My Turn – Commentary by Dr. Balaji B. Singh
The Globe is becoming one village – in the future, the Middle East, with its raw material cost advantages will become the basic producer of commodities, China will be the processor, and both China/India because of their phenomenal growth will become the new consumers – thus impacting the North American, Japanese European markets —– blah,…. blah….. blah…, You heard it over and over and over… from everyone….. people are repeating it so often.. it is becoming a popular consultant brain-regurgitation …, there is nothing new .. Enough of the supply/demand/price forecasts…..
Isn’t it time to think …. SO WHAT DO WE DO???? What should be the strategy??? .. How do we get ready? if you are in the Middle East???? If you are in North America???? If you are in Europe????? What specific strategy would you use at the micro level?
Just packing your bags and running to the Middle East and China, abandoning everything domestic is both a sign of withdrawal … and short-sighted… Optimize… innovate…. act to make sure you look at the future differently… understand what makes the other regions tick… to develop alternatives…
Case in point… Middle East is traditionally considered a high labor cost region compared to China and India… is it really???? …. Just think …they have the “Expatriate Guest Worker Program” for both low-skilled labor from poor counties and educated high-skilled labor from the West … just labor either way… even though the current emphasis is only on the skilled labor.. just think what happens in five/ten years… if most poorer countries send their low skilled labor to the Middle East… While the labor costs keep going up in China and India… Middle East may turn out to be a better labor choice……. Intrigued??????… Attend FlexPO and hear our ideas… We are the guys who told you PVC cannot be replaced…. back in 1995…..
We look forward to seeing you at this year’s FlexPO2006. We have selected the best topics/best speakers in an organized fashion – Some good reasons to attend Flexpo2006 in Houston, Sept 20-22, 2006 – Just see the program
CSJC Nizhnekamsk Refinery to use Spherizone technology for a new 200 KT per year PP plant in Russia
CSJC Nizhnekamsk Refinery has selected Basell’s Spherizone technology for a new 200 KT per year polypropylene plant to be built at Nizhnekamsk, Russia as part of a major refinery and petrochemical complex expansion. The project is scheduled for completion in 2011.
Nine Spherizone process plants have already been licensed in eight different countries, including locations in The Americas, the Middle East, Asia, and Western and Eastern Europe. According to Basell, these companies understand the importance of differentiation to capture the maximum value and maintain business profitability throughout the industry cycle.
Spherizone technology is an advanced manufacturing process for the production of polypropylene. It uses a unique, state-of-the-art, multi-zone circulating reactor system. Spherizone technology plants can produce the full range of polypropylene grades, as well as new families of propylene-based polymers with enhanced product properties.
Comments: Basell has been very successful with licensing of its Spheripol technology for polypropylene. It seems they are off to a good start with 9 licenses for Spherizone technology. All the major announced Spherizone plants are in the construction phase and the licenses offered so far are based on Basell’s plant. It will be interesting to see how Spherizone fares after the plants are operational.
The development of the Spherizone process started in the mid to late 1990s. In 1999 Basell scaled up a pilot plant in Ferrara (0.5 t/h), and later in 2002, started the first commercial Spherizone plant in Brindisi with a capacity of 160 KT. Over the past few years, Basell has licensed several Spherizone units to its joint ventures: Indelpro in Mexico 350KT/yr (2006- 2007), Sahara in Saudi Arabia – 450KT/yr (2008), HMC Polymers in Thailand – 300 KT/yr (2009).
Huntsman to repair and restart Port Arthur olefins manufacturing plant
Huntsman Corporation announced that its Board of Directors has given the go-ahead for the repair and restart of the company’s Port Arthur, Texas manufacturing facility that was damaged in a fire in April of this year.
The company also announced that it has chosen The Shaw Group of Baton Rouge, LA as the general contractor for the rebuild. Shaw will be responsible for all aspects of engineering, procurement, and construction. The total cost of the clean-up, engineering, and rebuild is estimated at $110 million.
Huntsman will also accelerate some maintenance work on the facility that was scheduled to be done during a 2010 turnaround and inspection. The company said that doing the work now will make the plant run more efficiently. The maintenance work will not extend the time required to repair and restart the facility.
