Headline makers

15 November 2004 00:01  [Source: ACN]

ACN looks back at some of the important stories in the past decade in the Asian petrochemical industry. Part one: 1994-1998

November 1994

Dow is looking to build a major petrochemicals complex in China, including a worldscale ethylene cracker, chloralkali streams, derivatives and, eventually, downstream products such as propylene oxide and epichlorohydrin, Dow Pacific president Denis Wilcock told ACN.

A preliminary feasibility has been carried out and the company is confident the project is realistic. Almost certainly, the investment would be undertaken with a local partner, Wilcock said.

January 1995

Reliance Industries plans to establish an aromatics facility comprising 1.2m tonne/year of paraxylene (PX) and 1m tonne/year of purified terephthalic acid (PTA) at a new petrochemical complex in Jamnagar, Gujarat, India. A 300 000 tonne/year PP plant has also been planned.

The three proposed facilities are part of the company’s new US$3.18bn integrated refinery and petrochemical complex.

February 1995

Gas Authority of India (Gail) has secured preliminary approval for financing of its US$822m olefins project from the Exim Bank of the US. Gail has completed 22% of the physical work of the petrochemical complex in Auraiya, India. The complex is planned for completion in December 1996.

Gail received a letter of intent for the complex in 1989, but it only managed to pass through a multi-layered government approval system in October 1992.

March 1995

Foreign chemical investment in Indonesia hit US$5.7bn in January and February this year, revealed the Indonesian Ministry of Investment. This represented more than 50% of all foreign investments, which reached US$10.4bn in the same period.

‘The surge in chemical investment is not surprising. Indonesia is increasingly becoming an attractive investment centre for foreign companies around the world,’ said a source.

‘We have the right infrastructure in place, cheap labour costs, and we are gradually modernising our economy,’ he added.

Amoco is to build four PTA plants with a total capacity of 1m tonne/year in Zhuhai, China, within the next ten years. A 250 000 tonne/year joint-venture plant to come onstream by the end of 1997 will form the first stage of the project, according to a company source.

The decision follows Mitsubishi Chemical’s announcement about installing four plants with a total capacity of 1.2m tonne/year in Southeast Asia by the year 2000.

May 1995

Prospective Thai petrochemical investors were taken by surprise when the Board of Investment (BoI) approved 15 projects worth US$4.1bn just ahead of the introduction of new regulations liberalising petrochemical investments. The new rules would allow private companies to invest in olefins production without government approval.

Included are two of five current cracker projects set to triple Thai ethylene capacity

July 1995

The BP Group is moving into serious discussions with the Chinese authorities on its prospective involvement in a major refinery and petrochemicals complex in China. The chemicals arm of BP is also pushing forward talks on a joint-venture investment in a worldscale acrylonitrile plant in China and expects to seek BP board sanction for a 150 000 tonne/year acetic acid plant in Sichuan by the end of the year.

China is lining up investments worth about US$12.05bn for ethylene projects to achieve a planned increase in capacity to 5m tonne/year from 2.1m tonne/year by 2000 and to 8-10m tonne/year in 2010.

Many ethylene projects are reported to be either under construction or on the drawing board. Among these are at least five large-scale projects with a capacity of more than 450 000 tonne/year.

September 1995

South Korea heads Hyundai Petrochemical’s list of choices after an investigative tour of 14 countries in search of a site for a cracker. The tour included the Philippines, Malaysia, Singapore and China.

But a grassroots plant in South Korea will rest on a change to a 1992 government regulation that states that no cracker can be built in the country until the end of 1995.

October 1995

Thai Petrochemical Industry has approved plans to build a second naphtha cracker in Rayong, Thailand. The decision will bring Thailand’s total number of crackers to six before the end of the century, and its C2 apacity to more than 2m tonne/year.

December 1995

Petronas has finally firmed up plans for its second cracker of 600 000 tonne/year in Kerteh, Malaysia.

The move underpins Petronas’ ambitions to establish Malaysia as an Asian petrochemical hub, said Hassan Marican, president and chief executive officer.

January 1996

The South Korean petrochemical industry is taking steps to regulate new ethylene capacity to ensure that the cracker overbuilding of the early 1990s is not repeated. The move comes after the government confirmed that it has lifted the 1992 ban on cracker development in the country.

The Korean Ministry of Trade, Industry and Energy confirmed that companies can go ahead with new ethylene projects from 1 January 1996.

A group of investors including BP Chemicals and Sumitomo Corp have formed a company called Bataan Polyethylene Corp to build a US$250m polyethylene plant in Bataan, Philippines, marking what could be the long-delayed takeoff for the country’s first petrochemical park.

April 1996

Sabic has taken a preliminary decision to build an 800 000–850 000 tonne/year cracker alongside its two Petrokemya crackers in Al-Jubail, Saudi Arabia. A final decision will be made by the end of this year.

The project would lift ethylene capacity in Saudi Arabia to 5m tonne/year by 2000.

May 1996

Four South Korean majors – Hyundai, Hanwha, Yukong, and LG Petrochemical – have announced new cracker investments within just one week. Industry watchers believe the reason for the move is to beat the guidelines on cracker development in the country, which are expected to be released at the end of May.

August 1996

BP Chemicals, the Salim Group, and Sumitomo Corp are jointly studying a proposed 600 000 tonne/year cracker in Merak, Indonesia, said a Salim official. The cracker is expected to be completed at end-1999. The official said the Bimantara Group was a potential Indonesian partner.

The main ethylene buyers would be Peni, Satomo Invdovyl Monomer, Styrindo Mono Indonesia, and Primo Ethycolindo.

