CHEMICAL UPDATE
MAY 2013
McIlvaine Company
TABLE OF CONTENTS
Asian Companies Emerging as Suppliers of Continent’s Fast Growth Chemical Industry
UK Researchers Devise PE Decomposition Additive
Mitsui & Celanese Enter Joint Venture to Produce Methanol in U.S.
Solvay, Ineos Reach Merger Agreement for PVC Businesses
Mitsubishi Buys Michigan-based Compounder Comtrex
Mitsubishi Chemical, JNC, and Japan Polychem to Transfer PP Businesses
Evonik and OPX Biotechnologies Signs Development Agreement for Bio-based Chemicals
Dow Chemical’s Venture Targets $1 Billion in Carbon Investments
Asian suppliers of plant parts and engineering are increasingly competitive on cost, schedule, and quality
Asian companies are emerging as suppliers of chemical plant parts and engineering services, C&EN recently reported.
BASF has come up with another way to take advantage of their firm’s deepening roots in Asia. The German chemical giant is establishing a new group staffed with hundreds of people who are tasked with procuring chemical plant parts and engineering services from Asian suppliers. The unit has already arranged the shipping of Asian plant parts to BASF manufacturing sites worldwide, including its largest site in Ludwigshafen.
One of the side effects of the fast growth of the chemical industry in Asia, and China in particular, is an improvement in local expertise in building chemical plants and manufacturing plant parts. Increasingly, chemical companies and engineering contractors worldwide are turning to China and neighboring Asian countries as sources of parts and engineering services.
Wison Engineering, a Shanghai-based contractor that builds chemical plants and refineries, is using its home base as a calling card for international expansion. “Our ability to competently source plant parts from Chinese suppliers is an obvious advantage for us when bidding on international tenders,” says Dechang Yang, general manager of procurement at Wison.
Wison has already built in Nanjing a synthesis gas plant, now operated by a Wison affiliate, that supplies an adjacent Celanese acetyl chemicals facility. And it will expand its syngas relationship with Celanese as the U.S. company moves into the ethanol business in China.
Although China offers low prices, sourcing plant parts and engineering services from the country does not simply translate into a lower construction bill for the buyer, Yang stresses. In fact, he says, Wison is not necessarily a lower bidder than its foreign competitors. “Depending on the situation, we can save our clients money by delivering the facilities faster, which reduces the capital cost, or finding in China suppliers who can produce longer-lasting plant parts.”
Aided by government incentives and the growth of the domestic chemical industry, China is rapidly expanding its ability to produce equipment for chemical plants, Yang notes. For example, the country now has the capacity to produce 15 million metric tons per year of ethylene, a key raw material used throughout the chemical industry. In 1985, China’s ethylene capacity was only about 1 million metric tons, according to Mitsubishi Chemical Techno-Research, a Japanese market research firm.
Nowadays, Yang says, about 80% of the parts and equipment used in a large chemical plant can be sourced from China. Twenty or so years ago, China had to import most key plant components such as reactors, pumps, and compressors, he recalls.
China’s emergence as an international supplier of chemical equipment and engineering services is occurring even though its chemical industry still has a relatively poor safety record. BASF and Wison stress that monitoring the performance of equipment suppliers is an important focus, through supplier audits, parts testing and knowing which other plant the equipment is already in use.
British researchers have developed a polyethylene additive which they claim can break down packaging, including plastic bags, European Plastics News reports.
Advanced Enzyme Science, a London-based polymer technology company, has developed Enzymoplast, which the firm says consists of proteins and enzymes that break down polyethylene “in a natural way”.
The use of plastic bags, plastic sheeting in agriculture or other products made of polyethylene is unproblematic provided that they are re-used whenever possible and then recycled, but this is seldom the case and these materials are often simply dumped.
According to Advanced Enzyme Science, Enzymoplast triggers a decomposition process when plastic bags containing the additive come into contact with microorganisms.
The microorganisms first devour the proteins, which breaks the polymer chain. It also activates the enzymes, which act as a catalyst and accelerate the process. After a few months only water and CO2 remain, claimed Advanced Enzyme Science.
Mitsui & Celanese Enter Joint Venture to Produce Methanol in U.S.
Mitsui & Co. announced May 15 that it will establish a joint venture with Dallas-based Celanese Corp. to manufacture methanol at Celanese's plant in Clear Lake, Texas.
Mitsui and Celanese will build a large-scale plant with an annual production capacity of 1.3 million tons.
