My Turn – Commentary on Global Petrochemical Industry Issues – Happy Holidays
We want to thank all of our clients and wish them a happy holiday season and a prosperous New Year.
The Year 2006 will go down in history as:
1. China! – The New Frontier; The mad rush to China is so intense – it consumed everyone and everything including – growth in U.S and Europe; Innovations; jobs; Consultant’s time 🙂 Conferences and resources – Yes, you can get a Ph.D. chemical engineer to work for less than an office temp’s salary and tremendous growth in consumer products.
It is almost like the song “China! China! If you can make it here; Everyone will forgive you could not make it in the U.S. of Aaaa’! …. Sing to New York…New York tune of Frank Sinatra…
2. Lack of innovation in polyolefins and elastomers – for the first time since the late 80s, polyolefins, and elastomers have been classified as true commodity/core products with no innovations. There have been no new products introduced into the market, except INFUSE®… A lot of discussions…
3. India – the call center and a source of a highly educated English-speaking population suited for R&D centers, technical developments, and the service industry – is just a notch below China in Consumer growth
4. Watch out for CHINDIA – China/India is A powerful combination accounting for 40% of the Global population – technical brains; disciplined, educated, low-cost workforce; Growing consumers, entrepreneurship – You can’t beat them… Join Them
5. What happens to the U.S. industry – Nothing! The U.S. will remain a giant in terms of production, consumption, and innovation – the newer technologies will propel it to the next life cycle by increasing its living standards!
SABIC considering ethylene plant in India
Saudi Basic Industries Corp (SABIC) announced that it is in talks to build a chemical plant in India as part of plans to boost capacity by almost 50% between 2009 and 2015.
The company plans to reach an agreement with a partner to build the ethylene and other chemicals-products plant by the end of next year.
Sabic has already committed to development plans worth at least $25bn to boost capacity by a third to 68 million tons in 2009. Recently SABIC agreed to buy the European operations of Huntsman Corp for $700mn.
Sabic is also in talks with China’s Dalian Shide and China Petroleum and Petrochemical Corp (Sinopec) about building a plant in China. The discussions started three years ago.
Comments: The economic growth and large demand potential have shifted the interest of multinational companies towards India. There have been many announcements for capacity in ONGC and now a new international player (SABIC) is also planning to add capacity in India. We anticipate that some of the announced capacity will be either delayed or canceled; if all the announced capacity does come on-stream then there is a chance of over capacity.
All this new build has to be supported by developments in the downstream industry that seems to be lacking. Chemical Market Resources, Inc. will be presenting a paper on “strategies for planning and development of Indian petrochemical industry” at Vibrant Gujarat Global Investors’ Summit 2007 on January 12, 2007.
Dow Chemical to acquire Bayer’s Wolff Walsrode (cellulose products) business
The Dow Chemical Company and the Bayer Group announced that they have reached an agreement for Dow to acquire Bayer’s Wolff Walsrode business group, primarily involved in cellulose products. The transaction is expected to close in the first half of 2007, subject to regulatory approval.
The new business would combine Wolff’s advanced production technology and proficiency in HEMC (Hydroxyethyl Methyl Cellulose) and CMC (Carboxymethyl Cellulose) chemistry with Dow’s leading HPMC (Hydroxypropyl Methyl Cellulose) product brands and industry expertise. Cellulose derivatives produced by the combined businesses are used across a broad range of industry sectors, including construction materials, personal care, pharmaceuticals, food, and several specialty applications.
Comments: Water-soluble polymers are a diverse class of macromolecules ranging from naturally occurring biopolymers such as polysaccharides and most polypeptides to wholly man-made materials. Such materials have found a wide range of applications.
Cellulose products are classified as semi-synthetic types of water-soluble polymers. These include carboxymethyl, hydroxyalkyl, methyl, and ethyl derivatives. These products are produced by reacting alkali cellulose with the appropriate halide, sulfate, or epoxide. Methylcellulose is a polymeric derivative made by reacting chemical cellulose with methyl chloride.
These products are used in (1) coatings – latex paints, polymer emulsions, (2) construction – cement, mortars, (3) paper – coating, sizes, (4) pharmaceuticals – lotions, ointments, (5) cosmetics – toothpaste, shampoos, creams, lotions, (6) ceramics, and others. They function as thickeners, protective colloids, water-binder, retarders, stabilizers, and/or extrusion aid in these applications.
Wolff Walsrode, Bayer’s division has been swinging between overall losses and profits over the last few years. Bayer has divested most of its chemicals operations and this was one of the few remaining businesses.
After the acquisition of Bayer’s cellulose business, Dow’s market share in water-soluble will increase and it will have leadership positions in North American and European markets.
