UpdateINEOS' ACN plant purchase sparks concern

13 March 2008 21:37  [Source: ICIS news]

(Adds INEOS source quotes in paragraphs 5-7)

LONDON (ICIS news)--INEOS Nitriles planned purchase of BASF’s acrylonitrile (ACN) plant along with its Seal Sands site in Teesside, UK, will double the company’s ACN production in Europe and has caused concern in the market on Thursday.

“[The market will be] increasingly monopolistic,” said one trader, in reaction to the news. 

“Buying Seal Sands is a very good fit for us,” said one source at INEOS Nitriles. “The additional capacity means we will have close to 0.5m tonnes of ACN capacity within the European arena.”

INEOS Nitriles, which already markets itself as the largest global manufacturer and marketer of ACN, has agreed to buy the 280,000 tonne/year capacity plant from BASF along with the Seal Sands site.

Increasing production at the plant could allow INEOS to have excess material to sell on the open European market, a company source said.

INEOS said in a release it currently produces about 230,000 tonnes/year (roughly 50,000 tonnes less than capacity), mainly for downstream BASF plants in the UK, Belgium and Germany.

“What this does is make more product available to the local European market,” the INEOS source said. “Over past or two or three years this plant’s had operating problems. We believe with our expertise … by taking ownership of that facility, we can get a bit more volume out of that plant.”

“The acquisition is conditional on approval by the relevant competition authorities,” German chemical company BASF said in a statement.

The companies have not disclosed the financial details of the transaction.

The adipodinitrile (ADN) and the hexamethylenediamine (HMD) plants have been excluded from the sale although INEOS Nitriles will run these.

“HMD remains a key element in BASF’s PA 6.6 value chain,” BASF said and so the company has held on to them.

The ADN plant at the site is to be closed permanently at the end of 2008 - this was previously announced by BASF in June 2007 after they signed an external supply agreement with US-based Invista.

“The sale of the Seal Sands site is part of our approach to focus on the core assets of our polyamide value chain,” said BASF performance polymers division president Dr Harald Lauke.

“The purchase of BASF’s Seal Sands manufacturing site is a natural development for INEOS Nitriles and supports our long-term strategy,” INEOS Nitriles CEO Rob Nevin said.

The ACN plant would serve INEOS’s existing acetonitile plant located at the Seal Sands facility, the company’s statement said.

An INEOS spokesman added the purchase was part of the company’s strategy for growth and commitment for its customers, rather than to sure-up feedstocks for downstream manufacturing.

The purchase would not affect supply or volume to the market but long-term it increased INEOS’s pricing power, traders said.

“In terms of the psychological effect the longer-term could see a firming of the market,” a trader said.

INEOS is the biggest player globally, and this will help it access markets in the UK, Spain and Portugal,” he concluded.

INEOS already has global nameplate production nitriles capacity of 960,000 tonnes/year with plants in Cologne, Germany and Green Lake and Lima, US.

ACN, ADN and HMD are used in the production of acrylic and polyamide (PA) fibres, acrylonitrile-butadiene-styrene (ABS) and PA plastics. At present most of the ACN capacity at Seal Sands is used by BASF's downstream businesses.

INEOS Nitriles, which presently employs 370 staff, said all BASF’s 240 staff at Seal Sands would be transferred to its employment.

A further 250 people are employed by contractors at the facility and INEOS Nitriles has agreed to take over all existing supply and service agreements.

INEOS Nitriles, which has yearly sales of $1.8bn (€1.2bn), was created when INEOS bought the Innovene olefins and derivatives businesses from BP in 2006.

Prices for ACN were assessed at $1,870-1,900/tonne CIF (€1,200-1,220/tonne) CIF (cost, insurance and freight) WE (west Europe) last Friday, according to global chemical market intelligence service ICIS pricing.

($1 = €0.64) 

Additional reporting by Mike Nash and Ben Lefebvre

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By: Lucy Craymer
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