Europe HDPE buyers unfazed by news of fresh closure

22 July 2013 13:53  [Source: ICIS news]

LONDON (ICIS)--European high density polyethylene (HDPE) buyers are not troubled by news of the latest plant closure at the end of 2014 from Borealis in Burghausen, Germany. This is because availability from new lower-cost capacities is expected to fulfil their needs amply, sources said on Monday.

Borealis cited “the challenging economic situation in regard to polyolefins production, and in particular HDPE in Europe” as one important reason for the plant closure.

“By closing the HDPE plant, we will be able to focus even more aggressively on optimising the two remaining polypropylene (PP) plants at the site,” the company said in a statement on its website.

“The announcement that it will close end of next year... won’t impact the market. It would be a surprise if they decided not to close,” said one large buyer. “It’s not the first to shut and it won’t be the last.”

The market had been expecting the closure for some time ahead of Borouge’s new plant in Abu Dhabi, due on stream in late 2013.

Borouge 3, located in Ruwais, is expected to raise Borouge’s olefins and polyolefins capacity to around 4.5m tonnes/year from the current 2m tonnes/year. The project includes construction of a third ethane cracker, two additional Borstar polyethylene (PE) plants, two additional Borstar PP plants and a low density polyethylene (LDPE) unit.

Saudi Polymers brought online an HDPE plant in 2012 at its facility in Al-Jubail, Saudi Arabia, with an HDPE capacity of 1.1m tonnes/year, leading to oversupply in this sector and closures of HDPE capacity in Europe.

“It’s [the Burghausen HDPE closure] just part of the process of European plants being closed,” said a trader.

This HDPE closure is the latest in a string of announcements.

Total Petrochemicals will close its “smallest and oldest” HDPE line  in 2014 at Antwerp, Belgium.

Netherlands-headquartered LyondellBasell plans to shut down a 100,000 tonne/year HDPE unit in Wesseling, Germany in the third quarter of 2013. US-headquartered Dow Chemical closed its 190,000 tonne/year HDPE plant at Tessenderlo, Belgium at the end of 2012.

HDPE has been stable to firm in July, as European production remains cut back to accommodate low demand. Producer sources expect output to remain reduced for some time.

European PE costs are based largely on high-cost naphtha, and competition from ethane-based PE from the Middle East and new shale gas production from the US is making Europe increasingly less competitive.

Borouge is a joint venture between the Abu Dhabi National Oil Co (ADNOC) and Austria-based petrochemical producer, Borealis. Austrian oil, gas and petrochemical group OMV has an interest in Borouge through its 36% stake in Borealis.

Saudi’s Petrochem holds a 65% stake in Saudi Polymers, while the remaining 35% is owned by Arabian Chevron Phillips Petrochemical – a wholly-owned subsidiary of US-based Chevron Phillips Chemical.

HDPE is used widely in the packaging and household goods sectors.

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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