ICI to construct a second emulsion polymerization plant in China
CI is investing in a second emulsion polymerization facility in China, underlining its strategic commitment to ‘aggressive growth’ in the region.
Construction has started on the $20 million facility at the Songjiang Industrial Development Zone in Shanghai and is scheduled for completion in mid-2007.
The plant will be operated by National Starch, a business of ICI, and will produce for the local market specialty polymers and solution acrylic adhesives for high-end tapes and labels, water treatment, detergent, packaging coatings, and decorative coatings industries.
The 45,000 tons per annum facility, with 40 new staff, will have the capacity to serve several other end-use markets, including ICI’s paints business in China, and ICI Swire Paints. ICI currently has eight major facilities in China, manufacturing products such as decorative paints, adhesives, specialty starches, and electronic materials for the China market and the Asia Pacific region. Additional facilities, including the new emulsion polymerization plant and the recently announced China Technical Centre for Group R&D and construction polymers plant, are to be completed by 2008. ICI employs nearly 2,000 people in China, where it had sales of more than US$400 million in 2005.
Comments: It seems that ICI is joining the “gold rush” crowd in China just like the other resin manufacturers, underlining its strategic commitment to ‘aggressive growth’ in the region. The 45,000 tons per annum facility, with 40 new staff, will have the capacity to serve several other end-use markets, including ICI’s paints business in China – ICI Swire Paints.
ICI had previously announced that it will construct a manufacturing facility to produce dispersible powders in China and this is the second announcement. National Starch is the second largest operating division of ICI after ICI Paints. The Company operates in four business groupings within National Starch: Adhesives, Specialty Starches, Specialty Synthetic Polymers, and Electronic and Engineering Materials.
Investcorp to acquire leading foams manufacturer Armacell
Investcorp, the asset management firm specializing in alternative investments, announced that it had agreed to acquire Armacell International GmbH from Gilde Buy-Out Fund and funds managed and advised by CVC Capital Partners (CVC).
Armacell is the global market leader in the development and production of flexible technical insulation. The Company’s product categories are mainly based on Elastomerics and Polyethylene technologies, markets that are characterized by attractive growth. Its insulation products are predominantly sold to wholesalers, including insulation specialists, heating and plumbing specialists, refrigeration wholesalers, OEMs, or DIY retailers.
Armacell was spun off from Armstrong World Industries in 2000 and is today a global business, headquartered in Munster, Germany, with operations in the United States, South America, Central and Eastern Europe, Russia, and Asia. During FY2006, the Company expects to generate sales of EUR 325 million. Closing is expected to occur towards the end of January 2007.
Comments: Armacell is one of the largest players in flexible technical insulation materials with a consolidated annual turnover of around of over 300 million. The group has 19 manufacturing locations in 12 countries, including China, Australia, and North and South America, and is headquartered in Münster, Germany.
The company has been active in recent years by acquiring in Europe – Belgian Fagerdala Benelux and in North America acquired Monarch Rubber Companies and three plants formerly owned by insolvent RBX Industries.
Armacell product port folio grades include (1) Ensolite (high-performance grades based on PVC, NBR, CR, and EPDM mainly for industrial, automotive, sports, and recreational applications. (2) Oletex is mainly crosslinked polyolefin foam for automotive, construction automotive packaging, and recreational applications. (3) Monarch – Buns based on CR, EPDM, SBR, NBR, and NBR/PVC for applications such as automotive and transportation, industrial, electronics, footwear, sporting goods, and marine, and (4) Armasport which are based on PVC/CR are used in athletic and leisure applications.
Australian company introduces Polystone® polyethylene products
Dotmar EPP Pty Ltd is Australia’s largest and most progressive engineering plastics company focusing on the application of thermoplastic materials in engineering. It is the leading supplier of engineering thermoplastics in stock shapes and components in Australia.
Polystone products are from the semi-crystalline polyethylene (PE) family. The properties of PE are closely related to the length of the molecular chain (molecular weight) and the crystallinity. The longer the chain, the higher the molecular weight, and the better the desired characteristics of Polystone from HD (P300) to UHMWPE (P7000).
Applications for Polyethylene (PE) products include: (1) Flow promoting liners to resist sliding abrasion and assist release, (2) Conveyor components subject to high wear and requiring low friction, (3) Componentry in direct contact with foodstuffs, and (4) Parts subject to high impact stresses.
According to the company, Polystone is very light and extremely tough. It does not absorb water, has good sliding abrasion resistance, and is self-lubricating.
