ICIS Publishes Top 100 Companies For 2009

ICIS has recently published its regular Top 100 Chemical Companies feature, together with an excellent analysis of the events of the last year.

The Top 5, ranked in terms of sales, are BASF, Dow Chemical, ExxonMobil, Sinopec and Lyondell Basell. Of these, Sinopec is new to the top 5, having been ranked 8th last year.

Looking back over the last year, it is really quite remarkable that the major chemical companies have fared so well in adapting to an economic crisis that saw an oil price crash from a peak of $147 per barrel down to $32 per barrel and a virtual collapse in markets such as construction and automotive.

Clearly survival required significant cost reduction across the board. Reduced working capital, operating and maintenance cost reductions and reduced capital expenditure were commonplace, the only difference being the depth of cuts from one company to the next.

This blog has talked much about a new normal in the post recession period. The challenge remains a difficult one for all chemicals producers as we move forward. It will be necessary to deal with the economic conditions that this new normal will bring, whilst also adopting strategies to address the impacts of the recent cost cuts in areas such as capital expenditure.

However, in having survived so far, companies have clearly demonstrated that they have the management capabilities and willingness to adapt.

LyondellBasell Agrees US Environmental Settlement

photo : soils.co.uk


The Chemical Engineer has reported that LyondellBasell has agreed a settlement with the US Government for clean up of contaminated US sites. Under the settlement, LyondellBasell will pay $170m to clean up 15 contaminated sites across the US.

The contamination relates to sites which were never operated by Lyondell or Basell but which had been acquired in historical transactions.

This blog has no knowledge of the transactions involved and does not know what was or was not done in terms of detailed technical due diligence and/or protection against historical environmental liabilities by Lyondell, Basell or any of its predecessors.

The settlement does remind us, however, that costs associated with environmental clean-up can be very high. As chemical industry M&A activity starts to increase, potential buyers should be mindful of the need to carry out comprehensive technical and environmental due diligence, to ensure that all potential value adjusting issues are identified and managed accordingly during any deal

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.

Weekly News Round Up

This week's round-up of news and updates on previous stories

• The Thai Government has formally ordered construction work to stop at the Map ta Phut petrochemical complex. There is no clear information regarding a likely restart date at this time.

• The new Boeing 787 Dreamliner made its first test flight on Tuesday. Each 787 contains carbon fibre and adhesives to the value of $1M, with the carbon fibre coming from polyacrylonitrile. Boeing has already received 840 orders for the new aircraft.

• Following recent shale gas discoveries, the American Natural Gas Alliance (ANGA) now believes that the US now has approximately 100 years of natural gas reserves. If correct, this could significantly impact future petrochemical investment in the USA. This news follows the recent announcement of ExxonMobil's acquisition of  major US natural gas producer XTO Energy.

• According to reports, the bankruptcy court in New York has adjourned the hearing to consider the LyondellBasell's proposed reorganisation plan, until January 12th. The outcome of the hearing is of much interest for Reliance Industries which has made a preliminary non-binding offer for a controlling interest in LyondellBasell.
  
  
  

Weekly News Round Up

This week's round-up of news and updates on previous stories

• Numerous reports suggest that Reliance Industries is moving quickly in its efforts to aquire LyondellBasell , with executives from the two companies meeting recently in Houston. Reliance is believed to be preparing to make a binding offer for LyondellBasell.

• The Chemical Engineer reports that the European Union has approved a substantial amount of funding for a number of green energy-related projects. The EU had previously set aside €4 billion for green energy projects and has now allocated €1.6 billion for carbon capture and storage projects and €0.6 billion for offshore wind energy projects.

• Shell has opened a state-of-the-art mono-ethylene glycol (MEG) plant in Singapore. The plant uses Shell's OMEGA process, which is claimed to have lower construction and operating costs and maximises the yield of MEG (producing less di and tri-ethylene glycols), when compared with other processes.

• BASF chairman Juergen Hambrecht has spoken positively about his company's fourth quarter results, which were above expectations. 2010 is expected to be 'difficult' given the volatility of global recovery and the fact that central bank interest rates are expected to rise.

