This week's world news

19 March 2012 00:00  [Source: ICB]

EUROPE

TOTAL, KPC SIGNS MOU FOR CHINA PETCHEM PROJECT
French oil and gas major Total has signed a comprehensive memorandum of understanding (MoU) with Kuwait Petroleum Corp (KPC) to join a 300,000 bbl/day refinery and petrochemicals project in Zhanjiang, Guangdong province, southern China. The yuan (CNY) 59bn ($9.32bn) project is currently a 50:50 joint venture between China's ­state-owned energy firm Sinopec and KPC, but KPC has been seeking a partner to share its 50% stake. A 15m tonne/year refinery, 1m tonne/year cracker and downstream facilities for ­products such as polyethylene (PE), ­polypropylene (PP) and ethylene glycol (EG), are expected to be included.

EUROPE LDPE IS TIGHT ON PRODUCTION ISSUES
Production problems in the low density polyethylene (LDPE) sector in Europe have led to tight supply and higher prices this month, which may increase further in April, market sources say.

Borealis's 350,000 tonne/year LDPE plant at Stenungsund, Sweden, is out of action for technical reasons; INEOS has force majeure in place from its 360,000 tonne/year LDPE in Cologne, Germany; and LyondellBasell's Wesseling LDPE production in Germany has been running at reduced rates for several weeks.

POLAND'S SYNTHOS SELLS NEW ND-PBR TIRE RUBBER
Poland-based producer Synthos has started commercial sales of high-performance neodymium-polybutadiene rubber (Nd-PBR) made with Nd catalyst technology licensed by Michelin. Sources at the firm said an operating profit of at least zlotych (Zl) 70m ($22.2m, €17.0m) from revenues of Zl600m should be generated in 2012 by the Nd-PBR produced by a new 80,000 tonne/year installation in Oswiecim, Poland.

BASF BUYS BATTERY CHEMICALS TECHNOLOGY
BASF, via its Battery Materials business unit, has signed a long-term licensing agreement to acquire global rights for the production and sale of lithium iron phosphate (LFP) battery materials technology. The Germany-based chemicals major is buying the global rights from LiFePO4+C Licensing, an affiliate of Swiss specialty chemicals firm Clariant. LFP is a cathode material used in the production of advanced lithium-ion batteries.

BAD PRESS HINDERS EUROPEAN BIOFUELS - BP
European biofuels need a stable investment climate to progress, but this is being hindered by negative press, the chief executive of BP Biofuels says. The industry has not done enough to encourage debate on "biofuels done well", said Philip New, the chief executive of BP Biofuels. He was speaking at the seventh annual World Biofuels Markets Conference in Rotterdam. There is an "antagonising polarisation of debate", which ensures that the positive aspects of biofuels are ignored, he said.

GERMAN CHEMS WARN EU AGAINST CO2 CERTIFICATES
Germany's chemical producers' trade group has warned the EU against cutting the quantity of available carbon dioxide (CO2) certificates. The warning, by Frankfurt-based Verband der Chemischen Industrie (VCI), came ahead of a vote in the European Parliament. That vote could result in calls for the European Commission to cut the number of CO2 certificates, thus raising certificate prices and implicitly raising the EU's climate targets.

GERMAN EMPLOYERS SLAM CALL FOR 6% WAGE HIKE
Germany's chemical employers have rejected a union's call for a 6% wage increase for the ­country's chemical workers this year. Labor union IG BCE, in calling for the wage hike last month, cited the strong 2011 performance and high profits reported by many firms in Germany's chemical industry. However, chemical employers trade group BAVC said that the outlook for Germany's chemical industry had dimmed.

BAYER AIMS TO LEAD IN HIGH-TECH MATERIALS
Germany's Bayer aims to achieve volume gains in its material science segment that are "in excess of the rate of global GDP growth" and strengthen its lead in the high-tech materials market. Bayer intends to further improve its market share of global toluene di-isocyanate (TDI) production to 24% in the "medium term", from 23% in 2011, it said.

WEAK Q1 EXPECTED FOR BAYER MATERIALSCIENCE
German chemical major Bayer's material science segment could have a weak first quarter (Q1) in 2012, as tight margins continued in January, global analysts Bernstein Research said. "We expect a weak first quarter 2012 [for Bayer MaterialScience] as the margin squeeze continued in January on key products such as polycarbonate [PC] - especially in Europe, where the increase in naphtha price and weakening euro has put pressure on producers," said Bernstein.