Comments: Established in 1967 and with five state branches, Dotmar, the leading supplier of engineering thermoplastics in stock shapes and components in Australia, through its strong network of International and Australian Engineering Partners, stays at the “leading edge” of product and technology in its field. Dotmar offers a series of “Polystone” PE products – 16 different grades for various special applications. The key products attributes include excellent abrasion resistance, low coefficient of friction, high surface release properties, high chemical resistance, excellent impact resistance, and good damping properties;
The important applications include flow-promoting liners to resist sliding abrasion and assist release, conveyor components subject to high wear and requiring low friction, component tray in direct contact with foodstuff, and parts subject to high impact stresses. Dotmar also supplies PP based Polystone PP(H) product line which is much stiffer and harder with high heat resistance and excellent chemical resistance at elevated temperatures, used extensively in the chemical process industry.
Solutia to buy Akzo Nobel’s 50 percent stake in Flexsys – rubber chemicals joint venture
Solutia Inc. announced that it has reached an agreement in principle to purchase Akzo Nobel N.V.’s stake in Flexsys, the 50%/50% rubber chemicals joint venture between Akzo Nobel and Solutia, as well as Akzo Nobel’s Crystex business in Japan. The proposed transaction is subject to completion of the definitive purchase agreement, approval by the United States Bankruptcy Court, receipt of required regulatory approvals, and the fulfillment of other customary closing conditions. Solutia expects to fund the purchase through a combination of sources, including a portion of its new debtor-in-possession (DIP) financing package.
Formed in 1995, Flexsys is the world’s leading supplier of chemicals to the rubber industry. With 2005 sales of approximately $600 million, Flexsys employs more than 1,000 people worldwide.
Flexsys products play an important role in the manufacture of tires and other rubber products such as belts, hoses, seals, and footwear. These chemicals help cure and protect rubber, increase durability, lengthen product life, and provide color control and heat resistance.
Comments: The manufacture of laminated glass and nylon-related products have been the two major strategic businesses for Solutia until now. The company had initially identified Flexsys as one of its largest non-core joint ventures but with the highest sales amongst its other non-core JVs. The sales of the rubber chemicals business increased steadily to $600 million in 2005.
Eastman Chemical offers early retirement to its employees
Eastman Chemical offered early retirement incentives to mostly white-collar employees in Tennessee, Texas, and Pennsylvania, hoping to trim 200 to 250 people from its domestic workforce.
According to the company, the retirement was offered to folks who would have been looking at retiring at the end of next year. The company put incentives in place to encourage them to retire now.
About 1,400 domestic employees are eligible, based on their age and length of service, at Eastman headquarters in Kingsport; Longview, Texas; and West Elizabeth, Penn., near Pittsburgh. Some 7,500 of Eastman’s 12,000 employees worldwide are in Kingsport.
Workers will have from Dec. 18 to Jan. 17 to apply, and their retirement would take effect from February to March.
The goal is to offset a 10 percent drop in revenue from the recently announced sales of its specialty organic chemicals operation in Arkansas and its polyethylene business in Texas. Eastman Chemical expects to receive $300 million from those sales, closing in the fourth quarter of this year.
Comments: Developed countries are becoming stricter regarding plastic bags and Italy is one of them. Italy has been trying to ban plastic bags for a long time now but has not been extremely successful.
However, with the increase in demand for biodegradable plastics, there could be some replacement of traditional plastic bags.
Rohm & Haas form PVC additives joint venture with Chinese producer
Rohm and Haas Company (ROH) and Weihai Jinhong Polymer Company, Ltd. announced their agreement to form a new joint venture, Jinhong Rohm and Haas Chemicals Company Ltd (JinHaas), designed to deliver a complete range of quality plastics additives products and superior technical support to the building and construction and PVC packaging segments of the Chinese market. The joint venture is currently pending for Chinese government approval.
The new manufacturing joint venture, to be based at Jinhong’s Weihai City plant, will produce methacrylate butadiene styrene (MBS), acrylic impact modifiers (AIMs), and acrylic processing aids for distribution in China, as well as other emerging markets.
The addition of the local manufacturing facility will allow Rohm and Haas to provide an extensive line of products that are engineered to maximize value by meeting the very specific requirements of the Chinese market.
According to the terms of the venture, Jinhong will contribute to its Weihai City plant, and Rohm and Haas will contribute cash to jointly improve manufacturing operations. The structure of the joint venture gives Rohm and Haas 51 percent ownership. It is expected to be operational in first quarter 2007.
The JinHaas joint venture provides both parties with increased market penetration and growth potential that would be significantly more costly and time-consuming for either company to achieve individually. Rohm and Haas expect to double its plastic additives sales in China by 2010.
Comments: Acrylic impact modifiers (AIM) are mainly used in PVC. The demand for PVC is growing at a very high rate as compared to the rest of the World. Having a local presence of PVC additives will help Rohm & Haas capture a major portion of this growth and increase its market share.
