Celanese plans US methanol plant amid SCC supply dispute

17 July 2012 00:50  [Source: ICIS news]

A methanol tank HOUSTON (ICIS)--Methanol supplier Southern Chemical Corp (SCC) wants to end its contract with Celanese, but the US acetyls producer wants to maintain the arrangement until it can build its own methanol plant, according to opening arguments made in a civil court case on Monday.

SCC alleges Celanese broke the terms of the 10-year supply contract and is seeking unspecified damages.

Celanese wants to hold SCC to the contract, which expires in 2015. By then, Celanese hopes to have its own methanol plant up and running.

“We just want to finish our contract in the next three years so we can build our plant,” Celanese attorney Lazar Raynal said during opening statements in the Houston court.

Celanese says it is the largest methanol consumer in the US, while SCC is the second largest supplier. Celanese has received roughly 800,000 tonnes/year of methanol from SCC.

But Celanese now plans to build a 1.3m tonne/year methanol plant to supply feedstock for its acetyls complex in Clear Lake, Texas.

SCC has spent years in court trying to end the supply arrangement with Celanese.

Celanese said in its June methanol project announcement that it wanted to capitalise on cheap US natural gas, but it did not mention its legal fight with SCC.

The US Gulf in the past year has become a magnet for new methanol projects.  Methanol is a major raw material for acetic acid, Celanese’s flagship product.

SCC attorney Jeff Chambers said the supply contract price was 52 cents/gal.

US methanol spot barge prices on Monday were around 108.5 cents/gal, according to traders.

Celanese’s Raynal said the lawsuit was really about SCC’s not making enough money from Celanese in the contract. “When people tell you it’s not about money, you can bet it’s about the money,” he said.

SCC alleged that Celanese violated the supply contract by using the methanol for purposes other than internal use.

Chambers said the relationship between the two companies soured from the start, because SCC discovered that Celanese was not using methanol it purchased just for its internal use.

SCC discovered Celanese was buying methanol at the contract price and re-selling it for double, even more than triple that price to companies such as Sekisui and Evalca, Chambers said.

“Then we find out they’re shipping our methanol to Singapore,” Chambers said, adding that Celanese disguised it as methyl acetate. “That was the last straw.”

Celanese’s Raynal said SCC president Jan Spin told Celanese that selling methyl acetate was not a violation of the contract.

Raynal said Celanese did not sell methanol it bought under the contract to third parties, but engaged in informal deals known as swapping and tolling, where chemical firms - often competitors - trade materials with each other.

Raynal acknowledged there was tension at the beginning of the contract, but said it stemmed from a new M5000 plant in Trinidad. SCC markets methanol produced by five plants in Trinidad and Tobago. The plants are operated by MHTL.

“That plant was going to get built off the back of our deal,” Raynal said.

Once built, the plant had trouble getting started. Raynal said SCC and MHTL worried about having to declare force majeure in March and April of 2005.

“That’s why there was tension at the beginning of the relationship,” Raynal said. “They sold more methanol than they had. They asked us to change the price. We said no. We have a contract.”

Celanese’s defence is that “a 10-year contract is a 10-year contract.”

Celanese has paid an average of $130m (€82m) a year for methanol it has purchased from SCC.

“We have sent them about $1bn under this contract,” Raynal said.

SCC’s Chambers said the methanol producer wants out of the deal because of what it alleged was Celanese’s deception in selling methanol to third parties.

“All of this boils down to a radical difference of values between the two parties,” Chambers said. “We can’t do business with people like that.”

The trial is expected to last five weeks.

($1 = €0.82)

By: Lane Kelley
+1 713 525 2653

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