CHEMICAL UPDATE
JANUARY 2014
McIlvaine Company
TABLE OF CONTENTS
Sales of Petrochemicals Will Grow at 6.7% rate to $791 billion in 2018
New Disclosure Rules in Oklahoma Target Chemicals Used In Fracking
Brazil to Increase Plastics Production in 2014
BASF Expanding Mobile Emissions Catalysts Production Capacity in India
Berkshire Hathaway to Buy Phillips 66 Unit
Kemira Sells Formic Acid Business to Taminco, Will Focus on Water Chemicals
Lyondellbasell Restarts Texas Methanol Plant
Nova Chemicals to Use Marcellus Shale Ethane for Ethylene
Arkema Announces Doubling of Organic Peroxide Production Capacity in China
A new report by Transparency Market Research predicts that the global petrochemical market will reach $791 billion in 2018, with an average compound annual growth rate of 6.7 percent between 2012 and 2018.
In 2011 the petrochemical market was valued at $472 billion, the report found. Ethylene accounted for 28 percent of the global petrochemical market, meaning that it was the most consumed subcategory in 2011. In total, global petrochemical consumption reached 436.86 million tons in 2011.
The biggest petrochemical market in terms of regional demand was China, accounting for 25 percent of the global consumption. Transparency Market Research anticipates that the Asian country will retain its position as a world leader though 2018, as demand for petrochemicals will continue to grow faster than in other parts of the world.
Petrochemicals are petroleum derived products obtained from crude oil and natural gas. They are mainly used in the production of petrochemical derivatives such as formaldehyde, polyvinyl chloride, acetic acid and epoxy resins among others. The growing demand of petrochemicals from major end use industries including transportation, construction and packaging is expected to drive the petrochemical market globally.
The report estimates and forecast global and China’s market for petrochemicals from the demand side. The study comprises of global petrochemicals market in terms of volumes (million tons) and revenues (USD billion) for the period of 2011 to 2018. The report showcases the major driving and restraining factors along with emerging opportunities which are expected to drive the market in the near future.
The report also includes value chain analysis to understand each component prevailing across the petrochemical value chain. In order to analyze competitive landscape of the market, the report consists of Porter’s five forces model which measures impact of suppliers, buyers, new entrants, competition and substitute products on the petrochemicals market. The study also includes company market share analysis along with company profiles of the major participants operating in the petrochemical industry.
The petrochemical market has been segmented into key petrochemical products such as ethylene, methanol, butadiene and propylene among others and each segment is further classified into their respective applications. All the product segments and applications are forecasted in terms of volume (million tons) and revenue (USD billion). The report also analyzes the consumption of petrochemicals for major geographical regions as North America, Europe, China, Rest of Asia Pacific, Middle East & Africa and Latin America. In addition, the study also includes market attractive analysis of all product segments which are benchmarked on the basis of market size, growth rate and general attractiveness.
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.)
More information on the report is found at http://www.transparencymarketresearch.com/petrochemicals.html
More information is now available on oil and natural gas wells drilled throughout Oklahoma.
Operators of all oil and gas wells in the state must report the chemicals used in hydraulic fracturing either directly to the website FracFocus.org or to the Oklahoma Corporation Commission, which will add the information to the FracFocus database.
The new regulation is an extension of a rule that required operators of horizontal wells in the state to disclose the makeup of their fracking fluids beginning in 2013.
The rules initially targeted only horizontal wells because that category represents most of the larger operators and about three-quarters of the wells drilled in Oklahoma in 2013, Corporation Commissioner Dana Murphy said.
“It's important to go ahead and include all wells because we want to treat all operators the same, but you have to focus where most of the activity is first,” Murphy said.
Corporation Commission rules for many years have required operators to report the chemicals used in drilling operation only if the commission asked for it.
Many operators began reporting their fracking fluid voluntarily in 2011 when FracFocus.org became operational.
Brazil is set to increase its production of plastics in 2014, according to a new analysis by local plastics industry association Abiplast. The forecast predicts a rise in both volume and value, Business News Americas reported.
Abiplast estimated that the country's total output of plastics next year will go up 1.8 percent in terms of volume, following a 1.6-percent increase in 2013. Meanwhile, demand for plastics in Brazil will rise 9 percent in value, an increase that is similar to the one predicted for this year, the website said.
The Brazilian plastics market is expected to become more favorable and profitable to local plastics producers. Over the past few years the increase in demand for plastics has been met by imported products mostly, but Abiplast said that 2014 will see the start of a reversed trend that will ramp up domestic production.
Commenting on the predictions, Abiplast president José Ricardo Roriz Coelho stated that demand for plastics is expected to rise following the recent depreciation of the Brazilian currency, which will affect imports of food products, especially those that are already packaged. Since food packaging accounts for the largest proportion of demand for plastics, the sector will be the main driver of plastics production growth in the country next year.
Roriz added that one of the main challenges for the Brazilian plastics sector was the rise in thermoplastic resin prices. Globally, costs increased by 18 percent between January and September 2013, while Brazilian plastic manufacturers only hiked product end prices by 4.55 percent over the same period.
