to PO agro-film.
The Sumitomo Chemical group had, until now, managed its PO agro-film business through a close cooperative relationship between Sumika Plastech and Sanzen in manufacture, sales and R&D. With this business integration, Sumitomo Chemical will streamline organizational elements and services that overlap between the two subsidiaries, while unifying manufacturing, marketing and development functions to promote quick decision-making for the further growth of its PO agro-film business.
Sealed Air Corporation introduces “Soft Touch” polyethylene foam
Saddle Brook, NJ based Sealed Air Corporation has introduced new Cell-Aire® ST polyethylene foam thatprovides a soft, non-abrasive, high coefficient-of-friction surface for superior product protection
The “soft touch” surface of Cell-Aire® ST foam would be used for protecting items such as furniture, dishware, electronics and other fragile pieces from becoming scratched during handling and transportation.Other applications include cushioning and surface protection for items such as appliances, automotive parts, books, dishware, electronics, furniture, musical instruments, and pharmaceuticals.
The company has also introduced food-grade Cell-Aire® ST foam and plans to market it for packing fresh fruit and vegetables. The Cell-Aire® foam will be available in blue color and in widths of 48-inch, 60-inch and 72-inch with thickness ranging from 1/32 inch to 1/8 inch.
Comments: Polyolefin foams are based on polyethylene, polypropylene and ethylene-vinyl acetate copolymer. Polyolefin foams are widely used in applications such packaging, automotive, medical, marine and others.
The Dow Chemical Company first introduced polyethylene (PE) foams in the North American markets in the 1950s, while Sentinel Products was the first company to develop and commercializeclosed cell crosslinked polyethylene foam using metallocene enhanced PE resins.
Sealed Air Corporation purchased Sentinel Foam & Envelope Corp., a subsidiary of Sentinel Products in 1980s.
In late 90s there has been a general trend towards introducing soft touch materials. This trend is consumer driven – consumers are demanding materials with softer touch properties. Variety of consumer products such as tools, pens, razors, and others have soft grips.
This appetite for soft touch products has been complemented by technological developments and R & D efforts by suppliers.
The introduction of soft touch foams by companies such as Sealed Air, Dow, and others portrays the attempts by producers to capitalize on the market trends.
Sealed Air Corporation is a major player in performance solutions for food, protective and specialty packaging. About 40% of Sealed Air’s sales are concentrated in the protective packaging industry and 60% of its sales in the food and specialty packaging industry.
Mitsui Chemicals plans to expand polypropylene compounding business
Mitsui is planning to expand its polypropylene (PP) compounding business mainly focused on automotive applications. Mitsui Chemicals is presently undergoing a large scale expansion at its subsidiary Grand Siam Composites Co., Ltd. in Thailand. Mitsui is now looking at China for new manufacturing locations to expand the business.
In January 2003, the company had integrated its US PP compounding affiliates, ATC Inc (Nashville, TN), and Color & composite Technologies, Inc (Sidney, OH) into a single operating company. The new company is called Advanced Composites, Inc.
Comments: The North American demand for PP compounds is expected to increase at about 6% for thenext five years with demand reaching toabout 650 thousand metric tons. The global demand is also expected to grow at a faster pace. Automotive markets have been one of the major drivers of growth for PP. The automotive industry has embraced PP as the material of choice for recyclability and because of the general trend towards homogenization of the materials. PP producers are focusing on the automotive markets to take advantage of these trends in the automotive industry.
China has emerged has a cost competitive location for manufacturing of various plastic products. Mitsui is attempting to take advantage of the general market trends by looking at China to expand its compounding business with focus in automotive applications.
Increase in BP’s second quarter earnings for its petrochemicals segment
BP reported the strongest quarterly result for its petrochemicals segment since 2000 by more than doubling operating earnings to $308 million in the second quarter. The improvement was primarily driven by lower feedstock costs and better margins and came despite a 3 percent drop in production, compared to the first quarter, which totaled 6.8 million metric tons.
The company is skeptical about its third quarter earnings due increases in feedstock costs and flat demand. The total operating earnings for the company were $5 billion, with exploration and production accounting for about $3.5 billion.
