Basell to acquire Solvay Engineered Polymers, Inc.
Basell, the global leader in advanced polyolefins, announced that it has signed a definitive agreement with Solvay by which Basell will acquire Solvay Engineered Polymers, Inc., a leading supplier of polypropylene compounds in North America. The transaction is subject to relevant regulatory approvals and is expected to close in early 2008.
According to the company, the acquisition of Solvay Engineered Polymers will complement Basell’s existing Polymer-based Composite Materials and Alloys (PCMA) business in North America.
According to SEP, over the past years, the company has made great progress in expanding its product and application range. Joining Basell is now the right way forward for Solvay Engineered Polymers, as it will provide the company with upstream integration into key raw materials and access to complementary technologies and market segments.
Comments: Acquisition of SEP by Basell is a continuation of saga that had its roots in the late 80s.
Exxon, Union Carbide and DuPont were instrumental in developing PP-EPDM blends for impact modified applications. Due to lack of applications (impact characteristics poorer than, then popular PC and Azdel and RIM) all three provided formulations to compounders like Republic Plastics, Dexter Plastics and A. Schulman. These three compounders were primarily responsible for developing the new markets for TPOs – buoyed by the automotive industry’s acceptance of TPO because its recyclability in spite of its low performance.
Since the mid to late eighties TPOs had the phenomenal growth. Almost all the polyolefin players attempted to replicate the TPOs in reactor – Reactor TPOs and/or attempted to acquire the three then leading compounders – Repubic, Dexter and A. Schulman.
Himont (later Montell – Basell) was the first one to have successful acquisition of Republic and expand into TPO markets along with their Catalloy (Reactor TPO). Soon after, Dexter Compounding was evaluated by almost all the polyolefin players, with Solvay PP succeeding in the acquisition forming the company Solvay Engineered Polymers (SEP). SEP under excellent technical leadership ended up being the premiere TPO compounder/automotive industry leader.
The current acquisition of SEP by Basell completes the circle with Basell as the leader.
Parallel – Read
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Mitsubishi – Exxon – Mytex analysis
A Schulman Analysis
TPO Industry Analysis
Should Polyolefin Players go into downstream compounding? Positives and Negatives
Dow Chemical to shut down some assets and eliminate 1000 jobs
In its ongoing drive to improve the efficiency and cost effectiveness of its global operations, Dow Chemical Company has announced plans to shut down a number of assets and make organizational changes within targeted support functions. As a consequence of these activities, approximately 1,000 jobs will be eliminated from across several functions, geographies and businesses.
The Company expects to incur a charge in the range of $500 million to $600 million, which includes such costs as severance and asset write-downs. This will be reflected in Dow’s results for the fourth quarter of 2007. Once these actions are fully implemented, the Company expects to realize savings in the order of $180 million a year.
Dow will record an impairment charge related to its manufacturing site in Lauterbourg, France, as a result of overcapacity within the industry, a disadvantaged cost position, and increasing pressure from generic suppliers. As required, the Company has launched an information/consultation process with the local employee representatives on the closure project.
Dow will exit the automotive sealers business in North America, Asia Pacific and Latin America within the next nine to 18 months, and will explore strategic options in Europe. The decision, which reflects concerns about the unit’s ability to meet the financial expectations of this business, will allow the Company to focus its resources on delivering differentiated and higher value technologies to the automotive industry.
The Company will write down its investment in a joint venture – Pétromont and Company, Limited Partnership – due to an unfavorable financial outlook, reflecting significant long-term economic challenges.
The Company’s styrene plant in Camaçari, Brazil, will be idled on January 1, 2008, in the wake of escalating competition and weak industry fundamentals.
The Company will close its manufacturing facility for hydroxyethyl cellulose located in Aratu, Brazil, in the face of capacity limitations, high structural and raw material costs, and aging technology. After studying several options to improve the profitability of the facility, the Company opted to close the plant during the first quarter of 2008.
Union Carbide Corporation, a wholly owned subsidiary of the Company, will shut down its polypropylene facility at St. Charles Operations in Louisiana before the end of the year. The decision was driven by a number of factors, including the substantial capital costs required to maintain long-term operations at the facility.
