Article: Sasol, Ineos say forming JV to produce HDPE in North America

Two major companies, Sasol and Ineos, have formed an unlikely partnership that will see the businesses develop 426,000 mt/year high density polyethylene plant in the United States, according to a report from Platts.  The reason this is so compelling is that due to the abundance of shale gas and the competitive advantages that come with the resource in the US; European and Middle Eastern businesses will have to drastically reduce prices to remain competitive as a new price equilibrium evolves, with more and more HDPE plants being established across the Atlantic.  This is a real threat to business models and continues a clamour for reevaluation of HDPE facilities across the globe.

South African-based Sasol and Switzerland-based Ineos will team up to produce high density polyethylene in the US, the companies said Wednesday, announcing plans for a joint venture which would include a 426,000 mt/year HDPE plant.

“This partnership will leverage the expertise of two global players in the chemical market. Together we will develop a world-scale HDPE plant which will allow us to monetize ethylene and supply a high quality product,” Andre de Ruyter, Sasol Senior Group Executive for Global Chemicals and North American Operations, said in a statement.

“The joint venture expands on our greater North American strategy and will complement the products produced from the ethane cracker and derivatives project in southwest Louisiana.” A final investment decision is expected to be made in the first half of 2014 with start-up of the plant expected at the end of 2015, the companies said.

Sasol has previously announced plans to build a 420,000 mt/year low density polyethylene plant, and a 450,000 mt/year linear low density polyethylene plant in Lake Charles, Louisiana.

Ineos already operates a 794,000 mt/year HDPE plant in LaPorte, Texas.

The new plants comes amid HDPE closures in Europe. Austrian petrochemical company Borealis will cease HDPE production at Burghausen, Germany, by the end of 2014 due to challenging business conditions for HDPE, a company spokeswoman said last week. The company has a one HDPE plant of 175,000 mt/year capacity at the site. Borealis’ announcement of the HDPE plant’s closure mirrors similar steps taken by Dow Chemical in Tessenderlo, Belgium, LyondellBasell in Wesseling, Germany and Total in Antwerp, Belgium in the past few months.

According to Booz analysis, given the abundant supply of cheaper feedstock, the US can price HDPE in the short term at $1,210/mt FD NWE with a 10% margin. The competition it will create will lead to a reduction in Middle Eastern margins by 48% and possibly prompt Europe producers to close marginal capacity until the average falls to $1,210/mt FD NWE.

The disparity in the North American and European markets, mainly brought about by the former’s feedstock shale gas advantage, will further drive downsizing in the latter’s HDPE assets, many sources said.

Ineos, which operates both in the US and Europe, said it is considering selling its HDPE plants in Rosignano, Italy and Sarralbe, France, producing 200,000 mt/year and 195,000 mt/year, respectively it said last year.

Ineos has yet to find new owners for the plants, though Tom Crotty, the group director, said May to Platts that the company is not rushing to sell and will rather continue operating them as normal if it failed to find a suitable buyer.

Article by Chris Ferrell and Nandita Lal

Edited by Dan Lalor

The full article is visible below – By Pankaj Oswal

http://www.platts.com/latest-news/petrochemicals/houston/sasol-ineos-say-forming-jv-to-produce-hdpe-in-21322110

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Article: Survivor Latin America: Small polymer makers ponder moves ahead of US petrochemicals boom

Platts is reporting that trouble lies ahead for South American polymer producers. A swell in US petrochemical production is said to be looming a substitute in the marketplace and this is particularly threatening for smaller producers with less diversity in production.

The US petrochemical renaissance could spell the death of the small polymer producer in Latin America.

Or not.

But there’s no denying that the threat facing these companies is quite real and quite easy to figure out.

US olefins production, particularly ethylene, is set to expand by easily 30% over the next five years on the back of cheap feedstocks resulting from the shale gas boom. Canada and Mexico will also see ethylene and polyethylene expansions.

Polymer production expansions will accompany that growth (mostly in PE, so far), and it is no secret that the US will look to increase market share in Latin America, a region net short plastic resins.

The region, which for discussion purposes encompasses Mexico, Central and South America and the Caribbean, has companies big enough to hold their ground and compete — Brazil’s Braskem (polyethylene, polypropylene and polyvinyl chloride), Mexico’s Pemex Petroquimica (PE) and Mexichem (PVC) come to mind — but even these will face tremendous challenges.

So what about the “smaller” guys? The region has a number of small- to medium-sized polymer producers scattered mainly through Mexico and South America, with capacities that range from 50,000 to 500,000 mt/year

They are an interesting bunch, to say the least. Some, like polypropylene producers Indelpro in Mexico and Petroken in Argentina (LyondellBasell) as well as PE makers Dow Argentina and Petrodow in Chile (Dow Chemical), enjoy at least some level of backing from US majors.

