My Turn – Dr. Balaji B. Singh – The year for Specialty Polyolefins SPO-FlexPO2008, June 25-27, 2008 Houston/Galveston, TX
Comments: The start of New Year heralds a new race for Specialty and value added polyolefins.
Chemical Market Resources focused on technology and value added polyolefins since 1990 and has conducted over 40 multiclient studies on various specialty polyolefins.
We wish the best year ever and Hope you all have peace and fun – Prosperity will automatically follow.
Three Saudi Private-Sector Groups to Build Isocyanates Complex at Yanbu
Three private-sector Saudi groups have teamed up to build an $800-million isocyanates complex at Yanbu, Saudi Arabia. House of Invention International (Jeddah, Saudi Arabia), will partner with Sara Holding Co. (Riyadh) and Midroc (Jeddah) to build the complex, which will in the first phase comprise two 50,000-m.t./year units, one of which will produce methylene di-para phenylene isocyanate (MDI) and the other producing toluene diisocyanate (TDI). Completion of the first phase will require an investment of $500 million and is scheduled for completion by 2010.
The second phase, doubling the capacity for MDI and TDI, is due onstream in 2012. This part of the project will require an additional $300-million investment.
Chematur Engineering (Karlskoga, Sweden) will provide technology and front-end engineering design, as well as detailed engineering. Construction will be carried out by local firms. Chematur will have a 5% equity stake in the project and the rest will be divided equally between the three Saudi partners.
The investors selected Yanbu for the project because they believe that feedstock will be available in the future at Yanbu. The investors will until that time source benzene and toluene feedstock from the Far East. The project will require 32 KT per year of benzene and toluene. Output from the isocyanate plants will be sold locally and in export markets. The partners are in discussions with potential overseas offtakers. They are also seeking financial advisors and are in talks with an undisclosed Kuwaiti company.
Comments: The first wave of investments in Saudi Arabia was focused on the major commodity derivatives of ethylene and propylene; polyethylene & polypropylene.
The next phase of investment in Saudi Arabia will focus on specialty chemicals, non-polyolefins products and downstream products.
This project resembles many other projects being planned in Saudi Arabia with focus on non-polyolefin products. In next few years we will hear announcements of other similar projects. Such projects will help Saudi Arabia in having a more diversified chemical industry and will also decrease the reliance on low cost feedstock.
The feedstock advantage of the country will start to decrease as supply matches demand. Therefore the country needs to have a more diversified product mix and a focus on higher value products to decouple the industry from feedstock advantage based investments.
Lanxess Selects Singapore for Butyl Rubber Project
Singapore has won the race to host Lanxess’s previously reported $592.8 million butyl rubber project. Malaysia and Thailand competed for the project, Lanxess’s largest single investment since its spin-off from Bayer in 2005. The butyl rubber plant will have capacity to produce about 100 KT year of halo butyl rubber and will be completed toward the end of 2010.
Lanxess had said earlier that the main determining factors in the final selection would be availability of raw materials; personnel; infrastructure; and energy supplies. The company needs isobutylene and isoprene raw materials as well as bromine or chlorine, depending on which halo butyl rubber the plant will produce.
Comments: Butyl rubber is mainly consumed in tires, tubes and other pneumatic products where over 80% of the total resin is consumed. Other application for butyle rubber includes automotive, mechanical goods, adhesives, caulks and sealants and pharmaceutical. Butyl rubber in North America and Western Europe has seen little growth as production bases of tires, the main use of butyl rubber, is shifting from the US and Europe to Asia. In addition the automotive market is expanding in Asia especially in China and India where more people are able to afford cars for their daily commute. Singapore chosen as a location for their new site is understandable with its central location and a well organized chemical complex.
Petromont Closing Polyethylene & Ethylene Plants in Quebec
Pétromont & Co. LP — a 50-50 joint venture between Dow Chemical Co. and state-owned Ethylec Inc. — will stop polyethylene and ethylene production in Quebec for “an undetermined period” beginning April 30. In a Feb. 12 news release, officials with Montreal-based Pétromont said the closure decision was the result of several factors, including the strong Canadian dollar and difficulty in obtaining petroleum-based feedstock at competitive prices.