Saudi Arabia to scale down its Saudi Gas Initiative (SGI) project
Saudi Arabia has announced that it is splitting its plans for an expansion of gas, water, electricity and petrochemicals output into separate projects. It will now try to make up for the time lost by negotiating deals with several Western oil companies on massive strategies for integrated upstream and downstream projects involving 3-4 million tons of ethylene and derivatives capacities.
The Saudi government plans to announce a number of deals on upstream projects in the first quarter of 2004, and then make investment decisions in petrochemicals and other areas later in the year.
The idea for an integrated project called the Saudi Gas Initiative (SGI) was first conceived in 1998 as a means of exploiting the country’s non-associated gas reserves to begin a new round of industrialization. The SGI was divided into three core ventures. The two largest were to be headed by ExxonMobil and Shell whose partners would have included BP, Total and Conoco Phillips.
The only deal to emerge from the extended negotiations on the ventures has been the formation of a joint venture between Shell, Total and Saudi Aramco, the state oil company. The joint venture will explore for gas in a 200,000 square kilometer area in Rub Al-Khali, known as the Empty Quarter, in the southeastern part of the country. There has been no agreement yet on the production of gas discovered by the venture, and petrochemicals and other downstream projects seem to have been completely excluded from the project.
The companies now want to concentrate on gas exploration and are unlikely to try to negotiate anything further with the Saudis. Shell does not intend to be involved in the construction of any major new petrochemicals projects in the Middle East for at least five years. By virtue of the gas exploration agreement, Western oil companies will have direct access to Saudi Arabia’s vast oil and gas reserves for the first time since the county nationalized its oil operations in the 1970s.
The plan, in which Saudi Aramco is reported to be seeking a partnership with one more of the original Western SGI participants, is likely to be the first of a number of petrochemicals projects in the country in which the Saudi oil company will become involved.
The Confederation of British Industry (CBI) leads the campaign to change EUchemical laws
The Confederation of British Industry (CBI) is leading a campaign to prevent a new EU law that is threatening to “decimate” Britain’s chemical industry.
CBI is seeking major changes to the proposed EU chemicals regulation. If unaltered it would force EU chemicals companies to bear the cost of testing in excess of 30,000 substances which could lead to thousands of jobs being lost to the Far East.
According to CBI, business is continuing to struggle with the ever-growing cumulative cost of environmental legislation covering areas such as climate change, pollution and water. This huge new testing program could cost up to £6 billion. It would impact on all companies that use chemicals and could be the death knell for some companies in the chemical industry.
U.S. International Trade Commission decides to go ahead with investigation on polyethylene bags dumping
The U.S. International Trade Commission (ITC) has decided on Aug. 4,2003 to proceed with an unfair trade investigation against bag makers and importers from China, Malaysia and Thailand. The anti-dumping complaint was brought by a coalition of U.S. bag manufacturers and will still have to pass other governmental reviews before any import restrictions would be put in place.
The Department of Commerce now will conduct a more thorough investigation to determine if dumping is occurring and whether penalties should be imposed. The case will then go back to the ITC to determine if the dumping has harmed the U.S. industry. For anti-dumping tariffs to be imposed both of the agencies must concur before anti-dumping tariffs are imposed.
Comments: There has been lot of concern in the polyolefin industry regarding the imports of finished goods in the United States and its impact on the domestic plastic industry. The imports of plastic bags have reached to 1.5 billion pounds of PE which isequivalent to 2-3 world scale plants. Amid growing concerns about the profitability of the industry a coalition of U.S bag manufacturers filed an anti-dumping complain against bag manufacturers in China, Malaysia, and Thailand. After preliminary assessment the U.S. International Trade Commission has decided to proceed with the investigation and The Department of Commerce will commence a thorough investigation to determine the occurrence of dumping.
On manufacturing basis, bag manufacturing can be divided into three parts: (1) raw materials, (2) equipment depreciation and (3) labor and overheads. Most of the developing countries had a labor advantage for a long time ($15/hr vs. $3.40/hr for equally skilled labor). The raw material advantage has been on the decline for the last decade because of development of domestic polyolefin industry.
At the capacities under consideration in film/bag manufacturing, equipment recovery is a substantial portion of the total cost unlike large scale polymer production where the costs are written off on millions of pounds. Until recently, most of the plastics equipment was made in Europe followed by North America and costs were equivalent. However, the plastic processing equipment made in developing countries like China, can be purchased at 20% of the cost of an equivalent machine in North America and Europe. This essentially provides an additional advantage to the developing countries in lower margin requirements and meet or beat the North American margin expectations.