And the Company will significantly reduce support functions, including R&D, at the Union Carbide site in South Charleston, West Virginia, as those functions continue to align their activities more closely with Dow’s strategic growth objectives. Approximately 200 jobs will be affected.
Comments: Dow Chemical Company is on track with its previously announced Global reorganization plans to focus on: (1) Asset reduction, (2) moving to newer technologies and opportunities, (3) Globalization to expand to West – beyond China and (4) diversification beyond basic chemicals and plastics.
Reductions in Force are never pleasant scenarios for both the organizations and the employees – but are unfortunate events that the whole industry endures. Our thoughts and prayers are with the organizations and people – Change is constant and on-going …. The strong will always survive changes and flourish.
Reliance and GAIL join to construct petrochemical plants globally
Reliance Industries Limited (RIL) and GAIL (India) Limited signed a Memorandum of Understanding (MoU) for Joint Co-operation in Petrochemicals.
Under the MoU, GAIL and RIL will explore opportunities for setting up petrochemical complexes outside of India in feedstock rich countries. Identified opportunities will be examined by a Working Group, consisting of representatives from both the companies. GAIL and RIL will set up a Special Purpose Vehicle (SPV) for setting up petrochemical complexes abroad. The Working Group is examining such opportunities in Middle East, Russia and FSU countries. In addition, the two companies will also examine the possibilities of mutual co-operation in the domestic market. This MoU signed is the beginning in the area of petrochemical between GAIL and RIL. A Memorandum of Understanding (MoU) was also signed between the two companies on March 15, 2007 for co-operation in identified areas in the natural gas sector including Natural Gas pipeline, City Gas distribution, Coal Bed Methane, Exploration & Production and Operations & Maintenance services.
Comments: Reliance Industries and Gas Authorities of India Limited (GAIL) both compete in the domestic market. GAIL is the largest gas distribution company in India with 410 KT polymer capacity. GAIL currently has overseas investment in Egypt, China, and Singapore. Reliance Industries has significant experience in petrochemical and refining industry while GAIL is experienced and a leading player in distribution and marketing of natural gas. The joint co-operation will give both the companies to tap into its expertise to establish a position across the value chain. It will be interesting to see how this join co-operation works between these two companies with unique/different cultures.
Siam Cement and Dow Chemical to build LLDPE plant
Siam Cement PCL (SCC), Thailand’s top industrial conglomerate, announced that it had agreed with Dow Chemical to build a $315-million petrochemical plant.
The plant, to produce linear low density polyethylene (LLDPE) used in the packaging industry, would have a capacity of 350 KT per year and was expected to begin commercial operation in the first half of 2010.
SCC will hold a 50 percent stake in the plant, which would use feedstock from another joint venture plant with Dow. That joint venture, formed in 2005, was to build a $1.1 billion olefins plant to boost SCC’s petrochemical capacity by 2010 to meet rising demand and produce high-margin products.
Comments: SCG-Dow Group is a joint venture formed in 1987 by The Dow Chemical Company and The Siam Cement Public Company Limited. The Group is comprised of five joint venture companies that manufacture and supply markets across Asia Pacific. The key products include ethyl-benzene and styrene monomer; styrene-butadiene and acrylic latex; polyethylene; polystyrene and compounding products; polyols and formulated polyols.