“These factors have had a major impact on the company’s profitability, and in light of the equally unfavorable conditions affecting the petrochemical sector across North America, Pétromont has no choice but to suspend its operations,” officials said.
They added that the facilities will be kept intact in case market conditions change or for a potential buyer of the business.
Pétromont has average annual sales of $750 million and employs a total of 325 at a 615 million pound-per-year capacity high density PE plant in Montreal East and a 655 million pound ethylene plant in Varennes.
Comments:In last two years North America has seen significant restructuring and asset optimization. Lack of feedstock, higher priced feedstock, age of assets, and new capacity in other regions are the key reasons that have led to restructuring in this region.
A large amount of commodity plastics capacity closures have been announed in Canada in last two years. The major annoucnements include: 440 million pounds of PP capacity by Basell in Varennes, 385 million pounds of PP capacity operated by Basell in Sarnia, 120 million pounds of polystyrene capacity operated by Ineos Nova in Montreal, 300 million pounds of polystyrene capacity operated by Dow in Sarnia, and 220 million pounds of LDPE capacity oeprated by Dow in Sarnia.
We anticipate such restrucing and asset optimization to continue for next few years due to the age of the assets and increasing feedstock cost.
LyondellBasell to Stop Production of HMS PP in Varennes, Quebec in April 2008 & Will Exit HMS PP Business
LyondellBasell Industries announced that it will stop producing High Melt Strength (HMS) polypropylene at its Varennes, Quebec site in April 2008. The HMS unit is expected to continue normal operations until then.
Yves Bonte, Senior Vice President of Polypropylene said, “LyondellBasell has been a leader in the HMS specialty polypropylene business for over 15 years. However, in light of our previously announced decision to close our Varennes site, where the HMS unit is located, further study concluded that continued HMS polypropylene production is not economically viable.”
Bonte added, “LyondellBasell has no alternate manufacturing capacity to produce HMS polypropylene. As a result we will be working with our customers to manage an orderly exit from this business.”
Comments: Basell then Montell pioneered the commercialization of high melt strength polypropylene (HMS PP) resins in 1991. The company produced HMS PP by introducing long chain branches by irradiation of conventional polypropylene resin below its melting point in an inert environment. The high melt strength characteristic of polypropylene was introduced in the market to compete in thermoforming, extrusion, blow molding and other applications. LyondellBasell currently markets their products in thermoforming of large parts, automotive interiors, foamed packaging, extrusion coating and others.
There are three major approaches for HMS PP – (1) in-reactor developments, (2) Post-reactor process, (3) additives and (4) equipment modification – and/or a combination of these.
Basell, since its Himont days focused on post reactor radiation method for their HMS PP. Being a post-reactor process, there are no major advantages compared to additives and/or other post-reactor processes. In addition, the radiation method is extremely sensitive to the radiation and making grade to grade consistency is more difficult.
The North American demand for HMS PP was close to 22 KT in 2007 with the largest market segment in extruded foam application; other applications include thermoformed packaging, thermoformed large parts, extrusion coating, blow molding, blown films and others. The vacuum caused by LyondellBasell’s exit from this business would be satisfied mainly by imports as the company was the only major player in this market in North America.
Ideally,if an when the organizations succeed in developing a cost effective HMS-PP, it will have replacement opportunities in PS foam sheet markets in several applications including fast-food packaging.
SCG-Dow announces Specialty Elastomers Plant
SCG-Dow Group, a joint venture of The Dow Chemical Company (Dow) and Siam Cement Public Company Limited (SCG) announced that it is in the final stage to plan and build a specialty elastomers train at the joint venture’s Map Ta Phut site in Thailand. George Biltz, business group president for Specialty Plastics and Elastomers, a business unit of The Dow Chemical Company said, “Dow and Siam Cement have a very successful relationship and a long history of working together.