According to the company, even though the plant sustained extensive damage, it will be able to repair its critical infrastructure, including the compressors, and bring it back online. The company plans to restart the facility in the second quarter of 2007.
The Port Arthur facility has an annual production capacity of 1.4 billion pounds of ethylene and 800 million pounds of propylene.
Comments: This is somewhat a relief and welcome news for ethylene contractors in light of the recent increase in ethylene prices. One of the contributing factors to a sudden increase in ethylene price is the shutdown of Huntsman’s Port Arthur ethylene cracker plant, which accounts for 2% of domestic ethylene supply, after a major fire there last month. Huntsman’s ethylene plant in Port Arthur, Texas, continues to recover from a late April explosion. Production of ethylene, propylene, and benzene at the plant remains out of commission, although cyclohexane production resumed in early June. Huntsman plans to rebuild the plant and resume production in early 2007. The outage reduced Huntsman’s second-quarter profit margin by an estimated $47 million. The fire that caused the blast was started by a ruptured line used in cooling. Huntsman produces Low-Density Polyethylene (LDPE), Linear Low-Density Polyethylene (LLDPE), High-Density Polyethylene (HDPE), and Ethylene-Vinyl Acetate Copolymers (EVA) in multiple plants and technologies.
Total Petrochemicals considers debottlenecking of PP plants
Total Petrochemicals announced that it is considering plans to debottleneck polypropylene (PP) capacity in France and the US.
Total is studying plans to debottleneck its 220 KT per annum PP unit at Gonfreville, France. A final decision on that project will be made next year. The three-line Feluy plant can produce 1 million m.t./year of PP. Total also has a 50% share in a 280 KT/year PP plant at Lavera, France.
Total is also planning to add 150 KT/year of PP capacity at La Porte, TX, within 18 months. The debottlenecking will allow the company to delay the construction of a new PP unit in the U.S. for five years, sources say. The new plant was original to have a capacity of 300 KT/year and be built at La Porte, Total’s only PP manufacturing location in the US. The debottlenecking instead will raise La Porte’s PP capacity to 1,200 KT /year.
Comments: Total has polypropylene capacity in the United States, Belgium, and France. The United States accounts for 50% of the capacity while Belgium and France account for 40% and 10% of the capacity respectively. Total also has a 50:50 JV with Samsung in Korea. The total capacity of the JV in Korea is 240 KT and the Total portion of the 50:50 JV is 120 KT.
Total’s technology portfolio consists primarily of Spheripol (53%) and Fina Loop (37%) processes. The La Porte, Texas, site consists of 9 lines: (1) Spheripol reactor that came on stream in 1998 plus (2) 8 bulk loop reactors, 4 large and 4 small that were originally Phillips technology. These have been modified so extensively that they are now said to be Fina technology.
Total’s PP technology strategy centers around the improvement of existing catalyst technologies and the development of new catalysts (traditional and single-site based) to expand the envelope for polypropylene end-use applications. It is expected that Total will continue to invest in single-site/metallocene PP technology, developing it in-house and cooperation with other industry participants.
Mitsubishi and Riken Technos form TPE joint venture in the US
Mitsubishi Corporation and Japanese compounder Riken Technos Corp announced their plans to establish a joint venture named “Riken Elastomers” in Hopkinsville, Kentucky, in their efforts to respond to future demands for thermoplastic elastomer compounds from Japanese auto manufacturers in the US.
The companies plan on investing $19.8 million in a thermoplastic elastomer compounds plant to serve the automotive market. The 5,250 sq meter facility is being built in Hopkinsville, Kentucky, and will supply compounds to Japanese-owned car parts manufacturers in the US. It will be operational by July 2007. The two companies have formed a joint venture, Riken Elastomers Corp, to manage the plant. It will create 24 jobs and is 60% owned by Riken Technos, 30% by Mitsubishi Corp, and 10% by Mitsubishi International.
Comments: The TPE market has been growing steadily in the automotive market as manufacturers find ways to produce a resin that would reduce the total weight of the car with better performance properties. TPE’s advantages over synthetic rubber include recyclability, greater ease of processing, and design flexibility. The other advantage TPEs have over thermoset rubbers include faster molding cycles, lower energy consumption, closer tolerances on fabricated parts, and lighter weight.
