22 March 2007 17:30 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Nova Innovene just got a lot bigger – or it will do so officially probably in the third quarter.
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Sales for the venture will expand to around $3.5bn (€2.6bn) from more than $1bn now.
Nova has wanted to get out of its commodity styrenics bind for some time. The business has been difficult for what seems like an age although margins have improved recently.
Nova Innovene, the alliance struck between Nova and BP in 2004 to accommodate the difficult European market seems like the best model to further tackle costs and duplicated assets.
Nova's chief executive has virtually repeated his comments of three years ago about prospects for the venture, pointing to possible $40m/year cutbacks and the consolidation of production capacity.
Players in commodity styrenics are all seeking the solutions to poor profitability that work best for them.
Nova built on its technology relationship with BP to create Nova Innovene.
Innovene was then the name of the planned olefins and derivatives spin-off from BP. Privately-held Ineos bought a re-vamped Innovene from BP at the end of 2005.
Overcapacities and poor prospects dog the general purpose polystyrene (GPPS) business.
The product competes with more environmentally-friendly polymers like polypropylene (PP) and is on a slippery, downward slope.
Dow Chemical, Total, BASF and latterly Nova Innovene which closed its 180,000 tonne/year GPPS plant at Carrington in the
Margins in the GPPS business have improved since the closures but poor returns still hang over the business and price volatility threatens its future.
Demand has been soft in North America but plant closures by Dow Chemical towards the end of last year – and the prospects of a deal from Nova Chemical for its STYRENIX business were expected to be positive developments for 2007.
Under the terms of the current agreement, Nova will put its North American styrene and solid polystyrene assets into the venture and Ineos its North American styrene and polystyrene assets alongside their respective holdings in Nova Innovene.
A signal of the intentions of the partners came from Nova’s chief executive Jeff Lipton on Thursday.
“We are very pleased with this path and believe this larger, stronger joint venture will quickly build on the success of our recent work with INEOS in
The expanded venture will be number one in capacity terms in styrene and solid polystyrene in North America and number two in solid PS in
Nova will keep its more profitable North American EPS business, its ARCEL advanced foam resins and new EPS-based business ventures.
The deal points up the fact that further restructuring of the global GPPS business is on the cards.
Dow has signalled its intention, for instance, to put its commodity styrenics into a joint venture. It could well involve a player from the Middle East with access to feedstocks or with a group with access to markets growing faster than those in North America and
An announcement on a possible Dow deal has been expected since late January.
($1 = €0.75)
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