This new facility, when constructed, will supply customers in the fast-growing Asia Pacific region with some of the most technologically advanced plastomers and elastomers in the world, including AFFINITY™ Polyolefin Plastomers and ENGAGE™Polyolefin Elastomers.
The new plastomers and elastomers plant is expected to receive feedstock from their second joint-venture olefin plant in Map Ta Phut (commercial start-up in mid 2010) and will bring specialty products into our product portfolio.
Comments: This announcement is in line with Dow’s (and some of the other chemical companies) ongoing strategies of having future assets near where the customers are/or where the feed stocks are. It is a significant commitment by Dow’s Specialty Plastomers & Elastomers business to nurture the current customer base with local supply as well as cater the needs of growing customer base in Asia/Pacific region. This also is an endorsement in trusted partnership between Siam Cement Group and Dow Chemical which is in place over past 25 years. With favorable trade agreements among ASEAN countries and Thailand with other Asian countries, this asset would prove to be of high value investment for Dow in the growth region and solidify Specialty Plastics and Elastomers business in Asia even more strongly.
In our opinion, there is a strong need and market acceptance for Metallocene EPDM in the market place and there is some shortage as well. It would be ideal for Dow to have a swing train with Diene capabilities which could allow making products like Engage, Versify and Nordel IP on the same train and try to cater strongly to the industrial market segments as well. In near term, at the start up of the train, it is likely that there might be some competitive pressure between Mitsui and Dow till the additional capacity is well positioned in multiple market segments.
LyondellBasell in Talks on Petchem JV in Tatarstan
LyondellBasell is in early discussions to form a petrochemicals manufacturing joint venture in the Russian Republic of Tatarstan. LyondellBasell has expressed its interest to the Tatarstan government to participate in a petrochemicals joint venture in Tatarstan, says Just Jansz, president/technology business at LyondellBasell. “We have been talking to various parties in Tatarstan. These talks are being coordinated by Tatarstan’s Prime Minister Rustam Minnikhanov and various authorities that deal with the petrochemical industry in Tatarstan. There are no further details at this stage but the complex would include an ethylene plant.
As the first step toward a petchems jv in Tatarstan, the local oil producer Tatneft (Almetyevsk, Tatarstan) and LyondellBasell plan to form a polypropylene (PP) compounding joint venture in the special economic zone at Alabuga, Tatarstan. The partners plan to spend 1.2 billion rubles ($48.9 million) on the compounding plant, which will be designed to produce 42 KT a year of PP compounds, mainly for the automotive industry. Start up is expected in September 2009. The compounding plant will eventually source PP from Tatneft’s planned Spherizone-process 200 KT per year PP plant, which will form part of TANEKO, a petchems complex being planned by Tatneft at Nizhnekamsk.
Until that plant is ready, however, Nizhnekamskneftekhim (Nizhnekamsk) is likely to supply PP to the compounding unit. Nizhnekamskneftekhim, Russia’s second largest chemicals player behind Sibur (Moscow), last year started up a 180 KT per year Spheripol-process PP plant at Nizhnekamsk.
Comments: As the availability of feedstock in the Middle East is decreasing, companies are trying toe secure feedstock in other cost advantaged regions. Russia is still relatively unexplored with a few announcements of petrochemical developments. As the search for cost advantaged feedstock continues this region will also be fully utilized.
LyondellBasell is also making progress on its petchem project in Kazakhstan. It appears that LyondellBasell is aggressively pursing opportunities in regions having cost advantaged feedstock.
Meanwhile LyondellBasell will be able to compete in the compounding market via its facility in Tatarstan. The company has also increased its compounding operating significantly via new capacity and recent acquisition of Solvay Engineered Polymers.
Kraton Taps Former Lyondell CEO as Chairman
Kraton Polymers has appointed Dan F. Smith, the former chairman and CEO of Lyondell Chemical, as its chairman. “Mr. Smith’s proven leadership, experience, and achievements in the chemical and polymer industry will prove invaluable to Kraton in pursuit of its strategic objectives,” says Kelvin Davis, the outgoing chairman of Kraton’s board. Smith became chairman of Lyondell in 1997, and served in that capacity until last year, when Lyondell merged with Basell. Kraton recently named Kevin M. Fogarty as president and CEO, succeeding George B. Gregory, who has served as Kraton’s chief for three and half years.
