Basell moves to cut back PP capacity

24 September 2001 00:00  [Source: ICB]

Basell's announcement to close 330 000 tonne/year of polypropylene capacity has focused attention on the status of the European PP industry. The company will mothball 180 000 tonne/tonne of homopolymer capacity at the Wilton, UK, site, close a 90 000 tonne/year slurry plant and mothball a 60 000 tonne/year homopolymer plant at its Tarragona site in Spain.

Robert Genin, president of Basell Europe states these plants 'have remained among our highest cost operations. By taking this action we will improve our financial position and make a major contribution to reducing overcapacity in Europe'.

Consultant David Freer of Tecnon Orbichem commenting on the announcements notes: 'Basell is clearly changing the face of the European pp industry. PP businesses will now have to stand on their own performance, rather than just be a component of propylene production'.

European producers are examining the cost-effectiveness of their PP units, in relation to plant size, age and feedstock positions. The new climate in which PP producers look for better margins to justify their existence, could mark a period of difficult adjustment for converters and their downstream customers, as they are likely to face higher prices.

The issue of European polymer overcapacity and cost effectiveness comes into sharper focus as companies increasingly engage in joint-venture polymer partnerships in the Middle East.

Plants in the region enjoy lower-priced feedstock cost advantages and economics of scale.

Basell's Wilton closures are to be initiated in 2002 and follow on from BP's recent decision to end polyolefins production at the site (ECN 10 September 2001). The shutdowns means polyolefin production at Wilton will come to halt, which a market observer described as 'an end of an era', as polyolefins have been produced at the site since the 1940s.

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