The five companies were formed in the following years:
1) Pacific Plastics (Thailand) Company Limited – 1975
2) Siam Styrene Monomer Company Limited – 1988
3) Siam Synthetic Latex Company Limited – 1990
4) Siam Polystyrene Company Limited – 1993
5) Siam Polyethylene Company Limited – 1995
Dow has 50% stake in all these companies. Recently Dow acquired the remaining 50% stake in Pacific Plastics Company Limited. The production facilities are located in Map Ta Phut Industrial Estate, Rayong Province, in Thailand. The total capacity for polyethylene in Thailand is 450 KT. After the construction of this plant the capacity will almost double to 800 KT. This announcement is in line with Dow’s strategy to invest in feedstock advantaged and/or high growth areas. This announcement further strengthens the relationship between Dow and SCG . Mr. Kan Trakulhoon (President of The Siam Cement PCL) and Mr. Andrew Liveris (President and CEO of The Dow Chemical Company) had recently co-signed an agreement to set up Map Ta Phut Olefins Co., Ltd. to strengthen the two corporations’ olefins business in the Asia-Pacific region. This partnership was for construction of an olefins plant in Map Ta Phut, Rayong Province, with a production target of 900 KT of ethylene and 800 KT of propylene. The plant is scheduled to start its operations in 2010.
Petrobras increases its stake in Braskem from 8% to 30%
Petroleo Brasileiro SA (Petrobras) announced that it will boost its stake in Braskem SA. Petrobras, Brazil’s state-run oil company, will swap stakes in five petrochemical plants for 103.4 million new common and preferred Braskem shares. The shares would be worth 1.57 billion reais ($884 million). The deal boosts Petrobras’s voting stake in Braskem to 30 percent from 8.1 percent.
In a separate statement today, Petrobras said it will own 40 percent of a joint venture with Uniao de Industrias Petroquimicas SA, a Brazilian petrochemical company known as Unipar. The two companies will transfer assets to a new company, Cia. Petroquimica do Sudeste. The venture was first announced in August. The two operations will consolidate almost all of Brazil’s petrochemical industry into Braskem and Petroquimica do Sudeste.
Sao Paulo-based Braskem said it will save $1.15 billion in costs and taxes with the acquisition of stakes in the five plants. Under the agreement, Braskem will get Petrobras’s minority stakes in Cia. Petroquimica do Sul, Ipiranga Petroquimica, Ipiranga Quimica and Petroquimica Paulinia. Petrobras will also transfer all of Petroquimica Triunfo SA to Braskem.
Comments: Braskem has announced that it will consolidate strategic assets with the Southern Complex and plus Petroquímica Paulínea. Braskem will incorporate 37.3% of Copesul’s total capital, 40% of Ipiranga Petroquímica, Ipiranga Química and Petroquímica Paulínia’s total capital and 100% of Petroquímica Triunfo’s total capital. With this, Braskem will have full control over these companies.
With the operation, Petrobras will increase participation in Braskem’s voting capital from 8.1% to 30% and in the total capital from 6.8% to 25%.
Record-low interest rates in Brazil have helped fuel demand for plastics and resins in Latin America’s biggest economy. The news is relevant and positive for Braskem as it increases its coverage in the petrochemical scenario, mainly in thermoplastic resins, and generates future gains with synergy.
Basell to set up compounding joint venture with Russian firm Tatneft
Leading polypropylene producer Basell plans to set up a joint venture company in Russia to provide compounds for the country’s growing automotive industry.
Basell is set to join forces with oil and chemicals group OAO Tatneft to establish a 45,000 tpa compounding plant which could start production in Tatarstan’s Alabuga industrial zone by late 2008.
The two stage, EUR 36 million project is expected to draw up to 60% of its polypropylene raw material from a new oil refining and petrochemicals complex being built by Almetyevsk-based Tatneft in Nizhnekamsk. Basell will bring to the partnership plastics and compound processing technology, equipment and other materials such as additives and pigments.
In the new plant’s first development phase, capacity is due to reach 20,000 tpa, later increasing to 45,000 tpa in the expansion phase.
Under the scheme, local production will replace imported compounds at the heart of semi-autonomous Tatarstan’s major automotive manufacturing region. Vehicle builders in the republic include car maker Severstal Auto with plans to manufacture 200,000 cars a year by 2011 and truck producer KamAZ which aims to build 80,000 by 2010.
The plant is also intended to supply other assembly plants beyond Tatarstan in Russian automotive industry centres including Izhevsk, Togliatti and Nizhny Novgorod.