Comments: Kraton, originally developed by Shell Chemical Company – SB copolymers, were considered the crown jewels of Shell. Kraton polymers was first acquired by Ripple Wood and then by Texas Pacific Group. The original value, considered high was by all sources was further enhanced in the second acquisition – the SB copolymers, even with their healthy growth, did not keep up with the value enhancement.
The major trends that impacted the Kraton performance include: (1) Shell’ exiting of SB copolymers slowed down the innovations in SB copolymers, (2) The base-load applications – footwear, asphalt modification and roofing moved to China and Asia, (3) Most technology patents exprired and/or alternative technologies for partial hydrogenation developed products that are as good as SEBS.
Toray to Commence OPP Film Production in France
Japan’s Toray Industries, Inc. is to commence production in Europe of Torayfan* (bi-axially oriented polypropylene (OPP)) high-barrier metallized film. The new company-Toray Films Europe S.A.S., (TFE) will be established in France this month, with 20 KT of film production facility and 22 KT of metalizing facility at an investment of 10 billion yen. Production is estimated to commence in April 2010.
Comments:Annual growth fir high-barrier films in the European market is projected to exceed 10%. This move will help the company take advantage of the growing market in Europe. The new company is to be sited in the vicinity of Toray Plastics Europe S.A., or TPEu, which is Toray’s polyester film manufacturing base in France. By leveraging technologies and expertise accumulated by TPEu in the production of polyester film and its manufacturing infrastructure, Toray aims to achieve a smooth launch of the Torayfan business in Europe.
Diversification of the food culture in the global market has led to increasing needs for keeping food products fresh for longer periods, and delivering them with their original flavor to the consumer. This has led to rapidly increasing demand for films with better barrier functions against oxygen and moisture vapor than available in the standard products. Torayfan excels in strength, transparency, and moisture resistance, thus is suitable for post-processing including printing and lamination. It is widely used in food packaging, including packages for dry snack food and dried fish flakes.
Toray currently develops and manufactures high-barrier film at Toray Plastics (America), Inc., (in North Kingstown) and Front Royal, VA, U.S.A., and markets the product primarily in the US and Europe. TPA’s high barrier film has the top market share of about 60% in the North American market owing to its superior barrier functions and high quality. The main segment is the manufacture and marketing of OPP and PET films and polyolefin foam.
Advanced Polypropylene Appoints Off-takers; Fires Up Production Complex
Advanced Polypropylene Co. (APPC; Al Jubail, Saudi Arabia) has appointed three companies to offtake the entire output from a world-scale polypropylene (PP) complex at Al Jubail for sale on international markets. The companies are Vinmar International (Houston), Mitsubishi Corp., and Domo (Gent-Zwijnaarde, Belgium) The SR3-billion ($800 million) complex is mechanically ready and will start production this quarter.It comprises a 455 KT per year propane dehydrogenation plant that uses Lummus Technology’s Catofin process, and a Novolen-process, 450 KT PP facility. Samsung Engineering was the contractor on the project. Saudi Aramco will supply propane to the dehydro unit.
Comments: APPC is a joint stock company that has been listed on the Saudi stock exchange since early last year. APPC’s complex is one of several PP projects that are due to be completed this year in Saudi Arabia.
Several other projects will come on-stream in next few years and most of these projects will have off-take agreements with either distributors, licensors or JV partners. The final destination of the products being produced by these companies will become more apparent as the off-take partners are revealed. While majority of the output will end-up in Asia; off-takers may change the dynamics based their capabilities and market knowledge.
SABIC Europe puts PPF-7 (Polypropylene) Project “on hold”
The Managing Board of SABIC Europe has decided to put the PPF-7 (Polypropylene) Project planned for Wilton, Teesside, UK on hold indefinitely. The decision was made after careful review of the project feasibility taking into consideration a number of key factors, including:
– Very suddenly increased global economic uncertainty, creating a difficult business environment. – Continuing unfavorable conditions in the construction market, with an overheated contractor sector creating cost inflation and labor constraints.
