ICIS updates the top 10 chemical company rankings

Ups and downs

19 September 2008 12:30  [Source: ICB]

Of the 10 ranked highest in our global Top 100, four hold firm, two drop down and four climb - with two new entries. Here are the highlights of the chemical sector's brightest players

Listen to Andy Brice and Will Beacham discuss the change in rankings 

1 BASF - UNCHANGED

Changes at board level have done little to dent the hopes of German major BASF in retaining its top position in our rankings. The board of executive directors saw the retirement of Eggert Voscherau, Peter Oakley and Klaus Peter Lobbe, and the addition of Harald Schwager and Hans-Ulrich Engel in January and March, respectively.

After the chemical giant announced more than a year ago that it would sell its styrenics division, it finally looks like a deal will be done. The price tag originally deterred bidders, but the decision to reorganize its styrenics business and add its copolymer operations to the mix looks likely to bear fruit.

2 DOW - UNCHANGED

Second-placed Dow Chemical has continued its aggressive cost-control plans and raised efforts to respond more effectively to surging costs. The US-based producer has stolen most of the headlines for major acquisitions this year, particularly with its announcement in July that it would buy specialty chemical maker Rohm and Haas, also of the US, for $18.8bn (€13.3bn).

It also soon hopes to finalize a joint venture with Kuwait's Petrochemical Industries Co. into which it intends to place a large proportion of its commodity petrochemical and polymer businesses.

Apart from these deals, Dow has been among the most vocal regarding the need for hefty price hikes. Its unprecedented across-the-board price increases came hot on the heels of record-high crude and oil prices, highlighting the pressures faced throughout the chain.

3 EXXONMOBIL - UNCHANGED

Holding firm at number three, the US-based energy and chemical major's achievements this year have been many and varied. In July, Rex Tillerson, chairman and CEO of ExxonMobil said its core focus was on meeting the challenges posed by energy supply and demand.

As part of efforts to improve the supply of its specialty compounds in the Asia-Pacific region, the company has entered into an agreement with Singapore-based Resin & Pigment Technologies (R&P) - a subsidiary of Singapore specialty cement and polymer manufacturer EnGro - where R&P will make a range of ExxonMobil's products, primarily for automotive applications.

Other projects have seen the completion of a major expansion at its plant in Baytown, Texas, US, to increase halobutyl capacity, used in the production of tires.

ExxonMobil also announced that its affiliate, Mobil Producing Nigeria, has started operations of a $1.3bn (€919m) project in Nigeria to produce and sell natural gas liquids.

4 SHELL - UP FROM 5

Shell has seen a decent increase in sales this year, clawing itself up a place to fourth. The past few months have seen numerous deals including the August addition of Canada's Duvernay Oil to its portfolio. In June, Shell signed a preliminary agreement with US-based BPZ Energy to explore for oil and gas in northern Peru.

This followed agreements with Qatargas and PetroChina for the long-term supply of liquefied natural gas (LNG) from Qatar to the rapidly-growing Chinese market. In March, Shell and Virent Energy Systems, in the US, agreed to develop biogasoline, converting plant sugars into gasoline and gasoline blend components, rather than ethanol.

5 LYONDELLBASELL - UP FROM 11 (LYONDELL)/19 (BASELL)

Newly merged petrochemical giant LyondellBasell, of the Netherlands, is the highest new entrant to the Top 10.

The nascent business was formed in December 2007 after US-based Access Industries' Basell spent a mammoth $19.4bn (€13.7bn) on the US petrochemical major Lyondell, after an unsuccessful bid for US chemical giant Huntsman.

Among many changes since the deal is the company's decision to stop polypropylene (PP) production at its Morris plant in Illinois, US, in the fourth quarter. The move forms part of an ongoing strategy to rationalize and concentrate production on its Spheripol and Spherizone process facilities.

It also finalized the sale of its Sarnia, Ontario, Canada, site to global oil major Shell in August, having previously announced plans to stop PP production there because of high operating costs.

There are also plans to expand its global PP compounding capacity by 30% to 1.2m tonnes/year by the end of next year. A new facility in Guangzhou, China, is due to come on stream, followed by a joint-venture compounding plant in Dammam, Saudi Arabia.

The company says it is looking at opportunities in Russia and India, as well as expanding its sites in Suzhou, China Rayong, in Thailand and Ensenada, Argentina.

It has also increased attempts to stave off the effects of soaring naphtha prices by shifting more of its US ethylene production away from the costly feedstock to natural gas liquids (NGL).

6 INEOS - UNCHANGED

Expansion has been the mantra of UK-based INEOS this year. Although it keeps sixth place in the table, its flurry of acquisitions could see it climb next year.

Back in January, INEOS finalized the deal to buy compatriot oil major BP's vinyl acetate monomer (VAM) and ethyl acetate (etac) businesses for an undisclosed sum. This saw a 250,000 tonne/year VAM plant and an etac plant of the same capacity in Hull, UK, change hands, along with the UK's Teesside-to-Saltend ethylene pipeline.

It then agreed to buy Norwegian oil company Norsk Hydro's polymer operation, which included the remaining 50% interest in the Noretyl ethylene cracker at Rafnes, Norway. INEOS already holds the other half. Then, in August, INEOS Nitriles finally received clearance from the European Commission to buy German chemical major BASF's Seal Sands acrylonitrile (ACN) site on Teesside in the UK. The deal includes a 230,000 tonne/year ACN plant.