Comments: It is not just “China” any more for new business opportunities! Realizing the potential of other under-developed regions of the world for the growing automotive industry, Basell is stepping in the right direction – joining forces with oil and chemicals group OAO Tatneft in Russia to establish a 45,000 tpa compounding plant which could start production in Tatarstan’s Alabuga industrial zone by late 2008.
This is indeed a” win-win” situation for both parties! In this two stage project, Almetyevsk-based Tatneft will supply the polypropylene raw material from a new oil refining and petrochemicals complex being built in Nizhnekamsk while Basell will bring to the partnership plastics and processing technology, equipment and other materials such as additives and pigments. By setting up this new compounding facility, Tatneft is planning big – not only capturing the local automotive markets but also becoming the preferred supplier to other assembly plants beyond Tatarstan in Russia including Izhevsk, Togliatti and Nizhny Novgorod . Eventually, this will be beneficial to Russian automotive consumers in terms availability and competitive prize of new products.
Basell also improved its compounding business position in the US via acquisition of Solvay Engineered Polymers.
Japanese trading firm Marubeni divests its stake in JG Summit
Marubeni Corp has divested its 17.72% stake in Philippines-based polyolefins manufacturer JG Summit Petrochemical to the latter’s parent firm JG Summit Holdings. The sale is in line with Marubeni’s select and concentrate policy for its petrochemical and chemical operations. The Japanese trading house is also dissolving non-core businesses.
JG Summit has a 200 KT per year factory for making high-density polyethylene and linear low-density polyethylene, and a 180 KT per year polypropylene unit in Batangas Province, Philippines. The company is currently constructing a naphtha cracker, with ethylene capacity of 350 KT per year. The unit, which will require an investment of over $600 million, will be finished in 2011-2012.
Comments: Marubeni has been focusing on its strategy of investing heavily in electric power projects and hence it has been divesting its non-core assets.
The dissolution is part of the company’s policy to follow a select-and-concentrate strategy for its petrochemical and chemical businesses, and withdraw from noncore businesses.
The company had previously withdrawn from its equity interest in Indonesia’s sole ethylene-center operator Chandra Asri.
Marubeni is promoting the expansion of its logistics services, including adding this year three vessels dedicated for ethylene transport. It also is participating in a butadiene rubber joint venture with Ube Industries and others in China. In addition, in the area of inorganic chemicals, the company has participated in an aluminum project with Showa Denko in Indonesia. Australian industrial-salt maker Dampier Salt, in which Marubeni has a stake, has launched a project to expand capacity.
In the early 1990s, Marubeni had invested in cement, power generation, telecommunications, and petrochemical projects in Indonesia and investment in polyolefins was one of them.
Dow and Chevron Phillips venture to be called Americas Styrenics
Chemical producers The Dow Chemical Co. and Chevron Phillips Chemical Co. LP laid out management plans for a proposed joint venture to produce polystyrene plastic.
Tim Roberts, now general manager of styrenics at Chevron Phillips Chemical, will become the president and chief executive of the new venture, known as Americas Styrenics. Thomas Egolf, finance director of Dow Technology Licensing, was named chief financial officer.
Scot Mitchell, global manager of polystyrene for Chevron Phillips Chemical, was named commercial vice president. Peter Ott will become vice president of operations, while Randy Pogue will be vice president of supply chain. Doug Chauveaux was named vice president of human resources. All three have ties to Dow or Chevron Phillips Chemical.
Americas Styrenics will likely have about 600 employees in North and South America. Dow will contribute six polystyrene plants to the venture, while Chevron Phillips Chemical will add a styrene monomer plant and a polystyrene plant. The joint venture is expected to begin operations during the first quarter of next year.
Comments: The polystyrene joint venture between Dow Chemical and Chevron Phillips was announced earlier this year. The announcement of new name and new team for the JV Company is one step closer for the JV partners to set the ball rolling for the new company.
European Commission fines chloroprene rubber cartel firms EUR 243 million
Chloroprene rubber producers were fined EUR 243.2 million ($359 million) by European regulators for carving up markets and fixing prices over a decade.