The North American Demand for TPE in the automotive application was close to 460 million pounds in 2005 growing at close to 7 %. The building of a TPE plant in North America will enable Riken Elastomers to capture the growing Japanese model automotive market in North America. Japan auto manufacturers have been steadily increasing their market share in the North American automotive application.
Riken Technos Corporation headquartered in Tokyo, Japan was established in 1951 with a PVC compounding plant in Tokyo. The company currently has manufacturing facilities and sales offices in Japan, Thailand, Indonesia, China, and the US. Riken is a resin supplier to various markets including automotive, food wrapping, electronic components, building furniture, and others. Riken’s products include (1) Actymer®, a dynamically crosslinked styrene elastomer, (2) Trinity®, oil resistant product used for electric applications, (3) Leostomer® a styrene elastomer and (4) oleflex® olefinic elastomers.
Lyondell acquires CITGO’s stake in Lyondell–CITGO Refining
Lyondell Chemical announced that it has acquired CITGO’s 41.25 percent ownership interest in Lyondell-Citgo Refining LP (LCR) in a transaction valued at approximately $2.1 billion, including CITGO’s portion of the refinery’s debt. Concurrently, Lyondell has negotiated a new five-year, 230,000-barrel-per-day crude oil contract with a subsidiary of Petroleos de Venezuela, S.A. for the refinery. The new contract is based on market prices, which in recent years have been lower than those under the previous crude supply agreement.
Had Lyondell owned 100 percent of the refinery for the first six months of 2006, and had the new crude oil contract been in place, the company’s unaudited pro forma financial statements indicate that pro forma net income would have increased from $450 million to $640 million, or $1.74 to $2.47 per share on a fully diluted basis. Corresponding data for the full year 2005 indicate that pro forma net income would have increased from $531 million to $772 million, or $2.04 to $2.97 per share.
The acquisition gives Lyondell sole ownership of the 268,000-barrel-per-day Houston refinery, which is strategically located on the U.S. Gulf Coast with access to interstate pipelines and the Port of Houston. The facility refines very heavy high-sulfur crude oil into clean fuels including reformulated gasoline and low-sulfur diesel, as well as other high-value products such as jet fuel and aromatics. It was one of the original Lyondell assets at the company’s formation and, in 1993, became part of a joint venture between Lyondell and CITGO Petroleum Corporation.
With the completion of the transaction, the refining operation will become a wholly owned subsidiary of Lyondell, joining Equistar Chemicals, LP, and Millennium Chemicals Inc.; however, each will remain a separate legal entity.
Comments: This acquisition, coupled with a new market-based crude oil contract, unlocks the true value of this unique asset and contributes significantly to the company’s future position. Lyondell will benefit from the current strong refining market conditions.
Indian Oil considers the second petrochemicals complex in India
Indian Oil is considering construction of another oil refinery and petrochemical complex in India. The company, along with its subsidiary Chennai Petroleum Corp. is studying the construction of a 1,500 KT /year refinery, as well as an aromatics and polypropylene complex at Ennore, which could cost Rs330 billion ($7.2 billion).
According to the company, the project would be similar in scope to that planned at Paradip. Indian Oil plans to install a fluidized catalytic cracker at its Paradip refinery, which will provide feedstock for a 1,200 KT /year para-xylene and 680 KT /year PP plants, as well as a 600 KT /year styrene plant.
Comments: There is a lot of activity in the Indian petrochemical sector. A large number of announcements for capacity additions have been made. It is expected that not all of the announced plans will result in actual capacity additions. Some delays in the schedule are also expected in that part of the world. However, the activity in the Indian subcontinent indicates the growth of plastics in India and the changing competitive landscape. Government-owned IPCL used to be the dominant player in the Indian plastics market. Reliance changed the dynamics of the industry by becoming the new dominant player and acquiring a majority stake in the recently privatized IPCL. The industry now is moving towards an oligopoly with new players such as ONGC and IOC entering the market.
Atlantis Plastics starts new stretch film production line in Tulsa, Oklahoma
Atlantis Plastics, Inc. is continuing with its strategic capacity expansion program and announces the start-up of a new production line at its Tulsa, Oklahoma production facility.