– The availability of alternative options to supply sufficient volume to meet market needs and achieve SABIC’s strategic goals in the PP markets from our existing European and Saudi Arabian asset base.
SABIC remains strongly committed to give priority to invest in the growth, integrity and competitiveness of its European asset base.
Comments: In October 2007, SABIC was preparing to invite bids for this PP unit. The plant was supposed to use the Innovene process to produce 400 KT of PP capacity. There are only two producers of PP in the U.K. Basell operates a 210 KT a year plant at Carrington; and Ineos has a 250 KT a year unit at Grangemouth. Ineos was planning on raising the capacity of the unit to 280 KT by 2008. UK is a net importer of PP.
SABIC is also building a 400 KT low density polyethylene (LDPE) plant at the same site, which is due onstream in February 2008. Sabic inherited thaproject as well as an olefins and aromatics complex through last year’s acquisition of Huntsman’s petrochemical business in the U.K. The U.K. government provided a combined £16.5-million ($33 million) grant toward the LDPE plant and toward a project to upgrade the aromatics complex. It appears that this project did not make economic sense to SABIC and therefore has decided to put it on hold. It was not clear if government was providing any incentives for the PP plant as it did for the LDPE plant.
PetroChina Selects Dow, Aker Kvaerner for PP Plant at Fushun
PetroChina Fushun Petrochemical Co. has selected the Dow Unipol polypropylene (PP) technology for a 300 KT a year plant to be built at Fushun by 2010. Aker Kvaerner will provide an extended process design package and technical advisory services for the project. The new plant will produce the whole range of PP grades, including homopolymers, random copolymers and impact copolymers. The Unipol process uses the Shac catalyst system. Last year Stone & Webster, a Shaw Group company, was awarded a contract to build the upstream 800 KT per year ethylene plant at Fushun.
Comments: This is the fourth PP plant in China to use the Unipol PP technology. Including the PetroChina Fushun project, UNIPOL™ Polypropylene Technology will be used globally to produce more than 10 million metric tons of polypropylene per year, which will be more than 16 percent of total global capacity. UNIPOL always had the largest installed base in Asia and this license reinforces its strength in Asia. PetroChina also selected UNIPOL Polypropylene Technology for its 200 KTA facility in Chengdu, GuangXi Province, and Aker Kvaerner is providing the basic engineering design and certain supply equipment.
Hanwha Grows in China & Czech Republic
South Korean plastics group Hanwha Chemical Corp. plans to invest 360 billion Korean won ($382 million) to establish a PVC operation in eastern China.
Meantime, Hanwha has set up a subsidiary, Hanwha L&C Czech sro, in the Czech Republic. Hanwha L&C makes plastic flooring materials, interior automotive parts, construction materials and PVC compounds.
In a bid to boost the competitiveness of its vinyls business, Seoul-based Hanwha Chemical will launch a wholly owned subsidiary in Ningbo, China, that will operate a 661 million-pound-per-year PVC plant in Ningbo. The plant is expected to launch in 2010, following approval from Chinese authorities.
The new chemical company also will have the capacity to produce 661 million pounds of vinyl chloride monomer and 1.1 billion pounds of ethylene dichloride.
The investment is part of Hanwha’s plan to lead vinyl production in China, while expanding to become a global player in PVC production
Comments: Hanwha currently has approximately 650 KT of PVC capacity in South Korea in Ulsan and Yeosu. Hanwha accounts for 42% of PVC capacity in South Korea while LG Chemical accounts for the remaining 58% of the capacity.
Hanwha started its operations in 1965 and started various PVC facilities in the next three years. Currently Hanwha participates in a variety of products including PVC, LDPE, LLDPE, EVA, HDPE, and various chemicals.
These investments will expand Hanwha’s operations into other countries and will expand its asset-base outside Korea. Hanwha had already identified China as one of countries for future investment and growth plans.
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