Rising Dominance of the US petrochem industry
Gas prices spiked in USA in 2011. As a result, a larger percentage of household income was spent on gas bills in 2011 than in any year since 1981. In response to rising oil prices, companies such as Dow Chemical, Chevron, Westlake Chemical, and Nova Chemicals announced major shale gas based expansions of nameplate petrochemical production capacity, including various ethylene cracker projects. Shale production in the U.S. has increased from practically nothing in 2000 to more than 13 billion cubic feet per day, or about 30% of the country’s natural-gas supply, heading toward 50% in coming years. The US petrochemical industry is announcing significant expansions of petrochemical capacity, reversing a decade-long decline. US shale gas will reduce competition for LNG supplies from the Middle East and thereby moderate prices and spur greater use of natural gas, reduce dependency on the Middle East for natural gas, combat the long-term potential monopoly power of OPEC. The rise of US corresponds to a period of increase in prices of natural gas feedstock in Saudi Arabia. This move is likely to have its greatest impact on Sipchem, SAFCO and SABIC, with Tasnee and Sahara facing the least impact. KSA petrochemical firms procure natural gas at one of the lowest prices globally. However they are facing difficulty in gaining new allocations of ethane at the current subsidised price of USD0.75/mmbtu for their capacity expansion plans, due to increasing domestic consumption of gas.
News from other parts of the global petrochemical industry in 2011 includes
Mergers & Acquisitions
*Belgium’s Solvay acquired Rhodia, a leading polyamide manufacturer in September 2011. Rhodia earlier had acquired engineering plastic compounding business of PI Industries in India.
* Styrolution a joint venture company formed by BASF and INEOS was approved in 2011 by EU.
* PolyOne acquired leading Brazilian producer of specialty engineered materials Uniplen Industria de Polimeros Ltd. to establish a foothold in Brazil.
*BASF completed acquisition of CRI/Criterion’s global styrene catalysts business. No plant assets associated with the deal.
*Spanish oil refiner Compania Espanola de Petroleos (Cepsa) concluded acquisition of a halted polyethylene terephthalate (PET) unit at San Roque, Spain, from La Seda de Barcelona. Cepsa intends to restart the plant, closed since September 2008.
*Mexichem SAB, Mexicos’ PVC maker and the largest maker of plastic pipes in Latin America, acquired Rockwood Holdings Inc.'s AlphaGary thermoplastic compounds business for US$300 mln in cash.
*DAK Americas concludes acquisition of Eastman Chemical PET business for US$600 mln.
*Gita Holdings, a Swiss-based fund agreed to buy polyvinyl chloride producer Vinyls Italia, agreed to buy and restart Vinyls Italia assets at Porto Marghera, Porto Torres and Ravenna, all of which were halted in May 2009 when the company went into liquidation.
*Braskem, the leading resin producer in the Americas completed acquisition of the Polypropylene Business from Dow Chemical Company. The assets involved in the deal include two manufacturing plants in the US and two in Germany, with a total annual polypropylene production capacity of 1.05 mln tons. The two US manufacturing plants located in Freeport, and Seadrift, both in Texas will be fully integrated into Braskem America, Inc. The two German plants located in Wesseling and Schkopau will operate under Braskem Europe GmbH.
*The European Commission cleared under the EU Merger Regulation, the proposed acquisition of joint control over certain assets currently wholly owned by Ineos AG of Switzerland by PetroChina Company Limited of China and Ineos AG.
*Eastman Chemical Company completed acquisition of Sterling Chemicals, Inc., a single site North American petrochemical producer, for US$100 mln in cash. This acquisition includes Sterling's plasticizer and acetic acid manufacturing assets in Texas.
*An auction will be conducted by the West Bengal Government for the sale of its stake in Haldia Petrochemicals. Co-promoter The Chatterjee Group (TCG) will be allowed to match the highest offer before any transaction is finalised.
New Capacities
*The Middle East will see new supply from two major complexes Saudi Kayan and Saudi Polymers by December 2011 or early 2012. They following new capacities will be brought onstream:
- 300,000 tons of LDPE
- 110,000 tons of LLDPE/HDPE
- 400,000 tons of PP
- 200,000 tonsPolystyrene
* India is expected to add 880,000 tons of Polypropylene in 2012 with the commissioning of PP plants at HPCL-Mittal Energy at Bhatinda and MRPL at Mangalore.
*Supreme Petrochem commissioned two new expandable polystyrene (EPS) units at Nagothane. The first unit will produce commodity-grade EPS.
*Lanxess is setting up 20,000 ton engineering compound facility of polyamide & PBT by 2012 at Jhagadia
*India expects to set up two projects of CPVC in the near future. DCW, an existing PVC manufacturer is setting up 10,000 tons CPVC plant using Arkema technology by 2013. Meghmani Organics is setting up a 20,000 tons CPVC project as a joint venture with Kaneka and Mitsui at Dahej in 2014. It will be called Trience Speciality Chemicals P. Ltd
*Uhde Inventa-Fischer and BASF SE successfully commissioned a plant for the production of Ecoflex®, the biodegradable co-polyester polymer developed by BASF.
*SABIC Innovative Plastics opened its specialty polypropylene (PP) compounds like long fiber filled PP for automotive markets operation at Bay St. Louis, Mississippi manufacturing site.
*An auction will be conducted by the West Bengal Government for the sale of its stake in Haldia Petrochemicals. Co-promoter The Chatterjee Group (TCG) will be allowed to match the highest offer before any transaction is finalised.
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