The new production line became operational in July and represents the third phase of a comprehensive investment program designed to upgrade and add capacity in support of Linear’s value-added product lines. The first and second phases, now complete, have resulted in strategic capacity addition through company-wide optimization of all production lines. Earlier in the year, the Company announced the addition of a new production line at its Fontana, California facility.
Atlantis Plastics, Inc. is a leading U.S. manufacturer of polyethylene stretch and custom films and molded plastic products. Stretch film is used to wrap pallets of materials for shipping or storage. The custom film is made-to-order specialty film used in the industrial and packaging markets. Atlantis’ injection molded and profile extruded plastic products are used primarily in appliance, automotive, agricultural, building, and recreational vehicle industries.
Comments: Tulsa Poly Films, a privately owned company, started manufacturing PE bags in the 1970s. In 1981 the company expanded operations to manufacture LLDPE-based stretch films at its Tulsa, OK facility. During this period of time, the company changed its name from Tulsa Poly Films to Linear Films.
In 1984, the company set up an additional plant at Nicholasville, KY, to manufacture stretch films. By this time the company had 2 manufacturing plants in Tulsa, OK; and a plant at Nicholasville, OK.
In 1987, Atlantis Group (Trivest Group) – an investment company, bought over Linear Films and renamed it Atlantis Plastics. Atlantis Plastics, headquartered in Atlanta, GA, is one of the largest producers of stretch films in North America. The company manufactures different types of stretch films including Machine stretch films and hand-wrap stretch films. About 80% of all films produced by Atlantis Plastics are by the cast extrusion process.
This capacity expansion will help the company increase its market share in stretch films and competing markets.
Dow acquires polystyrene joint venture shares from Asahi
Dow Chemical and Asahi Kasei Chemicals announced the conclusion of an agreement for Dow to acquire Asahi’s shares in Styron Asia Limited in Hong Kong (SAL HK) and for Dow Financial Holdings Singapore Pte Ltd. to acquire Asahi’s shares in SAL Petrochemical (Zhangjiagang) Co., Ltd. in China (SAL ZJG).
Styron Asia Limited is a 50:50 joint venture between Dow and Asahi, with SAL ZJG as the production entity that manufactures STYRON™ Polystyrene Resins and STYRON A-TECH™ Advanced Technology Polystyrene Resins, and SAL HK as the marketing entity. Dow will acquire Asahi’s remaining 50% ownership in SAL HK directly and SAL ZJG indirectly for an undisclosed sum. Dow and Asahi are in the process of applying to the Chinese government for approval of the equity transfer for SAL ZJG and registering the change of ownership for SAL HK.
SAL HK and SAL ZJG shall be operated in the ordinary course of business to ensure a seamless transition, and every effort will be taken to ensure that ongoing business with SAL HK and SAL ZJG’s customers continues to be smoothly conducted.
The change in ownership in SAL HK and SAL ZJG is a mutual agreement between Dow and Asahi to accommodate the evolving strategies of both parent companies who continue to maintain a close working relationship. This move is consistent with Dow’s approach to continually assess our joint ventures to ensure they are supporting our overall business strategy. It is part of a multi-tiered strategy by Dow to revitalize its polystyrene business in Asia and to position the business for long-term success and value creation in an increasingly competitive market.
Comments: In recent months, Dow Chemical has had several major activities in China. Dow announced the acquisition of the polystyrene JV with Asahi and also decided to invest $200 million in building the liquid epoxy resin and epichlorohydrin plants.
In late May, Dow signed a Letter of Intent (LOI) with Zhangjiagang Free Trade Zone in Jiangsu Province approximately 200 kilometers (125 miles) upstream from Shanghai. The LOI covers products in three downstream Performance businesses of Dow – DOWANOL™ PM glycol ethers in Specialty Chemicals, styrene-butadiene latex in Dow Latex, and STYROFOAM™ brand insulation in Dow Building Solutions. The estimated investment is $200 million. In July, Dow acquired a water treatment company in Zhejiang Province.
All these activities illustrate Dow’s intention to significantly expand its business in China. China is Dow’s third largest market behind the US and Germany in terms of sales. In 2005, Dow’s revenues in China were US$ 2.3 billion.