Others, such as Ecopetrol Polietileno and Propilco in Colombia, Propilven (PP) and Polinter (PE) in Venezuela and Pemex Petroquimica are chemical subsidiaries of state-controlled companies. A few others, including Petroquimica Cuyo in Argentina and Petroquim in Chile, operate independently.

Many of these companies have serious decisions to make regarding the long-term strategy of their businesses. Representatives from some of these companies have expressed at least some interest in potential partnerships with US-based majors, if these don’t exist already.

And at least one is considering redrawing its business model, morphing from producer to producer/distributor, even if this means becoming a seller of a product long viewed as competition.

This would certainly apply to anyone making polypropylene south of the US-Mexico border, but mainly in South America. The reason is simple: If North America, and mainly the US, begins to flood the market with cheaper polyethylene, PP makers in the region could see demand destruction, stemming from uncompetitive pricing on their part, and/or product substitution, as some PP demand could be lost to certain grades of PE.

So why not dig in those heels and invest in expanding?

The financial requirements for major expansions are out of reach for many of these companies, whether they have government backing or not. Even the bigger players in places like Brazil, Argentina and even Venezuela, have seen expansion projects stalled or, in a best-case scenario, advance at a snail’s pace, for a variety of reasons, including but not limited to lack of capital, will and/or feedstock.

And that’s key. In the near-term, at least, many of these companies do not enjoy the same levels of feedstock availability, much less the lower costs that US companies are enjoying.

But these smaller companies do boast a significant business aspect beyond a customer base and stable demand: Many of them have solid distribution networks.

The distribution element of the business should be of particular interest to any US-based company looking to expand market share in Latin America, as many lack the proper distribution infrastructure and/or channels beyond Mexico. Another key aspect to doing business “south of the border” is the personalized service and the trust factor many of these smaller players have developed and nurtured over their years doing business at the domestic or regional level. A handshake still goes a long way in Latin America, just as speaking the same language does.

Most US majors already have a solid grasp on Mexican polymer markets, thanks in part to proximity and the North American Free Trade Agreement.

Not so in South America, and the fact that US PE and PP producers are so focused on strategies that maximize profits in the domestic market, all the while limiting exports to Latin America, whether because of product availability issues and/or uncompetitive pricing, may not be sitting well with current and potential customers in the region.

US majors must keep this in mind: Many of these customers are beginning to be wooed by Asia-based sellers looking to grow their presence in the region.

And the smaller players in Latin America should remember that, in many cases, success — in this case survival — comes to do those who adapt.

Article by Bernardo Fallas

The full article is visible below – By Pankaj Oswal

http://blogs.platts.com/2013/07/18/latin-petchems/

Article: Global Petrochemicals Market is Expected to Reach USD 791.05 Billion in 2018: Transparency Market Research

This is an extensive piece from the PR Newswire.  The article states that Transparency Market Research’s recent report states that the Compound Annual Growth Rate for the global petrochemicals market will rise by 6.7% each year until 2018.  This well outstrips inflation and would make the industry a sure and steady growth area for the next five years.  Interestingly, volume is only expected to rise 5.4% per year indicating that relative price per volume will rise in this time.

According to a new market report published by Transparency Market Research (http://www.transparencymarketresearch.com) “Petrochemicals Market by Product (Ethylene, Propylene, Butadiene, Benzene, Xylene, Toluene, Vinyls, Styrene and Methanol) Global and China Industry Analysis, Size, Share, Growth, Trends and Forecast, 2012  2018, the global petrochemicals market was valued at USD 472.06 billion in 2011 and is expected to reach USD 791.05 billion by 2018, growing at a CAGR of 6.7% from 2012 to 2018. In terms of volume, the global petrochemicals consumption was 436.86 million tons in 2011 and is expected to reach 627.51 million tons by 2018, growing at a CAGR of 5.4% from 2012 to 2018.

Browse the full report at  http://www.transparencymarketresearch.com/petrochemicals.html

Growing consumption from major end use industries including construction, packaging, transportation, textile, plastics, healthcare and so on coupled with favorable operating conditions mainly in the Middle East and Asia Pacific is expected to drive the global market for petrochemicals over the next five years. Government initiatives in India and China to set up petrochemical complexes in the region are also expected to fuel the market growth. The rapid exploration and development of unconventional gases such as shale gas is also expected to provide feedstock advantage to petrochemical producers. However, volatile raw material prices and growing environmental concerns regarding the production and usage of various petrochemicals are expected to be a key challenge for market participants. Regulatory intervention has resulted in the industry shifting focus towards developing bio-based alternatives for petrochemicals.

