InterviewBraskem to explore US propylene supply options

05 August 2011 15:53  [Source: ICIS news]

Braskem seeks propylene supply optionsBy Joseph Chang

NEW YORK (ICIS)--Brazil-based polymers firm Braskem will seek other sources of propylene in the US after its expected completion of its $340m (€241m) acquisition of US-based Dow Chemical’s polypropylene (PP) business, an executive said on Friday.

“In the US we will be supplied by Dow for a transitional period of up to 18 months and then we will see what our options are,” said Luiz de Mendonca, CEO of Braskem America, in an interview.

“As we become the largest user of merchant propylene in the US, that gives us a lot of leverage,” he added.

Mendonca is also president of Braskem’s International Business Unit.

With the acquisition of Dow’s PP business, announced on 27 July, Braskem will become the leading producer of the thermoplastic in the US with 1.425m tonnes of capacity, according to Braskem.

It takes about 1.01 tonnes of propylene to produce 1 tonne of PP.

The Dow deal will provide Braskem with an additional 505,000 tonnes/year of PP capacity from two plants in the US, as well as 545,000 tonnes of capacity from two plants in Germany.

The transaction, in which Braskem will pay $323m in cash to Dow, is expected to close at the end of the third quarter of 2011. Contingency assumptions account for the remaining $17m

In Europe, Braskem will rely on long-term propylene supply contracts with Dow or contracts transferred from Dow to Braskem, said Mendonca.

Mendonca called the pending deal a continuation of Braskem’s acquisition strategy following its 2009 buyout of US-based Sunoco’s PP assets for $350m.

The company is open to more acquisitions in PP, he said.

“We have a long list of opportunities and projects, including acquisitions. The best opportunities sometimes come at an unexpected time,” said Mendonca.

Braskem would also consider expanding its acquired PP assets if warranted, he noted.

“We’ve never met a unit that could not be debottlenecked further,” Mendonca said.

The executive sees global PP growth of around 3.5%/year in the next five years.

“It doesn’t scare us at all that growth could be sluggish in the short term, or that raw materials are tight. We are in it for the long run, and there will be growth,” he said.

The plunge in the US stock market on Thursday with the Dow Jones Industrial Average (DJIA) falling over 500 points, or 4.3%, does not hurt the long-term prospects for PP, said Mendonca.

“It may have some short-term impact – we saw that in 2008-2009, but the market bounced back. Looking back, it was a good time to make acquisitions,” he said.

($1 = €0.70)

For more on PP or propylene visit ICIS chemical intelligence
For more on Dow visit ICIS company intelligence

By: Joseph Chang
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