BASF Catalysts India Private Limited (“BASF”) is expanding its mobile emissions catalysts production capacity in Chennai, India.
Construction of a new 47,000 square meter facility will begin in December 2013, enhancing the company’s existing emissions catalysts operation in Chennai with new production lines and manufacturing capabilities. Startup is planned in the first quarter of 2015.
Upon project completion, a total of nine manufacturing lines will be housed in the new operating site, producing light duty, heavy duty and motorcycle emissions control catalysts to meet growing market demand and customer technology needs. Once operating at full capacity, the site is expected to employ approximately 300 people.
“The pending expansion of Bharat Stage IV (Euro IV equivalent) emissions control regulations in India combined with overall vehicle production growth will drive a significant increase in demand for our advanced emissions control solutions,” said Anup Kothari, Vice President, Mobile Emissions Catalysts Asia Pacific. “BASF is investing to more than double our manufacturing capacity in India to help customers meet these emerging needs. At the same time, this expansion project will allow us to establish Chennai as our regional production hub to serve the fast-growing motorcycle manufacturing markets in India and ASEAN.”
The expansion activity in Chennai will provide the necessary equipment and infrastructure to address the technology pathways developed with customers for BS IV compliant applications. In addition to existing catalysts technologies such as the TWC (Three-Way Catalyst), DOC (Diesel Oxidation Catalyst) and CSF (Catalyzed Soot Filter), the advanced SCR (Selective Catalytic Reduction) technology system will also be locally manufactured, ensuring world-class heavy duty diesel production capabilities in the region.
“BASF is committed to driving forward innovative and sustainable solutions to the environmental challenges facing our society,” said Dr. Raman Ramachandran, Chairman, BASF Companies in India & Head South Asia. “In the past, BASF has successfully delivered advanced emissions control catalysts for cars, trucks and motorcycles to customers in India and throughout South Asia. The expansion project further demonstrates our strong commitment to achieving ambitious growth in the region, and our focus on delivering effective solutions to leading OEMs to prepare them for future challenges.”
BASF’s core mobile emissions control technologies:
TWC (Three-Way Catalyst): removes HC (hydrocarbons), CO (carbon monoxide) and NOx (nitrogen oxides) from gasoline vehicles.
DOC (Diesel Oxidation Catalyst): removes HC (hydrocarbons) and CO (carbon monoxide) and some PM (particulate matter) from diesel vehicles.
CSF (Catalyzed Soot Filter): traps PM (particulate matter) and then uses a patented catalytic technology to help oxidize it.
SCR (Selective Catalytic Reduction): converts NOx (nitrogen oxides) into water and nitrogen with the use of a urea solution.
Warren Buffett's Berkshire Hathaway Inc struck a deal to buy a Phillips 66 business that makes chemicals to improve the flow potential of pipelines for around $1.4 billion of stock.
Phillips 66 said recently that Berkshire will pay for the unit, Phillips Specialty Products Inc, using about 19 million shares of Phillips 66 stock that it currently owns.
"I have long been impressed by the strength of the Phillips 66 business portfolio," Buffett said in a statement. "The flow improver business is a high-quality business with consistently strong financial performance."
The exact number of shares Berkshire will pay for the unit will be determined by their price on the closing date, the companies said.
James Hambrick, CEO of Berkshire's specialty chemicals unit Lubrizol Corp, will oversee the business, Buffett said. Berkshire bought Lubrizol for about $9 billion in 2011.
Phillips 66 CEO Greg Garland said the company decided to sell the business because Berkshire Hathaway made a strong offer. He said the company will now focus its growth on its oil and natural gas transportation and processing business, as well as its other chemicals businesses.
Phillips 66 said it expects the Phillips Specialty Products unit to have about $450 million of cash and cash equivalents on its balance sheet at closing. It expects the deal to close in the first half of 2014.
Berkshire favors larger companies with consistent earnings power and easy-to-understand businesses.
Kemira says it signed an agreement to sell its formic acid business, including the feed and the airport runway deicing product lines, part of Kemira’s ChemSolutions segment, to Taminco (Allentown, PA) for €140 million ($191.5 million). The businesses sold had combined revenue of approximately €140 million in 2012. The deal includes a manufacturing asset for formic acid at Oulu, Finland, and approximately 160 employees will transfer to Taminco. Kemira is the second-largest formic acid producer in the world, behind BASF.
The transaction closing is expected during the first quarter in 2014. Sodium percarbonate, the remaining business within the ChemSolutions segment, will stay within Kemira and will be reported as part of the Paper segment. After the transaction has closed, the ChemSolutions segment will be discontinued. ChemSolutions has no synergies to Kemira's water related core businesses. After the divestment of the formic acid business, Kemira will become a purely water-focused chemical company based on three segments: Paper, Oil & Mining, and Municipal & Industrial.