Ethylene dominated the petrochemical market and accounted for over 28% of the total consumption in 2011. Growing demand for polyethylene, a major derivative of ethylene, mainly from packaging industry is expected to boost the global market for ethylene over the forecast period. However, widening supply- demand gap due to capacity addition in the Middle East and Asia Pacific is expected to put pressure on ethylene prices, globally. In terms of volume, methanol is expected to be fastest growing petrochemical at an estimated CAGR of 10.3% from 2012 to 2018. The growth of methanol is largely driven by its emerging application in gasoline blending and conversion of methanol to olefins (MTO).

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China was the leading consumer of petrochemicals and accounted for over 25% of the global consumption in 2011. Along with being the largest market, China is also expected to be fastest growing market, at a CAGR of 6.7% from 2012 to 2018, owing its significant downstream processing capacity. Asia Pacific including China accounted for over 45% of the total demand in 2011. North American market for petrochemicals is expected to be driven by rapid development of shale gas in the U.S.

The global market for petrochemicals is highly fragmented in nature. Top ten companies accounted for just over 49% of the total petrochemicals market in 2011. BASF, Sinopec and Exxon Mobil were the largest petrochemical manufacturers and together accounted for nearly 20% of the total market share in 2011. Major industry participants have fully integrated operations from extraction of crude oil and natural gas to production of petrochemical derivatives. Some of the other players operating in the global petrochemical market include Chevron Phillips, Dow Chemical, Company, Ineos, LyondellBasell, National Petrochemical Co., PetroChina, SABIC, Shell Chemicals and Total among some other companies.

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This report segments the global petrochemicals market as follows:

Petrochemicals Market: Product Segment Analysis

  • Ethylene
    • Polyethylene
    • Ethylene oxide
    • Ethylene dichloride
    • Ethyl benzene
    • Other (including Alpha olefins, vinyl acetate, etc.)
  • Propylene
    • Polypropylene
    • Propylene oxide
    • Acrylonitrile
    • Cumene
    • Acrylic acid
    • Isopropanol
    • Other (including Polygas chemicals, oxo-chemicals, etc.)
  • Butadiene
    • Styrene-butadiene rubber
    • Butadiene rubber
    • Acrylonitrile butadiene styrene
    • Styrene-butadiene latex
    • Other (including Nitrile rubber, mechanical belts, etc.)
  • Benzene
    • Ethyl benzene
    • Cumene
    • Cyclohexane
    • Nitrobenzene
    • Alkyl benzene
    • Other (including Maleic anhydride, etc.)
  • Xylene
  • Toluene
    • Benzene
    • Xylenes
    • Solvents
    • Toluene di-isocyanate
    • Other (including Pesticides, drugs, nitro toluene, etc.)
  • Vinyls
  • Styrene
    • Polystyrene
    • Expandable polystyrene
    • Acrylonitrile butadiene styrene
    • Styrene-butadiene latex
    • Unsaturated polyester resins
    • Styrene-butadiene rubber
    • Other (including copolymer resins, etc.)
  • Methanol
    • Formaldehyde
    • Gasoline
    • Acetic acid
    • Methyl Tertiary Butyl Ether (MTBE)
    • Dimethyl ether
    • Methanol to olefins (MTO)
    • Other (including biodiesel, solvent, chloromethane, etc.

The full article is visible below – By Pankaj Oswal

http://www.prnewswire.com/news-releases/global-petrochemicals-market-is-expected-to-reach-usd-79105-billion-in-2018-transparency-market-research-214895731.html

Article: Petrochemicals buying enlivens North Sea butane market

Respected commodity benchmarking and information provider Platts has reported that North Sea butane stocks have been increasingly sought in the last few weeks from Northwestern European buyers.  In only the last week the market has picked up noticeably and could indicate increasing demand for butane, which serves as an alternative to naphtha.

Buying interest from the petrochemicals sector in Northwest Europe has enlivened the North Sea butane market over the last week, according to industry sources.

Over the summer period, North Sea mixed butane is used by the gasoline-related sector in Northwest Europe in the production of alkylate and MTBE. However, mixed and normal butane can also be used by the petchems sector as an alternative feedstock to naphtha, providing the CIF butane price is at a discount to the CIF naphtha price.

Over the second half of June, activity on the North Sea butane market was extremely thin, with hardly any buying or selling interest seen for spot product.

More recently, however, the market has been a bit busier. At the beginning of this week, Statoil was a seller of 8,000-12,000 mt of either mixed or normal butane at sellers option CIF NWE July 8-12 and offered down to $765/mt when a deal was concluded with Borealis for delivery to their steam cracker at Stenungsund in Sweden.

Although trade sources said demand from the gasoline-related sector is still thin over the balance of July, there has been more demand seen from petchems. Sources added that another North Sea butane cargo was recently concluded into the petchems sector at a delivered price of about 92% of CIF naphtha.

Written by Derek Hardy

Edited by James Leech – Platts

The full article is visible via the link below – By Pankaj Oswal

http://www.platts.com/latest-news/petrochemicals/london/petrochemicals-buying-enlivens-north-sea-butane-26072691