BASF TO RAISE CHEMICAL CAPACITIES IN BELGIUM
BASF will invest about €10m ($13m) to increase its cyclohexane oxidation capacity in Antwerp, Belgium, by about 50,000 tonnes/year. The expansion will be implemented as part of two long-term planned turnarounds, and is intended to be completed by the end of 2014. The debottlenecking will help the company to reduce its dependency on external suppliers of cyclohexane oxidation products, it said.

AXENS SETS UP GROUP IN KUALA LUMPUR, MALAYSIA
French petrochemicals technology company Axens has set up a subsidiary in Kuala Lumpur, Malaysia. Axens said the subsidiary would take responsibility for the company's catalysts and adsorbents businesses in southeast Asia, Australia and New Zealand. It will provide technical assistance for users of Axens technologies and products in Asia.

AMERICAS

BRAZIL'S BRASKEM REPORTS $112M LOSS
Brazil's Braskem, Latin America's largest petrochemical company, reported a quarterly loss of reais (R) 201m ($112m, €85m) for the fourth quarter, amid higher raw-material costs, slowing demand and narrowing spreads in global markets. Earnings before interest, tax, depreciation and amortisation (EBITDA) was $396m during the quarter, down by 33% year on year. Net revenue increased by 25% to R8.7bn in the quarter. Costs jumped by 39% in the quarter to more than R8bn.

BADGER WINS DEAL FOR SHANGHAI CUMENE PLANT
US-based petrochemicals technology firm Badger Licensing has won a contract to provide technology for a 332,500 tonne/year cumene plant to be built in Shanghai, China. Badger said that the contract was awarded by Shanghai Sinopec Mitsui Chemicals (SSMC), a joint venture ­between China's Sinopec and ­Japan's Mitsui Chemicals. The cumene plant is expected to start operating in 2013. Badger is a joint ­venture between US petrochemicals engineering firm Shaw and ExxonMobil.

FED SAYS US ECONOMY TO CONTINUE GROWTH
The US economy has been expanding moderately so far this year and is likely to continue that pace over coming quarters, the US central bank says, citing increased consumer and business spending and declining unemployment. In one of the Federal Reserve Board's most optimistic evaluations in a couple of years, the bank's rate-setting Federal Open Market Committee (FOMC) noted that the nation's labor market conditions have improved further.

NOVA RECOMMISSIONS ONTARIO LDPE PLANNOVA Chemicals has begun re-commissioning its 170,000 tonne/year low density polyethylene (LDPE) plant at Mooretown in southern Ontario at reduced rates following an outage late last year, the CEO of the Canada-based petrochemicals major says. "We have confidence that we can restore a significant fraction of [Mooretown's] nameplate capacity," CEO Randy Woelfel told analysts during NOVA's 2011 fourth-quarter conference call.

US REFINERS STRUGGLE TO MAINTAIN RETURNS
Maintaining positive returns on capital investment is a major challenge for the refining industry as a result of high fixed costs and other factors, the chief executive of US refiner Tesoro said last week. "That's no easy task with a business with high fixed costs, enormous capital intensity and the need to run at very high utilisation rates," said Gregory Goff, the chief executive of Tesoro. He added that the refining sector had about a 4.8% return on capital investment.

US, EU, JAPAN TAKE CHINA TO WTO OVER RARE EARTHS
The US has joined Japan and the EU in complaining to the World Trade Organization (WTO) charging that China continues to restrict exports of rare earths critical to refining, petrochemicals production and other industries. US Trade Representative Ron Kirk said: "America's workers and manufacturers are being hurt in both established and budding industrial sectors by these policies." China supplies about 95% of rare earths worldwide.

VALE TO BUILD SULPHURIC ACID PLANT IN CANADA
Brazilian mining and metals major Vale plans to build a another sulphuric acid facility at its nickel smelter site in Sudbury, about 400km (250 miles) north of Toronto, Canada, a petrochemicals engineering firm said on Tuesday. US-based Jacobs, which won a contract to design and build the project in Canada, said it was part of Vale's strategy to cut sulphur dioxide emissions at Sudbury by more than 70%.

ASIA

PETROCHINA PLANS 1.2M TONNE/YEAR CRACKER
PetroChina is conducting a pre-feasibility study on building a cracker that can produce 1.2m tonnes/year of ethylene at Zhangzhou in Fujian province, a local governmental official says. PetroChina inked a framework agreement with the Fujian provincial government for the proposed cracker at Gulei in Zhangzhou in November last year, said an official from the administration of the Gulei Economic Development Zone.