Aside from its buying activity, INEOS has also again fervently pushed for a shift to monthly pricing for olefins to offset volatility. Such a move has been mooted in the industry for years.

7 SABIC - UP FROM 10

Despite rocketing raw material costs and the global economic slowdown, advantaged natural gas costs has helped SABIC take the mantle of the seventh-largest chemical company by sales.

Its ascent has clearly been helped by the $11.6bn (€8.2bn) deal to acquire the US's GE Plastics in August 2007, which boosted SABIC's turnover by nearly 30%. But the year ahead is looking strong, too SABIC has five major expansion projects due on stream in 2008, with another starting production by the end of the decade. These include Eastern Petrochemical (Sharq) and Yanbu National Petrochemical (Yansab).

The Saudi major has also agreed to market polyolefin products made by oil company Saudi Aramco's Fujian joint venture in China - the country's first refining and petrochemical industries integrated project established with a foreign company.

However, it is not all about expansion and growth. SABIC Europe opted to close two UK aromatics units it no longer deemed to be economically viable. The plans will see the closure of the Aromatics 2 unit at North Tees, near Seal Sands, and the paraxylene (PX) plant at Wilton by the end of 2008.

The company has also informed customers that it is exiting the melamine market from the fourth quarter because of poor economics. This will see its fertilizer subsidiary, Saudi Arabian Fertiliser, shut down its 20,000 tonne/year unit at Al-Jubail.

8 SINOPEC - DOWN FROM 7

Having added plenty of capacity in 2006 and creeping up the rankings to seventh place, Chinese energy giant Sinopec has had a largely underwhelming time since then.

Soaring crude values, combined with the government's vice-like grip on domestic oil product prices, contributed to the company's dismal first-half results. The oil and gas major's operating profit fell by 87% to yuan (CNY) 7.2bn ($1.1bn) from CNY 53.6bn year on year. This was accompanied by a 77% year-on-year dip in net profit for the first half ending June 30, to CNY 8.3bn from CNY 36.4bn.

The greatest erosion of the company's earnings came from its refining segment, which saw an operating loss of CNY 46bn, rather than the operating profit of CNY 5.7bn in the previous period. Sinopec blames this on having to run the refineries at full capacity to meet market demand, despite price control measures imposed by the authorities.

As a result, US-based ratings agency Fitch Ratings downgraded to Ratings Watch Negative, raising concerns over its reliance on subsidies to offset declining profitability. Slow sales and bearish downstream demand also forced the reduction of operating rates at its subsidiaries' crackers by 10-20%.

Sinopec says it is raising efforts to optimize its product structure, unit operations and the implementation of energy and cost savings in its chemical segment. It will also focus on researching and developing new products and manufacturing high value-added products.

9 MITSUBISHI CHEMICAL - UP FROM 12

Japan's largest cracker operator, Mitsubishi Chemical Corp. (MCC), has bounded up the chart to ninth position, and is aiming for further improvement over the coming years. It has pledged that by the end of the decade, it will focus on high-performance products and high-value businesses, with growth and innovation high on its agenda.

Earlier this year, a major investment was finalized between MCC, its partner Mitsubishi Engineering-Plastics and Chinese oil company Sinopec to form a $300m (€212m) joint venture to build bisphenol A (BPA) and polycarbonate (PC) plants in Beijing, China by mid-2010.

In a separate agreement signed last month, MCC subsidiary Tokyo-based Japan Polypropylene announced that it planned to work with Austrian polymers producer Borealis to supply polypropylene (PP) compounds for the automotive industry in the US and Europe.

However, like all producers, MCC has been feeling the pinch in an increasingly tough trading environment. In July, it revealed that rising crude oil values and a depressed PC resin market meant it was going to postpone the start-up of its newly constructed 60,000 tonne/year plant in Kurosaki, Fukuoka prefecture, until the situation improved.

Poor profitability also forced it to cut the operating rates of its three crackers to 80-85% between September and late December, thanks to weak demand.

Earlier this year, MCC had also decided to slash its production of purified terephthalic acid (PTA) by up to 30% in Asia.

Separately, Tokyo-based subsidiary V-Tech had closed its 110,000 tonne/year polyvinyl chloride (PVC) unit in Mizushima, Okayama prefecture, because of declining profits.

10 DUPONT - DOWN FROM 8

Despite US major DuPont seeing its sales creep higher, it has fallen down our rankings and now resides at 10th place.

Perhaps plans to harness the potentially lucrative solar photovoltaic (PV) market will help it reclaim its position next year. Its strategy is to more than triple sales to the PV industry.

With market growth of more than 30% anticipated each year, the company expects sales in several product lines to exceed $1bn (€707m) within the next five years. As a result, it has announced numerous plans, including a project to establish a PV lab in Hyderabad, India. The country is identified as having huge potential for market growth in solar energy. DuPont is also looking to install a PV array in Hyderabad to generate some of its energy requirements.

Furthermore, the company plans to more than double capacity for its Tedlar films by late 2009, to meet growing demand, although site selection is underway.

Other projects include doubling its capacity of thick film metallization pastes at its Dongguan plant, in China, and building a research facility and production plant in Hong Kong and Shenzhen, respectively. Both are expected to open in 2010.

To download the ICIS Top 100 chemical companies, visit ICIS connect


By: Andy Brice
+44 20 8652 3214



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