• Ineos Bio, together with its partner New Planet Energy, has been selected for a $50M grant for its advanced bioenergy facility in Florida, USA. The facility to use INEOS Bio’s advanced BioEnergy technology to produce bioethanol and power from a range of feedstocks, including forestry waste, agricultural waste, sustainable energy crops, construction waste and municipal solid waste.

Weekly News Round Up

This week's round-up of news and updates on previous stories

• In an interview with The Times, Jim Ratcliffe has indicated that Ineos will consider some asset disposals in the future. The company has to make substantial debt repayments in 2011 and has indicated that some asset sales could be a possibility. Ineos currently has debts of approximately €6.5M.

• LyondellBasell has announced that it will shut down its 'oldest and smallest' polypropylene line at its site in Wesseling, Germany. The company commented that this line, with 110kT capacity, was no longer economically viable.

• The Thai Supreme Court has upheld an injunction issued in September halting development of $12bn of petrochemical and power projects at the Map Ta Phut Industrial Estate in the eastern province of Rayong. This ruling, which could delay the start-up of several petrochemical plants, including a large cracker, has led to the involvement of the Government, in order to seek a resolution.

• An explosion occurred at the Valero refinery in Texas City, Texas, on Friday 4th December, killing one worker and injuring two others. Few details are currently available but the blast is reported to have occurred following a boiler failure, according to a company spokesperson.

• In another incident, three people were killed and two injured in a chemical plant explosion in Yongin, South Korea. According to reports, the blast followed a fire at the plant. An investigation is underway to identify the causes.

Weekly News Round Up

This week's round-up of news and updates on previous stories

• Speculation over the future of LyondellBasell continues. Following the reported $10-12 billion offer from Reliance Industries, a spokesperson for Sinopec has denied that they were considering a joint bid with equity firm TPG.

• Speaking at the Indian Petrochem 2009 Conference in Mumbia. Roland Walzi of Linde talked of the difficulties of 'mega cracker' projects. Mr Walzi exppressed his view that ethylene plants of greater than 2million tonnes/year capacity were unlikely due to 'technical challenges and economies of scale'.

• An investigation has started into two explosions at the SNF Group's factory, located in Andrézieux in France. Four people were injured in the incidents, two seriously, believed to be caused by the mixing of incompatible substances. The incident is believed to be due to human error.

• Moody's Investors Services has updated its outlook for the chemical industry. The view is pessimistic, given limited volume growth, overcapacity and concerns over rising raw materials prices.

• The Qatar-based Qatofin, a joint venture between Total and QAPCO, has inaugurated a new 450 kT LLDPE plant in Mesaieed. Commercial production is expected in January next year.

• ICIS has updated its estimate of the total number of job losses in the chemical industry since the start of the financial crisis. ICIS now estimates that more than 83,000 jobs have been lost so far.

Reliance Bid For LyondellBasell To Kick-Start M&A Activity

Now that both Reliance Industries and LyondellBasell have confirmed that an offer has been made for the world's 4th largest chemical company, we can anticipate a significant increase in M&A activity in the chemical industry.

Some industry analysts believe that the reported price, of somewhere between $10M - $12M, is relatively low, given LyondellBasell's recently published EBITDA results and could initiate a bidding war involving a number of prospective suitors.

The news follows hot on the heels of the various reports that IPIC is in talks with as many as 5 potential targets, including Bayer MaterialScience and other companies possessing technologies technologies which would support the development of the ChemaWEyaat project in Abu Dhabi.

There have also been reports that Dow Chemical has been in talks regarding the sale of a number of assets, as well as reports that Sinopec was looking at a number of potential targets in Europe. I've also heard several suggestions that a number of the Middle East majors will be looking to complete further acquisitions in 2010.

It looks certain that 2010 will be a major year of change in the sector, with the emergence of some new superpowers in the industry and further consequent changes to the asset footprint. Time for the site people to start changing the signposts and the letterheads once again!