September 1996

Mitsui Petrochemical president Shigenori Koda has confirmed that talks are underway with Mitsui Toatsu on a merger between the two companies by October 1997. Mitsui Toatsu declined to comment on the issue, and Koda denied a Japanese report that a concrete deal had been struck. However, his statement was the first official confirmation that merger talks were underway.

Attempts by the Korean Petrochemical Industry Association (KPIA) to self-regulate future South Korean ethylene projects have failed amid difficulties in obtaining approval from the Fair Trade Commission (FTC) and the lack of legal authority to enforce the regulation.

‘We have no legally binding tools to make sure companies follow what we say,’ said a senior KPIA official. The FTC has refused to give its approval on the grounds that the proposed self-control measures run counter to South Korean law on fair-trade practices.

March 1997

Japanese chemical majors will be able to form holding companies for the first time in 50 years when Japan’s antimonopoly laws are revised in early April. The legal change is expected to trigger a significant scale-up of the chemical industry’s restructuring efforts once related tax laws have been reformed.

The move to revoke the longstanding ban on holding companies in Japan was proposed by the Ministry of International Trade and Industry two years ago in response to mounting concern that Japan’s major producers would not be able to compete as market barriers come down.

May 1997

The wildly fluctuating Thai baht is creating a turbulent trading environment for the chemical industry. Earlier this month, the baht plunged to its lowest level against the dollar this decade, leading to a massive intervention package to bolster the ailing currency. One industry source said chemical industry balance sheets will ‘start to look pretty unhealthy’ as a result of the baht crisis.

September 1997

Companies are likely to find it harder to raise finance for new chemical projects in Southeast Asia following the currency rollercoaster of the last two months, analysts have indicated.

‘Banks are now cautious to lend because of the oversupply of chemicals. A lot of capacity is expected to come onstream in 1998-99, and still more in 2000,’ said Schroders analyst Silvia Kwan. She expects to see cancellations or delays of projects.

TPI is looking for joint-venture partners at group level in a desperate bid to raise loan-repayment funds. TPI, which has had to defer repayments on a US$10.8m loan, is to hold a crisis meeting with its bankers.

The Thai major is facing problems in repaying interest on its unhedged US$1.4bn in loans. Interest repayments have soared by as much as 45% since the collapse of the baht.

November 1997

Tripolyta is in talks with Chandra Asri for a possible merger of the two companies. But alternative options, including a long-term ethylene supply contract between the two companies, are also being explored.

Negotiations for a strategic partnership have been stepped up because of the currency crisis.

Petrochemical Industries Co (PIC) of Kuwait has revealed that it is considering a second worldscale olefins plant, based on naphtha feedstock, and a methanol facility.

The company also announced it has finalised plans to build an aromatics facility and is waiting for approval from parent company Kuwait Petroleum Co. PIC has yet to choose partners, but expects to do so in 1998.

December 1997

A more vicious petrochemical price war will result from the South Korean economic crisis, ACN was told.

Product prices will further plummet in the short term as South Korean companies try to raise exports in an effort to earn the funds needed to cover higher interest repayments.

‘What has happened in South Korea has made a bad situation worse. It is quite possible that prices will fall further,’ said Stephen Yao, chemicals analyst with ABN Amro Hoare Govett.

January 1998

TPPI will restructure its shareholding and suspend its US$2.3bn integrated olefins and aromatics project in Tuban, Indonesia. The decision comes in the wake of the deepening currency crisis. Tirtamas Group, the majority shareholder, and Siam Cement, are the two partners that have been hardest-hit by the currency depreciation.

March 1998

The South Korean government has removed a key obstacle to buyouts of chemical companies by overseas firms with its move to relax restrictions on hostile foreign merger and acquisition bids. International players have been eyeing stakes in asset-rich but cash-poor Korean companies, but have been limited by the law.

May 1998

TPI recorded the biggest loss in Thai corporate history in 1997 because of huge foreign-exchange losses and a change in the way it values assets and investments. The new valuation method, employed to enable the bankers to provide valuations viewed as more realistic to companies that could be interested in buying into TPI, saw a small profit for 1996 transformed into a net loss of US$1.7bn.

August 1998

Hanwha Energy is planning to put its refinery and associated aromatics businesses up for international auction in October. This follows failed attempts to obtain a satisfactory offer from potential buyers.

The Hanwha Group is under strong government pressure to sell its non-core businesses.

SK Corp and Hanwha Energy have revealed that they are evaluating swapping their respective chemical and refinery assets for concerns belonging to other chaebol as government pressure for the conglomerates to take part in business exchanges intensifies. The two are the latest chaebol to succumb to government pressure for conglomerates to exchange businesses as part of the initiative called The Big Deal.

September 1998

South Korea’s Hyundai and Samsung are set to spin off their Daesan-based petrochemical assets into a separate company as part of a government-led initiative to restructure the business conglomerates.

November 1998

Japan Polyolefins is in preliminary discussions with rival Japan Polychem to form what would be Japan’s biggest PE producer, said a source close to Japan Polyolefins. The market share of the new company would be close to 38%.

January 1999

Reliance Industries is likely to be one of the frontrunners in the race to acquire the 25% stake in IPCL, which is being divested by the Indian government.

Another strong contender is Dow Chemical. Other names being mentioned are Montell, Sabic, Mitsui & Co and Nissho Iwai.

March 1999

Daelim Industrial and Hanwha Chemical took the South Korean industry by surprise with their announcement that they will swap polymer operations and form a joint venture company to run their combined 1.2m tonne/year cracker capacity.

The deal is expected to be completed by 1 October.

Daelim will acquire Hanwha’s PP asset, while Hanwha will take over Daelim’s ldPE and lldPE plants.

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