UK Chemicals Exodus Underway?

I've just spotted a very interesting article from the Royal Society of Chemistry outlining concerns over the potential exodus of chemical and pharmaceutical companies from the UK.

As many will know, Ineos has recently announced its decision to relocate its corporate headquarters from the UK to Switzerland.

A number of other chemical and pharmaceutical companies may be poised to follow suit, given concerns over the perceived high levels of taxation in the UK for businesses and individuals.

Already the vast majority of UK chemical plants are owned by companies with headquarters outside of the UK. If the UK is no longer considered to be a 'strategic' location for an organisation, there may well be a drift of corporate, commercial and technical positions from the UK. Ultimately plant closures could follow, particularly if the total cost of employment is deemed to be too high.

This is a major concern. We have seen significant numbers of closures in recent years. My sense is that the UK needs a strong chemical sector, particularly if we wish to have a leading role in the development of green technologies. Although relocations of corporate HQs do not change the asset base, they do affect sentiment and can impact future investment decisions.

UK PTA Plant Set to Restart

photo : El Economista

Following numerous posts about site closure, I'm delighted to post an article about a plant restart. Back in July last year, this blog reported the closure of the La Seda PTA/PTA plant at Wilton, UK.

The company Lotte Chemical UK Ltd., a part of the wider Lotte Group recently bought the Wilton Plant for 26 Billion Korean Won (US$22.4 mln). The Wilton plant has capacity to produce 500,000 tpa of purified terephthalic acid and 150,000 tpa of polyethylene terephthalate.

The Lotte Group's goal is "to be come a group that is appreciated by even one more person and to produce products that are loved by as many people as possible" - I'm sure that the company is appreciated by quite a few people on Teesside just now!

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.

Friday News Round Up

Friday again, so time to update on some previous posts and share some other news

• In the UAE, Borouge has announced that preparatory work has started on the site for the Borouge 3 project. The contract for the 1.5 million tonne ethane cracker was awarded to Linde Group back in July. The complex will also include PP, PE, butane and associated infrastructure and marine facilities.

• Evonik has annouced that it will permanently close two plants at the Munchmunster Chemical Park, impacting over 100 jobs. The plants, which produced cyanuric chloride and acetocyanahydrin had been idled since the end of 2008.

• A fire in a PVC unit at Rompetrol Rafinare's Petromida Refinery has killed two workers and injured two others. The cause of the fire are not yet known. The incident follows another fatality at the site in October due to gas intoxication.

• A key US Senate committee has approved the 'cap and trade' bill. The committee approved the vote by 10-1 although opponents have criticised the committee, which is made up entirely of Democrats, for putting US jobs at risk. The bill must pass through 4 further committees before it can go to the Senate for a vote.

• Finally, the UK Daily Telegraph has reported the story of a man, Darren Young, who has become allergic to his wife due to an intolerance to polyethylene glycol. Any contact with the chemical causes swelling and a soaring heart rate. This means that he cannot go near his wife if she is wearing any kind of cream or body lotion. The allergy started after Mr. Young was given a steroid injection to treat a problem with his foot.

Ineos NOVA Annouces Breda Site Closure

photo: Ineos NOVA

As a manufacturer, it feels like I've blogged about site closures (and how to achieve succesful closure) too many times recently. Whilst site closure is necessary for operating companies and for the wider chemical industry, it's never a pleasant experience.

Another European petrochemical plant closure was announced yesterday, with Ineos NOVA announcing the closure of its Breda PS plant in the Netherlands. The plant, with a capacity of 90kT produces general purpose PS and some speciality PS. The plant employs 55 people.

Expandable polystyrene production will continue at the site, which also hosts a number of the administrative functions for Ineos NOVA.

I've talked about how to ensure successful site closure in previous posts (see 25th July blog entry for full details). One major factor in the overall closure cost is the current value of scrap metal. In late 2008, prices for mixed scrap peaked at 450 €/tonne but prices have since fallen back to 2005 levels and are currently around €180/tonne. As demolition contractors recycle everything that can be re-used, this reduced price has a big impact on the overall cost.