Reliance to Purchase LyondellBasell Assets?

photo : LyondellBasell

Speculation is mounting that Reliance Industries is looking to buy the North American assets of LyondellBasell. Various sources suggest that a price of between $3 billion and $6 billion will be offered for the assets.

LyondellBasell was formed back in July 2007, when Basell acquired Lyondell Chemical Co. for $12.1 billion.

Although it is necessary to take into account the fact that Lyondell had assets outside the US, the price range quoted is still much lower than the original price paid by Basell. It is not clear at this stage whether the deal would include any of LyondellBasell's very strong technology licensing businesses - which cover predominantly polyolefins, polyolefin catalysts, olefins, propylene oxide and derivatives - although I would think this is unlikely.

LyondellBasell does have some very good US assets. If Reliance were to acquire these assets it would significantly strengthen its global position and move significantly higher in the ICIS Top 100 chemical companies, where it currently holds 34th place. LyondellBasell is currently in 4th place. Changing times!

Confusion Over Future of Wilton EO Plant

photo : BBC There is confusion regarding the future of the Wilton, UK EO/glycols plant. Back in July, Dow announced that it intended to close the facility primarily due to the uncompetitiveness of MEG and the need for significant investment to upgrade the plant to produce more di- and tri-ethylene glycols. Local unions have expressed concern about the cascading effect of the closure on other industries in the value chain, with downstream Croda and Shell plants directly impacted by the closure. On a UK-wide basis, this closure, together with the LyondellBasell's recently announced Carrington LDPE closure, puts significant pressure on the UK ethylene balance, with supply now significantly greater than demand. On Sunday, the UK Sunday Times published a story that US-based Third Coast Chemicals were looking to take control of the plant, with the UK government providing most of the required £50m funding in what is regarded as the first leg of a strategic review by the government of the chemicals industry. The Sunday Times quoted 'senior industry sources' stating that 'the government was in the early stages of formulating an assistance programme to the beleaguered £60 billion-a-year industry.' On Tuesday, however, the regional industry group, NEPIC, denied knowledge of any such negotiations, noting that although Third Coast had previously expressed an interest, discussions had since broken down. Difficult to pick out the bones from this story. My view is that the UK ethylene network is at serious risk unless something is done to avoid a major supply/demand imbalance. Wilton, as an important chemical cluster, needs plants such as the EO/glycols facility to secure its future as a centre for chemical industry growth and innovation. The process engineering skills based on Teesside are critical to the UK's ability to develop the low carbon technologies of the future. A coordinated approach, involving government, government agencies and industry is the only possible way to achieve this future.

Lyondell Basell Announces Carrington LDPE Closure

photograph: LyondellBasell Lyondell Basell has today announced the closure of the Carrington LDPE Plant in Manchester, UK. A company spokesperson said that the plant was no longer economically viable, citing the current market environment, future projections for LDPE and the relatively small scale of the plant (185kT). The closure further magnifies the ethylene supply/demand imbalance in the UK, which now has a significant excess of ethylene. From a personal point of view, this is the plant where I started my career as a young engineer quite some years ago. Initially as an LDPE plant process engineer as subsequently as part of the design team for the 'newer' LDPE production line. Having seen it built and been a part of the commissioning team, I'm very sad to see it go.

Top 10 Chemical Companies in 2008 and in 1998

ICIS has recently published its fascinating analysis of the top 100 chemical companies in 2008 (ranked by sales). The names in the list will not be a surprise to many; BASF, ExxonMobil, Dow Chemical, LyondellBasell, Du Pont and Shell figure prominently in the list.

What is more interesting is to look back to the top 10 in 1998 and look at the differences. BASF, Dow and Du Pont were all present but other names have disappeared completely; ICI, Hoechst and Rhone Poulenc were very big 1998.

New additions to the top 10 are the likes of SABIC, Sinopec, LyondellBasell and Ineos, with SABIC and Sinopec growing very quickly in recent years. LyondellBasell and Ineos are, of course, new companies formed in recent years and which have grown through successions of acquisitions.

The brave amongst us might like to try and predict what 2018 might look like. New names like Borouge and ChemaWEyaat may well appear, with some European and North American companies coming under some pressure?