Methanol is used as a basic raw material in a wide range of industries, including the manufacture of adhesives, synthetic resins and pharmaceuticals.
Mitsui's share of the product will be sold mostly within the United States, while Celanese will use its share in the production of methanol derivatives, such as acetic acid, a main component of vinegar.
Mitsui has been looking for an opportunity to participate in this business area in the United States, the world's second largest consumer of methanol.
Celanese has been considering the establishment of a methanol manufacturing joint venture with a partner. The two companies recently reached an agreement on the establishment of a 50-50 joint venture for this purpose.
Signature of a letter of intent to create a 50-50 joint venture with combined sales of EUR 4.3 bn
Solvay and INEOS recently announced that they have signed a Letter of Intent (LOI) to combine their European chlorvinyls activities in a proposed 50-50 joint venture. The combination would form a polyvinyl chloride (PVC) producer ranking among the top three worldwide. It would build on the strengths of both companies’ industrial assets, skills and the complementary geographical presence in order to enhance competitiveness.
The joint venture would have pro-forma net sales of EUR 4.3 billion and recurring BITDA of EUR 257 million, based on 2012 figures. The combined business would have around 5,650 employees in 9 countries and would pool each company’s assets across the entire chlorvinyls chain. This includes PVC, which is the third most-used plastic in the world, caustic soda and chlorine derivatives. RusVinyl, Solvay’s Russian joint venture in chlorvinyls with Sibur, is excluded from the transaction.
Solvay would contribute its vinyl activities, which are part of Solvin (JV: Solvay 75%, BASF 25%), as well as its Chlor Chemicals business, spread across seven fully integrated production sites in Europe. These sites include five electrolysis units converted into more energy efficient membrane technology, which supports sustainable production of PVC.
Kerling, the subsidiary of INEOS and the largest PVC producer in Europe, would contribute its chlorvinyls and related businesses that include three modern and large-scale membrane electrolysis units. These assets are based on ten sites in seven European countries.
The LOI provides exit mechanisms under which INEOS would acquire Solvay’s 50 percent interest in the joint venture for a value based on a mid-cycle recurring BITDA multiple of 5.5x. The exit arrangements would have to be exercised between four and six years from the joint venture’s formation, after which INEOS would be the sole owner of the business. Solvay would be entitled to receive upfront cash payments of EUR 250 million upon completion of the transaction.
The proposed transaction is subject to the applicable information/consultation procedures with employee representatives in the countries involved. After completion of such procedures, the parties would enter into legally-binding agreements that would contain customary closing conditions, including anti-trust approval from the relevant authorities. Until completion of the transaction, the occurrence and timing of which is dependent on such approval and procedures, Solvay and INEOS will continue to run their PVC businesses separately.
International chemical group Solvay is headquartered in Brussels, employs about 29,000 people in 55 countries and generated 12.4 billion euros in net sales in 2012 generating 90% of its turnover in activities where it is one of the top three worldwide.
INEOS is a global manufacturer of petrochemicals, specialty chemicals and oil products. It comprises 15 businesses with 51 manufacturing facilities in 11 countries.
Mitsubishi Chemical Corp. has acquired Comtrex LLC, a maker of PVC compounds and thermoplastic elastomers based in Warren, Mich.
No purchase price was listed in recent news releases from Tokyo-based Mitsubishi and from Comtrex, which was founded in 1969 and currently has around 40 employees and annual sales of about $20 million. The firm sells PVC compounds, thermoplastic vulcanizates and other TPEs into a range of markets including automotive, industrial and consumer goods.
Mitsubishi will operate Comtrex as part of its Mitsubishi Chemical Performance Polymer unit, which is based in Greer, S.C.
In a news release, Mitsubishi officials said that the acquisition “is in line with [the group’s] medium-term management plan” of increasing its manufacturing and sales into TPEs, cross-linked polymers, adhesive polymers and conductive polymers.
Three Japanese polypropylene companies have decided to transfer their compounding subsidiaries to group company Japan Polypropylene Corporation (JPP, Tokyo). The PP compounding operations of Mitsubishi Chemical Corporation (Tokyo), Japan Polychem Corporation (Tokyo) and JNC Corporation (Tokyo) will be unified both in Japan and abroad.
JPP is a joint venture of Japan Polychem and JNC Petrochemical Corporation (Tokyo), the latter being a wholly owned subsidiary of JNC. Japan Polychem is a wholly owned subsidiary of Mitsubishi Chemical.