CHINESE PA PRICES TO FALL ON WEAK DEMAND, STOCKS
China's domestic prices of phthalic anhydride (PA) are expected to drop further on weak demand from the downstream dioctyl phthalate (DOP) sector and high inventory levels, industry sources said on last week. PA prices have declined by around yuan (CNY) 700-950/tonne ($111-150/tonne) from last month, a trader said. Prices fell because of weak downstream demand and market speculation in February, a second trader said.

SHANXI KINGBOARD STARTS UP COAL-BASED METHANOL
China's Shanxi Kingboard Lubao Chemical has started up its 100,000 tonne/year methanol unit at Lucheng in Shanxi, a company source said. Construction of the coal-based methanol plant was completed in December last year, and the unit was expected to achieve on-spec production on March 17, the source said. The company runs another 100,000 tonne/year methanol unit at the same site, which is running at full capacity with an output of 350 tonnes/day.

XINJIANG ZHONGTAI PLANS CALCIUM CARBIDE PROJECT
China's Xinjiang Zhongtai Chemical plans to build a calcium carbide project in Xinjiang province at a cost of yuan (CNY) 2.78bn ($439m). The project, which is still subject to the approval of the local government, will comprise a 600,000 tonne/year calcium carbide unit and support facilities. It is expected to be completed at the end of 2013.

SOUTH KOREA'S HYOSUNG TO SHUT PTA ON MARGINs
South Korea's Hyosung Petrochemical planned to shut its 420,000 tonne/year purified terephthalic acid (PTA) unit in Ulsan on 16 March because of poor margins, a company source said last week. The plant will be taken off line for six days until 21 March. Asia's spot PTA prices dipped to $1,165/tonne (€897/tonne) CFR (cost & freight) China Main Port (CMP) for Taiwanese cargoes and $1,150/tonne CFR CMP for South Korean material.

BRAHMAPUTRA PETCHEM PROJECT HIT BY DELAYS
Brahmaputra Cracker and Polymers Limited (BCPL) will miss its revised commissioning date of December 2013 for its petrochemical project in northeastern India because of delays in implementation and cost overruns, a company official says. A document filed by the company with the government estimates the project cost to have increased by 64% to $1.79bn (€1.38bn). BCPL's project includes a 220,000 tonne/year high density polyethylene (HDPE)/ linear low density polyethylene (LLDPE) swing plant, and a polypropylene (PP) plant.

KOREAN SHIP CARRYING SULPHURIC ACID SINKsA Korean cargo vessel carrying 7,000 tonnes of sulphuric acid sunk off the coast of Shanwei city in south China on March 14, according to the Guangdong Maritime Safety Administration. All 18 crew on board the Korean ship Athena were rescued. The ship departed from South Korea and was on its way to Zhuhai city in China when it sank.

SHENGHONG TO BUILD METHANOL-TO-OLEFINS
Jiangsu ShengHong Science and Technology Corp plans to build a 600,000 tonne/year methanol-to-olefins (MTO) project at ­Lianyungang in eastern China, a company source said. Construction work at the project in Jiangsu province is likely to start in 2013, said the source, adding that the project is expected to annually produce 300,000 tonnes of ­ethylene and 300,000 tonnes of ­propylene. The company is also planning to construct a derivative ethylene vinyl acetate (EVA) unit at the site, with a capacity of 350,000 tonnes/year, the source said.

MIDDLE EAST & AFRICA

CRUDE SUPPLIES AT HIGHEST LEVEL SINCE 2008
Crude oil supply from OPEC ­(Organization of Petroleum Exporting Countries) in February rose to its highest level since ­October 2008, amid ongoing ­concerns over Iranian crude ­supplies, boosted by higher ­output in Saudi Arabia and a sharp ­production recovery in Libya, the International Energy Agency (IEA) says. Output in Libya is currently about 300,000 bbl/day below its pre-war levels of 1.6m bbl/day.

ASIA, MIDDLE EAST TO LEAD GLOBAL OIL CONSUMPTION
Asia and the Middle East will represent the growth engines of oil consumption in the next five years, as growth weakens in Europe and the US, an industry consultant says. Oil refining capacities are rising rapidly in Asia, especially in China, in parity with the growth in regional demand, said Karl Bartholomew of KBC Advanced Technologies. He added that there is excessive capacity in the Middle East, while Europe and the US are phasing out inefficient assets as they improve their comprehensive refining capacities.


By: Will Beacham
+44 20 8652 3214



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