Lyondellbasell Restarts Texas Methanol Plant
LyondellBasell has restarted a Gulf Coast chemical plant that had been dormant for a decade, inspired to make the change because of low natural gas prices, the company said recently.
The methanol plant, which has a capacity to produce 780,000 tons of methanol per year, was shut in 2004 because natural gas prices in the United States became too high, the company said.
The plant transforms natural gas into methanol, a material used to manufacture chemicals such as acetic acid and formaldehyde. It also is used in adhesives, foams, plywood, solvents and windshield washer fluid, and it can be used as a direct replacement for gasoline in cars.
Several other companies recently have announced plans to build or restart methanol plants along the U.S. Gulf Coast to take advantage of low natural gas prices to produce the chemical product.
“The methanol plant restart is the first in a series of U.S. Gulf Coast projects by LyondellBasell to take advantage of the natural gas price advantage that we enjoy from shale gas,” Patrick Quarles, senior vice president of intermediates and derivatives for LyondellBasell, said in a written statement. “The methanol plant project and our other significant debottleneck projects will bring new capacity into our system earlier and at substantially lower cost than constructing entirely new facilities.”
LydondellBasell began restarting the methanol unit in early December, and has added 24 new jobs to the complex in Channelview, Texas, spokesman David Harpole said.
Nova Chemicals Corp. said it will be the first plastics company to use ethane from the Marcellus Shale Basin to convert to ethylene.
Nova has been accepting delivery of ethane from Marcellus deposits in Pennsylvania and storing it in former underground salt caverns under Sarnia. It is increasing the amount of ethane it uses to 100 percent in its Corunna, Ontario, ethylene plant to lower production costs. The Corunna cracker conversion will be complete in the first quarter of 2014. Also planned for 2014-2018 is capacity expansion of the Corunna cracker by 20 percent from the current 1.8 billion pounds per year nameplate.
Nova announced in a Dec. 18 news release an update of several projects underway. Besides the cracker conversion, it is debottlenecking low density polyethylene capacity in its new LDPE line in the nearby Moore plant. Also in Moore, it is retrofitting its high density PE line. The two PE projects should expand PE capacity at the site by a total of 300 million to 400 million pounds per year, Bezaire estimated from Nova’s Pittsburgh headquarters office.
The cracker and PE projects could cost more than $300 million, stated Nova CEO Randy Woelfel in a news release.
The higher PE production levels will roughly track Nova’s boosted ethylene input. Bezaire said Nova has worked out ethane supply arrangements with Marcellus producers and a pipeline operator from Pennsylvania to the Sarnia area.
The Sarnia expansions will come on stream in the 2014-2018 period.
Nova also said it continues to evaluate sites for a second technology facility to focus on its Advanced Sclairtech PE. Possible locations include Ontario and the U.S. Gulf Coast. It expects to have that facility running by 2020.
Nova continues to build a new LLDPE plant in Joffre, Alberta, and expects it be finished in the first quarter of 2016.
Belgian based chemical company Solvay SA is rapidly expanding in India as part of its global strategy of growing in the emerging economies.
India subsidiary Solvay Speciality India Pvt. Ltd. generated sales of around 227 million euros in 2013. "We are targeting to become double in size by 2016," said R. Prakash, the unit's managing director, at the Plastivision 2013 trade show in Mumbai.
Solvay opened a global R&D center in Saveli in the middle of 2012, which focuses on primary research and application development. It currently employs 50, and Solvay plans to increase that to 200 in the next three years.
Currently Solvay has more than 800 employees at eight facilities in India, including the R&D center. The manufacturing plants make specialty polymers, engineering plastics, surfactants and chemicals. Solvay is looking for organic and inorganic growth in India, with M&A efforts focused, in part, on specialty polymers.
Arkema, the world’s second leading producer of organic peroxides, announces the construction of a new organic peroxide plant on its Changshu site in China. This investment will help double the site’s production capacity.
By doubling its production capacity in China, Arkema will continue to support the strong growth in the organic peroxide market in Asia, a region in which the Group is also a producer in India, South Korea and Japan.
The new Changshu plant is due to come on stream in early 2016.
“These new capacities reinforce our leadership position in the organic peroxide Asian market for the initiation of polymerization reactions. Our customer service, together with an optimum industrial and logistics model as well these new capacities will enable us to support our customers’ strong growth in China, particularly in the growing plastics markets for the construction, packaging and automotive sectors,” stated Manny Katz Global president of Organic peroxides.
Complementing investments made earlier in particular the announcement of the construction of a new plant in Saudi Arabia, the doubling of capacities at the Changshu organic peroxide site illustrates the development strategy pursued by Arkema’s High Performance Materials segment, while further boosting the Group’s presence in high growth countries where Arkema looks to achieve 30% of its sales by 2016. Organic peroxides are widely used as polymerization initiators in commodity thermoplastics.
Arkema operates 11 organic peroxide plants on the three continents. With operations in more than 40 countries, some 14,000 employees and 10 research centers, Arkema generates annual revenue of €6.4 billion, and holds leadership positions in all its markets with a portfolio of internationally recognized brands
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