The transfer of PP compounding operations to single entity, subject to regulatory approval, will unify compound distribution networks and consolidate supply to the market of long-fiber compounds produced in Japan, China, and the U.S. PP compounders, meanwhile, are located in China, Thailand, India, and the U.S.
The subsidiaries that will be taken over by JPP include PP compounders Mytex Polymers (Jeffersonville, IN), Mytex Polymers (Thailand) Co. (Bangkok), Mytex Polymers India (Gurgaon, India), and Beijing Ju-Ling-Yan Plastic (China), and long-fiber compound manufacturers COMUSA LLC (Covington, GA), JNC Polyfine Asia (Changshu) Co. (China), and JNC Polyfine Co. (Tokyo).
With the expansion of overseas production and sales, the Japanese automobile industry has an increasing demand for stable supplies of materials of consistently high quality irrespective of the region, according to the companies. On the other hand, Mitsubishi Chemical and JPC have been independently engaged in the polypropylene compound business, while JNC has operated its Funcster long-fiber thermoplastic resin business as a standalone entity. This is despite the PP neat resin manufacturing operations of the companies being merged through the establishment of JPP in 2003.
Both the PP compound business and Funcster business are positioned as important strategic businesses for JPP. Through this business integration, JPP is expected to play an important role in expanding the business in line with the growing global market to enable it to act as a global supplier of highly functional materials.
OPX Biotechnologies Inc., a Boulder-based firm that develops acrylics and fatty acids from biomass and feedstocks, partnered with Germany-based Evonik Industries AG to jointly develop bio-based specialty chemicals, officials announced recently.
Under the joint development agreement, OPXBIO will use its Efficiency Directed Genome Engineering technology to develop the bio-processes to create the specialty chemicals, officials said.
"The bio-process we're developing has the potential to create economic and sustainable versions of products we use in our everyday lives,” Charles R. Eggert, OPXBIO's president and chief executive officer, said in a statement.
Financial terms of the agreement were not disclosed.
OPXBIO will be able to market the products resulting from the collaboration with Evonik, officials said.
OPXBIO was spun off from the University of Colorado in 2007 and a year later licensed a microbial technology from CU-Boulder to produce biorefining fuels and chemical products.
In 2009, OPXBIO raised $17.5 million from Braemar Energy Ventures, Altira Group LLC, Mohr Davidow Ventures and X/Seed Capital Management for the pilot-scale demonstration of the process to develop bioacrylic acid.
In 2011, OPXBIO signed a joint development agreement with Dow Chemical Co. in an effort that could result in the industrial-scale production and eventual commercialization of acrylic products made from corn and cane sugar. By the summer of that year, OPXBIO raised an additional $36.5 million.
Last year, OPXBIO announced it reached a “scale-up” milestone in demonstrating the fermentation process for its bio-based acrylic acid.
Dow Chemical Co. and Turkish partner Aksa Akrilik Kimya Sanayii are planning $1 billion in carbon-fiber investments over five years, including in Russia and the U.S., through joint venture DowAksa Advanced Composites Holdings BV.
The venture is in talks with two companies in Russia, Rusnano and Prepreg-ACM and Nanotechnology Center for Composites, for an investment to supply carbon-fiber derivatives, Ahmet Dorduncu, head of Akkok Group, Aksa Akrilik’s owner, said in a news conference in Istanbul recently. An investment in the U.S. is also possible, he said.
DowAksa has 3,600 metric tons of carbon fiber production capacity in Yalova near Istanbul, or a 6 percent share of the global market, and competes with producers including DuPont Co., Teijin Ltd and Toray Industries Inc. The material is used by a variety of industries, including automobile manufacturing, energy, medicine and aviation.
“The investment may rise to $1.5 billion by 2022, when the global carbon fiber composite market is expected to reach $40 billion,” Mithat Okay, chief executive officer of DowAksa, said in an interview. “The investment projection includes all ventures we want to have abroad,” he said.
Dow’s expansion in carbon fiber comes as it seeks to make $1.5 billion in disposals. The plastic-additives business and a polypropylene licensing and catalysts division have been earmarked for sale, with Chief Executive Officer Andrew Liveris pledging to be more aggressive about assessing whether units have a future within the company.
Akkok, which also owns Akenerji Elektrik Uretim AS in a joint venture with Czech energy producer Cez AS (CEZ), plans to invest $3 billion, mostly in energy and chemicals over the next 5 years to grow its sales to $5 billion in 2017 from $3.1 billion last year, Dorduncu said.
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