What Dow is missing is upstream ethylene capacity. As Dow is expanding its downstream chemical capacities, ethylene supply is becoming a bottleneck. Dow is trying to partner with domestic petrochemical companies such as Sinopec, PetroChina, or CNOOC. The Chinese government has approved the construction of a JV by Sinopec Group and Kuwait Petroleum Corp. in Guangdong Province.
The project leaves a door for a third JV partner. BP, Shell, and Dow all showed interest in the JV. BP and Shell have already had JVs with Sinopec and CNOOC, respectively. The share for the third partner is relatively small. Therefore, Dow has a chance to become the third partner, leveraging its process technologies. If it comes through, the JV will give Dow some security in the ethylene supply in China. Dow is also seeking opportunities in methanol to olefins (MTO) using coal as the feedstock with a potential Chinese partner.
Cytec Industries starts engineered materials production unit
Cytec Industries Inc. completed the commissioning of an $18-million production unit at its Kalamazoo, Mich., site that will produce a line of polymers for its Cytec Engineered Materials business. These polymers are a key component in the production of high-performance Cytec composites used by some of the most demanding applications in commercial and military aviation. The product qualification process with customers has begun.
Aerospace innovators such as Boeing, Airbus, Northrop Grumman, and Lockheed Martin rely on advanced composites because of the material’s light weight, strength, durability, and resistance to corrosion and high temperatures.
According to the company, there is a growing demand for advanced materials, and the new facility will boost and secure its supply of this critical system component. Construction activities started in August 2005, were completed in May 2006 and the commissioning of the unit was completed in June 2006.
Comments: Cytec Engineered Materials is a wholly-owned subsidiary of Cytec Industries Inc. Cytec Industries’ business portfolio, by revenue includes: (1) Cytec Surface Specialties: 46%, (2) Cytec Performance Chemicals: 28%, (3) Cytec Engineered Materials: 17%, and (4) Building Block Chemicals: 9%.
Cytec Engineered Materials currently operates 10 plants and 4 R&D centers in North America and Europe. Their Engineered Materials polymer portfolio includes fluoropolymers, PPS, PEKK, PEI, and others. All these polymers are engineering thermoplastic and have high heat resistance. Cytec did not specify which polymers will be included in this new production unit. The Kalamazoo, Michigan site currently manufactures water treatment and coating, and performance chemicals.
The aerospace and automotive industry continues to seek new materials and technology to replace metal parts to reduce the product’s weight. All major aircraft and automotive manufacturers have started using more amounts of lightweight composites in their products. For instance, the Boeing 777 launched in the mid-1990s used 9% composite compared to 50% composite in Boeing 7E7, a new generation of jetliners expected to go into service in 2008. Similarly, Airbus’s A380 aircraft is expected to use 25% composite compared to their older aircraft A300 which used only 5% composite. A similar trend is observed in the automotive industry. The new polymer production line will bolster Cytec’s composite business. Other composite manufacturers in the U.S. include Hexcel. Huntsman, Toray, and Zoltek.
NOVA Chemicals announces streamlined executive team – Chris Pappas appointed COO
NOVA Chemicals announced that the company’s executive leadership team will be streamlined as part of the restructuring announced on June 26, 2006.
Chris Pappas, Senior Vice President and President of Styrenics has been appointed Chief Operating Officer effective October 1, 2006. Senior Vice President Larry MacDonald will continue as Chief Financial Officer, and Senior Vice President Jack Mustoe will maintain his role as Chief Legal Officer and Corporate Secretary.
Dale Spiess, Senior Vice President and President of Olefins and Polyolefins, and John Wheeler, Senior Vice President and Chief Information Officer, have elected to retire effective September 30, 2006, and August 31, 2006, respectively.
The executive leadership team will be comprised of Pappas, MacDonald, and Mustoe, who will report to Jeff Lipton, President and CEO of NOVA Chemicals.
Comments: A diamond put in any background will still shine. We have followed Chris’ career from the time he was the polyolethylene manager at Dow to Metallocenes to DuPont Dow… to paints dot com… to Nova… A Classic… Congratulations!….
