SABIC likely front-runner for DSM’s melamine ops

28 September 2007 04:37  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Saudi Basic Industries Corp (SABIC) is expected to lead bidders for DSM’s melamine and urea business, which has been put up for sale, a major northeast Asian market player said on Friday.

“SABIC may show a keen interest in the DSM melamine business as it fits in with their strategy to become a global player,” he said.

Saudi Arabian Fertilizer Company (SAFCO), an affliciate of SABIC, has an annual capacity of 2.3m tonnes of ammonia, 2.6m tonnes of urea and 20,000 tonnes of melamine.

He said that the links to SABIC were strong, as DSM in 2002 sold its plastics and petrochemicals businesses to the major Saudi Arabian petrochemicals producer for €2.3bn ($3.2bn).

“It has always been SABIC’s intention to build a 100,000 tonne/year melamine plant and to scrap its current 20,000 tonne/year plant in Saudi Arabia that uses DSM technology,” he said.

“So they may be the most suitable candidate to bid for DSM’s melamine and urea business,” he said but added that SABIC may still go ahead and build the 100,000 tonne/year melamine plant in Al Jubail even if they were to take over the DSM business.

SABIC officials could not be reached for immediate comment.

DSM has put up its melamine, urea, fertilizer businesses, together with maleic anhydride and EPDM synthetic rubber business for sale as part of its divestment strategy aimed at increasing the group’s focus on life and material sciences.

DSM announced the new divestment plans, which involve businesses with roughly $2bn in annual sales on Thursday as it gave details of the latest review of its Vision 2010 strategy.

DSM currently has two melamine plants, one with a 125,000 tonne/year capacity in the Netherlands and the other, a 60,000 tonne/year melamine unit in Indonesia.

“DSM’s melamine business has been making losses so it makes sense for them to sell the business,” market sources said

The global melamine business has, in recent years, seen fierce competition from the Chinese producers who have undercut the other European and Asian producers with lower-priced product. 

Several melamine plants have, as a result shut down permanently in Europe and Asia.

Europe’s largest melamine producer, Agrolinz Melamine International (AMI) shut down its 50,000 tonne/year Castellanza plant in Italy in March this year and withdrew from a joint project with the Abu Dhabi National Oil Company (ADNOC) to build a 80,000 tonne/year melamine project in Ruwais, Abu Dhabi.

In Asia, Mitsuibishi Chemicals closed down its 35,000 tonne/year melamine unit in Kashima in March while Samsung Fine Chemicals shut its 35,000 tonne/year plant in Ulsan, South Korea last year.

By: Helen Yan
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