Rohm & Haas is highly integrated into the manufacture of acrylate-based products such as coatings and plastic additives. Monomer sales account for only about 17% of their revenues. Rohm & Haas is integrated into the manufacture of butyl acrylate and AIM. Plastic additives (including AIM) account for about 9% of the company’s total sales.The company has a 40% market share in AIM in North America. It has about 30-35% market share in MBS-based impact modifiers.
Metabolix begins construction of manufacturing facility to produce biodegradable PHA-based plastic
Metabolix Inc., a company developing and commercializing environmentally sustainable and biodegradable Natural Plastic, announced that permits have been received for a commercial manufacturing facility designed to produce 110 million pounds of biodegradable Natural Plastic annually and will now commence construction. The facility is being constructed as part of a joint venture agreement with Archer Daniels Midland Company, a world leader in agricultural processing and fermentation.
Metabolix Natural Plastics can be used as an alternative to petrochemical plastics in a wide variety of applications, including coated paper, film or bags, and thermoformed and molded goods. They are produced using a patented, biological fermentation process that converts agricultural raw materials such as corn sugar into a versatile range of plastics with excellent durability in use but that also biodegrade benignly in a wide range of environments, including marine and wetlands.
The Natural Plastic commercial manufacturing facility will be located adjacent to ADM’s corn wet mill in Clinton, Iowa. The plant will utilize starch from the mill’s existing corn grind capacity as raw material for Natural Plastic production and is designed to initially produce 110 million pounds annually. ADM and Metabolix are working together in a strategic alliance to commercialize Metabolix‘s patented and proprietary Natural Plastic technology. Permits enabling the start of construction were issued on November 30, 2006, by the Iowa Department of Natural Resources. Commercial production of Natural Plastic is expected to begin in 2008. Metabolix and ADM are currently operating a pilot manufacturing facility to produce pre-commercial quantities of material and develop applications with selected customers.
Comments: In recent years there has been an increase in demand for biodegradable plastics and materials produced from renewable resources. There has been growth in environmentally-friendly packaging and the trend is expected to continue. Another factor that is fueling the growth of biopolymers is the increasing price of petrochemical-based polymers.
Being a biotechnology-based company, Metabolix has also stepped into manufacture of the biodegradable polymers.
PHA, produced from a fermentation process using starch derived from potatoes, wheat, or corn, can be used as an alternative to petrochemical-based plastics. The material eventually biodegrades to simple carbohydrates, carbon dioxide, and water. Metabolix brands its version of PHA as “Natural Plastic”. The new PHA plant in Clinton, Iowa anticipates that processors and retailers will increasingly move away from petrochemical-derived plastics. The factory will be located adjacent to ADM’s corn wet mill in Clinton. The plant will use starch from the mill’s existing corn grind capacity as raw material for Natural Plastic.
NatureWorks fined for violating state pollution laws
NatureWorks, the world’s only commercial volume producer of PLA resin, has been ordered to pay fines totaling $120,000 for violating state pollution laws in Nebraska, US.
In the case brought against NatureWorks by the Nebraska Department of Environmental Quality (NDEQ), NatureWorks’s facility at Blair was accused of emitting volatile organic compounds (VOC) and hazardous air pollutants above the permitted levels. In the proceedings of the District Court of Washington County, Nebraska, NatureWorks was accused of exceeding VOC emission limits from its vacuum pumps in December 2003.
The NDEQ also claimed that NatureWorks had failed to install the necessary air pollution control equipment for hazardous air pollutants (HAP). According to State regulations, a production source that has the potential to emit more than 2.5tpa of a single HAP or 10tpa of accumulated HAPs requires the implementation of “best available control technology”.
The NDEQ complaint listed acetaldehyde and methyl-ethyl ketone as among the HAPs emitted by the NatureWorks plant. NatureWorks, a Cargill subsidiary, has settled with the NDEQ and has agreed to pay a fine of £60,000, plus a donation of $60,000 to a building project at a local school. As part of the settlement, NatureWorks has a little over a year to install the necessary emission control equipment.
World’s tallest man removes plastic from dolphins
Desperate to save two dolphins that had eaten plastic pieces at an aquarium in China’s Liaoning Province, veterinarians summoned the world’s tallest man—7-foot-9-inch (2.36-meter) shepherd Bao Xishun of the neighboring Inner Mongolia region.
The plastic pieces caused the marine mammals to lose their appetites and become depressed. But the dolphins’ contracting stomachs had stymied vets’ attempts to use instruments to remove the objects. Instead,, Bao’s extra-long arms were able to extract the offending shards.
After Bao, 54, “operated” on them—their teeth wrapped with towels for safety, the dolphins were in good condition. Some very small plastic pieces are still left in the dolphins’ stomachs. However, the dolphins will be able to digest these and are expected to recover soon.
Comments: Plastics go where no man can go!
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