INSIGHT: Volatile oil, fuel bode well for WR Grace's catalysts

12 May 2011 16:21  [Source: ICIS news]

By Al Greenwood

HOUSTON (ICIS)--Ever-changing prices for crude oil, propylene and fuel have boosted demand for US-based WR Grace's catalysts.

Catalysts are a key part of the company's business: its refining technologies segment made up 27.7% of revenues in 2010; specialty technologies, which includes polyolefin catalysts, made up 14.5%.

Sales for both segments rose by double digits during the first quarter of this year. WR Grace's stock has since risen above $44, close to a 52-week high and well above the level before the firm filed for Chapter 11 bankruptcy protection in 2001.

WR Grace sells catalysts used to make several products, such as biodiesel, polyolefins and transportation fuels.

In particular, it makes catalysts used in fluid catalytic crackers (FCCs), a key unit in refineries and the major source of propylene in the US.

Refiners consider several factors when choosing the best catalysts for their FCCs, according to Greg Poling, president of Grace Davison, the company's catalyst division.

Different grades of oil sell at different prices, so refiners want to choose the best-priced selection of crude for their feedstock.

Those differing grades, however, require different catalyst formulations.

Also, prices for the various FCC products can vary, influencing the catalysts refiners use.

Many refiners in the US have chosen catalysts to maximise propylene output as prices for the monomer have broken records, Poling said. "A lot of people are using their FCCs to make propylene."

With prices for oil and refined products changing so quickly, refiners are having to change rapidly in response.

"With the globalisation of everybody's industry; the volatility you see in raw material costs, the speed people want to change their operations - it 's much quicker than it used to be," Poling said.

"It's how quickly customers need to change. You have to have not just the products, but the technical service."

Moreover, that service is not limited to different crude grades and product prices.

Refiners are also becoming more sensitive to prices for rare earths, a key ingredient for FCC catalysts.

Refiners are eager to reduce rare earth content because prices have increased so quickly. And many of the new catalysts WR Grace introduced in the first quarter reduce rare earth content while preserving performance, Poling said.

Price volatility, though, is just one of the several trends benefiting the catalyst business.

As emerging economies continue to grow, demand for fuel will increase as more people own automobiles and drive more miles.

In addition, emerging markets are building more refineries.

Petrobras has already started work on a refinery at its massive Complexo Petroquimico do Rio de Janeiro (Comperj).

Meanwhile, the recovery in developed markets has led to increased demand for fuel, Poling said. Refiners are using heavier crude stocks too, another plus for FCC catalysts.

For polyolefin catalysts, manufacturers are increasingly seeking to adopt plastics to replace more expensive materials. That trend, in turn, is increasing demand for Grace's polyolefin catalysts.

In emerging markets, growth in consumer products is increasing demand for plastics, Poling said.

For polyethylene (PE) catalysts, the US has become a growing market, as the advent of shale gas has given the region a cost advantage over much of the world, he added.

For polypropylene catalysts, the Middle East is one of several growing markets.

To meet that rising demand, WR Grace is expanding capacity at its plant in Worms, Germany. The added capacity should start up later this year, WR Grace said when it announced the expansion.

In another move, WR Grace acquired Synthetech, which makes PP catalysts and fine chemicals. The acquisition gives it capacity for the manufacture of specialty single-site and polypropylene catalysts.

For more on WR Grace visit ICIS company intelligence

By: Al Greenwood
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