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.

Where Next For European Petrochemical Manufacturers?

photo: arabianoilandgas.com

Times have been tough lately for European petrochemical producers. With demand depressed since the second half of 2008, margins have been squeezed and profitability has been severely impacted.

This is further compounded by the tidal wave of new capacity coming on stream in the next few years. A number of huge petrochemical complexes are now commissioned and many more will start-up between now and 2012.

For the manufacturers this translates into significantly reduced operating rates, demands to cut costs and a highly concerned workforce, worried about future job security.

This is not an easy set of factors to manage. Strong leadership is absolutely essential. Costs must be cut but without significantly increasing the levels of risk - effective management of change is a must. There must be an absolute focus on 'doing the right things' and eliminating all types of waste throughout the entire supply chain and in all of the service functions. Good people management means communication (and more communication), empathy and a very clear sense of direction.

Even with all of this, there will be casualties. More plants will have to close down in order to restore the supply/demand balance and as I've noted previously, this is a process which needs strong project management in order to achieve best results.

It is a very tough and sometimes lonely time for manufacturing managers. Most important is to take control - identify strategies for dealing with all of the issues and keep looking at the horizon. In this way you'll be best prepared for whatever is coming.

10,000 Jobs at Risk in UK Chemical Industry

It has always been relatively difficult for the Chemical Industry to make itself heard in the UK, compared to, say, the automotive industry. A KPMG analyst, Chris Stirling has warned that the UK's chemicals industry was being left to "suffer in silence" whilst efforts were being focused on other industries. It is claimed that recent closure announcements put as many as 10,000 jobs at risk across the UK, either directly or in supply firms. "The chemicals industry simply cannot be left to suffer in silence. The industry needs to better promote itself to the Government, presenting the case for why it is imperative to have a guaranteed supply of certain strategic chemicals in the UK, not just in terms of our own industrial output, to which the chemical industry contributes more than £5 billion annually to the UK balance of trade, but also in terms of long-term job and wealth creation" he said. This blog endorses the view. The UK Chemical Industries Asociation, together with UK regional groups such as NEPIC are doing what they can but need the support of others within the chemical industry to make themselves heard!

Site Closure

photo : el Economista

Following my last post on site closure, today La Seda de Barclona announced that is to close five plants and lay off 300 staff as part of a restructuring plan that will allow it to focus on polyethylene terephthalate (PET) production.

240 of the job losses will be due to the closure of the 500,000 tonne/year upstream purified terephthalic acid (PTA) site at Wilton, in the UK. The Wilton plant has been shut down for several months already.

Site Closure

There have been many announcements of site closures in Europe in recent months. Given the new petrochemicals capacity coming on line in the Middle East, there are undoubtedly more to come in the coming months and years.

Site closure is a strategic decision, based on the long term economics of a business. The business aims will have been defined as part of the decision process.

However, Site Closure is unlike any other project; as well as being complex, with EHS, technical and regulatory challenges, it is also highly emotionally charged, with many of the people involved in the process being directly affected by the consequences. Having been in the middle of this process several times myself, I can state from experience that it is very different from other types of project.

A well-managed site closure process will achieve all of the aims of the impacted business, it will ensure a positive transition for the impacted employees and will satisfy all regulatory requirements. All of this whilst controlling costs and taking advantage of a number of financial opportunities which can arise.

The flip side is that poorly managed site closure can have a number of serious consequences, impacting both the profitability and the reputation of the parent company.

For example, the process can become unnecessarily protracted, leading to significant extra cost. Staff morale can decline sharply in the period between announcement and closure, leading to increased risk, unreliable production and hence customer dissatisfaction.

Key staff can be lost early in the process if thought has not been given to their future in the organisation. Legacy issues such as land contamination can lead to problems with regulators or landlords. The resale value of assets is not realised and property value (lease or freehold) is not optimised.

With the 'typical' cost of a site closure in the order of $10-15 M, the difference between a successful outcome and a poorly managed outcome can be very significant.