Molecular Sieves Market Squeezed; PQ Enters as Asia Crimps Demand

24 August 1998 00:00  [Source: ICB Americas]

By Dan Scheraga

Nine months after the entry of PQ Corporation into the molecular sieves market, rivals are seeing the pricing pressure they predicted the new competitor would bring. However, that is not preventing those companies from forging ahead with investments.

North American market leader UOP LLC is the latest company to do so, having recently agreed to purchase Bayer AG's inorganic chemicals group's zeolites business, including the unit's 5,000-metric-tons-per-year molecular sieves adsorbents plant in Leverkusen (CMR, 8/17/98, pg. 3). The move closely follows the startup of a new 5,500-metric-tons-per-year addition to the company's Mobile, Ala., facility.

Another company that recently boosted its European molecular sieves business through an acquisition is Elf Atochem. Through its Ceca subsidiary, the company bought a facility from Poland's Inowroclawskie Zaklady Chemiczne Soda Matwy SA. The plant, in Inowroclaw, near Poznan, Poland, has an annual capacity of 10,000 metric tons. An Atochem official says the company will invest FFr 50 million ($8.3 million) to refurbish the site and expand it by the end of the year.

The official says the Polish acquisition complements an expansion already underway at the company's plant in Honfleur, France, where Atochem is adding 4,000 metric tons of capacity for air separation and isomer separation grades of molecular sieves. That project is scheduled to be completed by the end of the year.

Prior to these projects, Atochem scrapped plans to build a $50 million 10,000-metric-ton-per-year molecular sieves plant in Axis, Ala. Early this year, the company said it would put those funds toward raising its molecular sieves capacity in Europe.

Atochem says the Polish and French investments will help it "consolidate its position as the world's third leading molecular sieve producer as well as continue the international expansion of its performance product activity."

Grace Davison is also boosting its molecular sieves capabilities. In addition to the recent expansion of the company's processes portfolio by licensing technology from Degussa, the company has also launched new molecular sieve products for refinery, olefins and insulated glass applications.

Additionally, the company recently published new literature explaining the role of its molecular sieves and silica gel dessicants in insulating glass units and another pamphlet outlining the benefits of the company's Phonosorb 802 LD dessicants for Low E coated insulating glass.

The company also has on ongoing effort to keep its capacity in line with demand, having raised the capacity of its primary North American molecular sieves facility in Curtis Bay, Md., by 20 percent during the past two years, according to Mike Rosenberg, North American director of sales and marketing.

Mr. Rosenberg says Grace Davison will get a lift when its parent company completes its acquisition of Crosfield, expected in September. The addition will integrate Grace Davison into silicate and zeolite raw materials.

Mr. Rosenberg acknowledges that PQ's entry has put prices under downward pressure, but he says other forces are also at work. "Pricing on molecular sieves is depressed worldwide," he notes. "It partially has to do with PQ's entry and the additional capacity that they and other companies are bringing on line. But it also has a great deal to do with the economic slowdown in Asia. Not only has Asian demand for North American molecular sieves slowed, but Asian producers of molecular sieves have been driven to more aggressively seek to export their product to other regions, including North America."

PQ plans to eventually expand its capacity, but its immediate strategy is to increase its range of molecular sieve products and deepen its penetration into its current market segments, including insulated glass and natural gas drying, says Colleen Del Monte, the company's commercial manager of molecular sieves.

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