According to European Commission, it imposed the fines on Italy’s ENI, DuPont Co, and Dow Chemical Co of the United States, and Tosoh Corp and Kanto Denka Kogyo Co of Japan for participating in a cartel.
Between 1993 and 2002 the companies shared the market and fixed prices for chloroprene rubber, used in a range of industrial products including hoses, condoms and the inner soles of shoes, a Commission statement said.
ENI had its fine hiked by 60 percent for repeat offending. It will have to pay 132.16 million euros. Germany’s Bayer AG would have faced a 201 million Euro fine but instead received full immunity because it blew the whistle on the cartel, the Commission said.
DuPont was fined 59.25 million euros, of which the Commission said Dow would have to pay 48.68 million euros.
In 2004, DuPont agreed to fund 100 percent of any potential DDE antitrust liabilities and costs up to $150 million, with DuPont also funding more than 75 percent of the excess, if any. Consequently, Dow’s share of this fine against DuPont is not material as to Dow.
DuPont criticized the EU executive’s decision and said it would consider its options after studying the details. Denka was fined 47 million euros and Tosoh 4.8 million euros. The Commission said Tosoh and DuPont/Dow were granted a reduction of their fines for providing useful information under its leniency programme.
Graham Packaging starts a bottle manufacturing plant in Turkey
Graham Packaging Company, L.P., has begun manufacturing operations in a new plant in Tuzla, Turkey, producing polyethylene (PE), polypropylene (PP), and polyethylene terephthalate (PET) bottles for the personal care, household products, and dairy markets in western Turkey.
The newly constructed two-story, 4,000-square-meter plant replaces a facility that Graham Packaging previously occupied in Istanbul. The new plant is bigger, has more modern infrastructure, and is closer to the company’s principal customers in the region. Sixty employees work in the plant.
“This investment in this plant is a tangible indication of Graham Packaging’s commitment to the rapidly developing Turkish market and will serve as a base for growth in the overall Euro-Asian region,” said Ashok Sudan, Graham Packaging executive vice president for global food and beverage.
Graham Packaging, based in York, Pennsylvania, is a worldwide leader in technology-based, customized blow-molded plastic containers for the branded food and beverage, household, personal care/specialty, and automotive lubricants product categories. The Company produces more than 20 billion container units at 85 manufacturing plants in North America, Europe and South America and had sales of $2.52 billion in 2006.
Graham Packaging is a leading U.S. supplier of plastic containers for hot-fill juice and juice drinks, sports drinks, drinkable yogurt and smoothies, nutritional supplements, wide-mouth food, dressings, condiments, and beers; the leading global supplier of plastic containers for yogurt drinks; the leading supplier of plastic containers for liquid laundry detergent; and the number-one supplier in the U.S., Canada and Brazil of one-quart/one-liter plastic HDPE (high-density polyethylene) containers for motor oil.
The Blackstone Group of New York is the majority owner of Graham Packaging.
Comments: Turkey in recent years has seen a healthy growth in its economy in the last few years, the GDP in 2006 was 6.1% becoming one of the high growth economies in the world. The country in the last few years has seen an increase in demand for bottled consumer product such as olive oil, vinaigrettes and in new applications such as fresh/pasteurised milk and drinking yoghurt. This increase has led to a growth in beverage packaging such as HDPE bottles that is led by companies such as Ülker, Yasar and Sütas. The growth in bottled water consumption continues to increase fueling the demand for pet bottles. Graham Packaging new plant will allow it to meet the growing demand for beverage packaging.
Graham Packaging has its headquarters in York, Pennsylvania. The produce blow molded PET plastic bottles, blow-molded HDPE, LDPE and polypropylene containers. The company has over 90 plants in 15 countries.
LyondellBasell Industries to be headquartered in Rotterdam
Basell and Lyondell Chemical will structure their combined operations into three global divisions—chemicals, polymers, and fuels—on completion of their merger. The corporate headquarters for the new firm, named LyondellBasell Industries will be at Rotterdam at the site where Lyondell had previously planned to locate its European regional headquarters. Basell’s corporate office in Hoofddorp, the Netherlands, will be closed by mid-2008.
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