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