Clyvia completes large-scale trial run for converting plastics into diesel
Clyvia Inc. announced that its wholly owned subsidiary, Clyvia Technology GmbH (“Clyvia Technology”), successfully converted 3 metric tons of plastics into 2,000 liters of diesel fuel. These test results are in addition to the results announced yesterday by Clyvia with respect to Clyvia Technology’s successful large-scale trial run for manufacturing diesel out of waste oils.
In this latest test run, a mixture of three kinds of plastics was used: plastic sheeting used for agricultural purposes, industrial waste plastics produced during the manufacture of electric fencing, and plastic materials sorted from domestic waste collection. These materials were first heated to a temperature of 270 deg C and then fed into Clyvia Technology’s pilot plant reactor. Once inside the reactor, the plastics were subjected to the fractional depolymerization process developed by Clyvia Technology, a process that is similar in operation to the cracking of crude oil.
Initial gas-chromatographic analysis of the resulting product has shown that the fuel produced meets the quality requirements for diesel and heating fuel. A sample batch has been submitted to an independent accredited research laboratory to confirm that the resulting product conforms with DIN (German standardization) norms.
Although the test run was conducted using a mixture of different types of plastics, Clyvia Technology expects that, once the plant begins permanent operations, the various types of plastics will be processed individually. Isolating the different types of plastics will allow Clyvia Technology greater control over the quality of the output product produced.
Once Clyvia Technology’s large-scale waste oil and plastics trial runs were completed, the pilot plant’s reactor was dismantled to conduct a functional diagnostic of the reactor parts. In addition, Clyvia Technology will conduct tests on the individual residues inside the reactor and will check for deposits that may have formed on the interior of the reactor. Once these diagnostics have been completed, Clyvia Technology will attempt to determine if the production process can be even further refined before the plant is once again put into operation. Clyvia Technology GmbH is a subsidiary of Clyvia Inc., a Nevada, USA corporation.
Comments: This is an interesting technology development for many reasons. If it becomes a commercially viable approach, it will address two important environmental/socio-economic issues namely plastics recycling and energy conservation. Similar work on converting used tires back into their starting materials was tried by tire manufacturers and Exxon Mobil Chemical in the past. In terms of chemistry, this is nothing but depolymerization or unzipping of the polymer chains to their monomeric units. This technology gives another leg to the so-called “sustainable development” which is defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
This new technology by Clyvia encompasses a combination of environmental, social, and economic aspects. It is indeed a step in the right direction of reducing the concept – of sustainable development of plastics to practice. Several companies are active in developing processes for recycling plastics such as polyethylene and PVC. Solvay, for example, has developed processes such as Vinyloop® for PVC recycling.
ICI to appeal PMMA cartel fine
ICI announced that it will lodge an appeal at the European Court of First Instance (Luxembourg) against a EUR91.4-million ($117 million) European Commission fine for the company’s participation in a polymethyl methacrylate (PMMA) price-fixing cartel. ICI’s fine was increased by 50% because the company is a “repeat offender,” the commission says. ICI divested its PMMA business in 1999.
According to ICI CFO, The fine is out of all proportion to what happened, and ICI “has launched an initiative with our staff to impress upon them the company’s codes of conduct, to avoid further involvement in this sort of activity.
Separately, ICI expects to complete the £410-million ($765 million) divestment of its Uniqema oleochemicals subsidiary to Croda International in the third quarter. ICI intends to use some of the proceeds from the sale to make “bolt-on acquisitions in markets where we are underrepresented,” such as certain segments of the adhesives industry and certain geographical markets in paints such as Central and Eastern Europe.
Comments: MAA/MMA/PMMA are important derivatives of ethylene and propylene and are constantly under scrutiny because (1) the number of people with proven/unproven technologies is three times the number of actual producers, (2) The vertical integration in the industry acts as the biggest barrier to entry by the new players, (3) Cumene/Phenol/Acetone suppliers indirectly support, older technologies that are both expensive and environmentally unfriendly and (4) most of the current production is concentrated in advanced countries, even though the growth is in Asia and developing countries (direct function of GDP).
A perfect recipe’ for alleged price-fixing … whether done intentionally or not…..
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