BASF to investigate renewable resource based plastics in cooperation with Cambridge, MA based Metabolix
BASF Aktiengesellschaft and Cambridge, MA based and Metabolix, Inc., have entered into an agreement on conducting research on plastics made from renewable resources. Under the terms of the initial one-year agreement, Metabolix will produce polyester plastics from sugar using fermentation technology and supply BASF with pilot-scale sample quantities. BASF’s polymer research division will investigate the materials technology and processing properties of the products.
Polyhydroxyalkanoate polyesters (PHAs) are a versatile family of biodegradable plastics made from renewable resources. They have a very broad range of applications and may be used for the manufacture of plastic films, fibers, thermoplastic materials, and dispersions for adhesive raw materials or coatings.
According to BASF, the manufacture of plastics using microorganisms holds huge future potential, and in the medium to long term, renewable resources are an attractive alternative to petrochemical raw materials -also from an economic point of view.
Comments: Biodegradable polymers are divided into two types: (1) natural, and (2) synthetic. The feedstocks used to produce natural polymers come from processing of crops, while the feedstocks for synthetic polymers are petrochemical-based. Synthetic polymers are usually more difficult to degrade by either animal or microbes than natural polymers.
Natural biodegradable resins are produced from wheat protein and starch blended with biodegradable polyester. Polylactic acid is produced from primarily from corn.
There are different kinds of synthetic biodegradable polymers including polyethylene terephthalate based polymers, aromatic-aliphatic copolyesters, and polycarbonate based polymers.
Synthetic biodegradable polyesters can be broadly classified into two categories. One is highly amorphous, imparting flexibility and clarity comparable to a conventional LDPE copolymer, and the second being more rigid, with properties similar to PET, PP, or PS.
Metabolix’s polymer is based on polyhydroxyalkanoate polyesters (PHAs), a versatile family of biodegradable plastics made from renewable resources. They have a very broad range of applications and may be used for the manufacture of plastic films, fibers, thermoplastic materials, and dispersions for adhesive raw materials or coatings.
According to BASF, the manufacture of plastics using microorganisms holds huge future potential, and in the medium to long term, renewable resources are an attractive alternative to petrochemical raw materials -also from an economic point of view.
Ajinomoto developing process to manufacture high purity lactic acid from sweet potato scraps
Ajinomoto is developing a process to manufacture feedstock lactic acid in corporation with Tohoku University. Ajinomoto aims to utilize starch scraps from sweet potato, a specialty crop in southern Kyushu, Japan, and develop a process which would facilitate low cost production of starch based biodegradable plastic, such as polylactic acid (PLA).
The company plans to commercialize the process in three years and would include strain improvement and culture technology to produce high-purity lactic acid at high yield.
Comments: Polylactic acid (PLA) was first made by Carothers in 1932 by direct condensation polymerization of lactic acid using solvents under high vacuum. In 1994, Kanebo, Japan, introduced LACTRON® (poly L-Lactide) fiber and spun-laid nonwovens.
Initially, they targeted agricultural applications, and in 1998 the product was re-launched for apparel end-uses. Fiberweb (now BBA), France, introduced a range of melt-blown and spun-laid PLA fabrics under the DeposaTM. Several Japanese companies made announcements regarding PLA, most notably Kuraray and Mitsui Toatsu (under the LACEATM). The biggest boost to PLA came due to research and development efforts of Cargill in the last decade. In 1997, Cargill Inc. and Dow formed Cargill Dow LLC in order to develop and bring to full commercialization the PLA technology and products. In April 2002, Cargill Dow launched the first global-scale 300 MM Lbs of NatureWorks PLA (formerly known as EcoPLATM) resin plant at Blair, NB. For their lactic acid needs, Cargill Dow has interim supply agreements with several US suppliers, including Purac Americas, IL and Archer Daniels Midland, IL. Recently, Cargill Dow formed an alliance with Mitsui Chemicals, Japan, to amplify the market for PLA in Japan. In return, Mitsui plans to market PLA as a substitute for petrochemical products. The company’s main competitive advantage is their patented, low-cost continuous process to make PLA.
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