UpdateINEOS to shut 236kt of US PP capacity

10 November 2008 18:25  [Source: ICIS news]

(Adds detail and company comment throughout)

INEOS closing PP capacityLONDON (ICIS news)--INEOS Olefins & Polymers USA will close a significant proportion of its North American polypropylene (PP) capacity, the company said on Monday.

A prolonged, difficult industry environment coupled with record high feedstock and natural gas prices during the first half of this year had contributed to low margins, it added. 

Two PP bulk phase units at the Battleground Manufacturing Complex in La Porte, Texas will be shut down by early 2009, to strengthen the competitiveness of its US PP assets, INEOS said.

The ages and technology of the production lines are sufficiently old that their variable costs make them uneconomic, it added. 

The closure represents approximately 520m lbs/year (236,000 tonnes/year) of homopolymer and random copolymer capacity.  INEOS Olefins & Polymers USA said it produces 2.8bn lbs/year of PP a year making it the second largest producer in the US.

INEOS did not disclose the financial implications of the closures but said that analysis had demonstrated that this was “an optimum business decision”.

“We are committed to a long term, competitive strategy for Olefins & Polymers USA,” the company told ICIS news.

Alongside its peers in the global petrochemical industry the company is facing an increasingly tough operating environment in which demand and prices have fallen dramatically.

“Given the size of INEOS we are continually reviewing our production capability and asset base in light of the prevailing market conditions,” INEOS said.

“The future of the individual units will be determined by their continuing ability to operate cost competitively and profitably to meet the needs of our long term strategy. We will ensure optimal operations across our sites and continue to provide our customers with quality products.”  

One of the two lines at La Porte will close by the end of 2008; the other line will close at the end of January 2009 and the majority of grades translated to other INEOS polypropylene assets.

US PP contract prices were headed for a large drop in November on the back of weak demand and lower feedstock costs, sources said during the week ended 7 November. October resin prices were down by 20 cents/lb ($441/tonne) or more, and November contract decreases were likely to be in the range of 25-30 cents/lb, buyers said.

Falling PP spot prices in the past two weeks and initial monomer settlements at minus 30 cents/lb for November were driving market sentiment, buyers said.

To avoid exposure to freefalling market prices, buyers were operating on minimal inventories, and this exacerbated an already sluggish demand picture. Some producers were throttling back production significantly to cope.

Flint Hills Resources said it would permanently close its Odessa site in Texas, which includes 100,000 tonnes/year PP capacity. The closure was scheduled for the first half of 2009, but production could be halted sooner depending on sales, sources said.

Pinnacle Polymers shut down its 410,000 tonne/year plant for a week recently, but it was unknown if the facility was restarted.

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For more on INEOS visit ICIS company intelligence

By: Nigel Davis
+44 20 8652 3214

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