Chemical Manufacturers Look to the Future

Chemical Manufacturers are taking decisive actions to position themselves for the future. According to Price Waterhouse Cooper's 13th Annual Global CEO Survey, chemical companies are responding to the current challenges in a number of ways:

• Companies are increasingly looking to Asia and expect operations to grow in this area
• The level of M&A activity is expected to increase
• Companies see innovation as being essential to future growth
• Comapnies are spending more to develop leaders and in-house talent
• Cost cutting and infrastructure improvements are essential

The comments absolutely reflect the need for a coherent and strategic approach to survive and thrive in these turbulent times. As noted previously, excellent strategic planning, in-built flexibility and the ability and desire to innovate will be the key attributes of successful companies.

Paul Hodges' Chemical Industry Outlook

My colleague, Paul Hodges has correctly predicted the key economic events that have shaped the chemical industry in recent years. Here is a short video from ICIS, featuring Paul, sharing his views on the 2010 outlook for the industry

Poor Demand In Construction Sector Threatens Chemical Manufacturers

photo : diamond.ac.uk

Whilst all chemical manufactuers are hoping for a better year in 2010, recent figures from the US indicate that demand remains very slack in the non-domestic construction sector, a major market for polymer and chemical manufacturers.

According to the American Chemistry Council (ACC), some 20% of spending in construction projects goes on chemicals and plastics and the figure is set to increase as buildings 'go green' with improved insulation, solar power etc.

The Associated General Contractors of America (AGC) has painted a negative picture in a number of recent press releases. In particular, the AGC recently released a construction industry outlook in which nine out of ten contractors stated that they believe that there will be no construction recovery in 2010.

This a big concern. Demand for chemical products relies on consumer demand, with construction and automotive being particularly important sectors. This downbeat assessment does not make happy reading for the chemical industry.

Cap and Trade Under Pressure as Republicans Win in Massachusetts

photo : Cleveland.com

The recent victory of Scott Brown in the recent US Senate by-election in Massachusetts is likely to put further pressure on the proposed Cap and Trade legisation.

The new senator actively campaigned against the legislation and his election reduces the Democrat majority in the Senate, making such bills harder to pass.

The election is significant. Brown highlighted two main issues in his campaign - the proposed healthcare reforms and cap and trade. His victory reflects the increasing concern voiced by the US chemical industry regarding the likely impact of cap and trade on industry and jobs.

It is being suggested that the bill could be watered down to focus on renewable energy alone. This blog has long promoted a sustainability agenda and agrees that increased use of renewables should be one element of this approach. There should also be a strong focus on new technologies to reduce energy consumption and waste. The chemical industry should be aiming for efficiency on a global basis. Regional schemes, such as cap and trade in its current form, are not the solution.

Paper Recycling Facility to be Built at Carrington UK

photo : bloglemu.blogspot.com

The Spanish company Sociedad Anónima Industrias Celulosa Aragonesa (Saica) has announced it will spend £290million to build a new paper recycling facility in Carrington, near Manchester, UK.

Construction will begin later this year and the facility is due to start-up in  2012. The plant will produce 400,000 t/y of 100% recycled board for use in corrugated cardboard. The investment will include advanced effluent treatment works and a combined heat and power station.

Carrington is the site of the petrochemical complex, formerly operated by Shell Chemicals, which at its peak, employed some 3500 staff. The paper mill itself is located on the site of a former BP distribution terminal, located alongside the Manchester Ship Canal.

This is very good news for an area which has seen multiple chemical plant closures in recent years. LyondellBasell shut down an LDPE plant at Carrington at the end of 2009 and NOVA Innovene (now Ineos NOVA) shut down a PS plant at the end of 2006. As someone who worked at Carrington for many years, I'm delighted to see new investment in the area.

Explosion at PetroChina Kills Five

photo : ibtimes.com

An explosion at CNPC's Lanzhou Petrochemical Company in Gansu Province, China has killed 5 people and injured 6 others.

According to reports, the blast, on 7th January, occurred at a naphtha tank farm at the site. The ignition source was believed to be static electricity, which ignited flammable vapours which had leaked from a nearby pygas tank

According to CNPC, there was no damage to nearby residential buildings and there was no escape of toxic gas from the site.Firewater has been collected at the site for treatment.

The CNPC Vice President Liao Yongyuan and a team of experts has visited the site to deal with the aftermath. CNPC has also sent an urgent message throughout the group, advising employees of the accident and stressing the need for improve HSE performance.

Cold Snap Hits Chemical Industry

photo shows view from the blog office

The current severe cold snap, affecting much of the Northern Hemisphere, is starting to have a significant impact on chemicals manufacturing.

All manufacturers are well aware of the need for robust winterisation programmes and most plants have well rehearsed procedures which can be implemented as soon as the mercury drops but this year, even the best procedures cannot address all of the issues being encountered.

China has been particularly impacted. Lower operating rates are reported across a number of crackers due to a combination of naphtha shortages and power supply problems. There are also severe transportation problems, particularly in Northern China.

In Europe, some crackers are reporting reduced rates, major polymer producers have reported operating problems and transportation is difficult in some regions. In the UK, many producers have interruptible gas supply contracts, which oblige producers to cut back consumption when national gas demand is high. There are also localised reports of staff having difficulties to get in to work, due to road transport difficulties.

Salt producers are working flat out. In the UK, the Salt Union reports that even though the mine has been working at capacity since mid-December, it is not able to sustain the unprecedented level of repeat orders and is working with the authorities to prioritise deliveries.

With the cold weather expected to last for quite some time, the industry has yet another challenge to deal with as we start the new decade.

Total Makes Strategic Move Into US Shale Gas Business

photo : Energy Tribune

Total has made a major move into the US shale gas market. Total and Chesapeake Energy Corporation have agreed a $2.25 billion joint venture related to Chesapeake's Barnett Shale assets

The Barnett Shale is currently the largest natural gas producing field in the U.S. and is producing approximately 50-60% of all shale gas in the U.S.

The move is highly significant for Total, with the company stressing the strategic nature of the investment, which will allow it enter the US shale gas business and to develop its expertise in unconventional hydrocarbons.

The latter point is very significant. As the attractiveness of natural gas grows, we can expect a significant increase in shale gas exploration and production activity wherever opportunities may exist. Watch this space for further news.

Chemical Industry Strategies For The Coming Decade

The start of a new year is a good time to think about Chemical industry strategies for the new decade. Just a very quick look back at the 'noughties' will tell us that we are set for a decade of significant upheaval for the industry.

The last decade saw huge changes in the chemical industry. Several years of strong growth followed by a very painful recession. The emergence of new players in the industry and a steady shift of the manufacturing base from Europe and North America to the Middle East and Asia.

In thinking about what is to come, I'd like to highlight two excellent articles published in ICIS Chemical  Business

In his article 'Prepare for the Great Petchem Marathon', Paul Hodges focuses on the key issues that need to be tackled. Restructuring, Supply Chain, Technology, Commercial Strategies and Size and Scale are flagged as key issues for chemical companies. Paul suggests that the motto for the new decade could be 'Think About Tomorrow and Act Today'

In another excellent article 'Recession Prompts Shift in Chemical Strategies', Anna Jagger focuses on the societal 'Megatrends' that will provide major opportunities for flexible and innovative chemical companies. The article lists Renewables, Food, Energy Efficiency and Water as being key issues for the coming decade.

The new decade will bring significant change. There will be significant problems to deal with, there will be threats to the industry but there will also be major new opportunities. Excellent strategic planning, in-built flexibility and the ability and desire to innovate will be the key attributes of successful companies.