02 December 2013 21:52 [Source: ICIS news]
NEW YORK (ICIS)--Dow Chemical’s US Gulf Coast chlor-alkali assets would be attractive to major polyvinyl chloride (PVC) producers, its chief executive said on Monday.
“We’ve received a lot of inquiries, especially from people who want to get access to US shale gas and low-cost energy. … These are strategic assets that have a financial benefit for anyone in the downstream PVC business, and the developing world in particular who are seeing PVC as a growth molecule, and are really big investors in US energy and shale,” said Andrew Liveris, chairman, president and CEO of US-based Dow.
Liveris spoke on a conference call about the carve-out of its chlorine and derivatives assets, which was announced earlier on Monday.
Companies that fit the profile of PVC producers in emerging markets that also have invested in US shale gas assets are China’s Sinopec and India’s Reliance Industries.
“These assets are perfectly positioned for anyone who wants to shut down some assets or potentially go for the growth side of it, because there are a lot of companies – including the customers of these assets – that are investing in chlor-alkali in the US because of low-cost energy,” Liveris said.
Companies already building chlor-alkali capacity in the US include US-based Westlake Chemical, Japan’s Shintech and Japan’s Mitsui through a joint venture with Dow.
US chlor-alkali and downstream PVC producers enjoy cost advantages from US shale gas on two fronts – low electricity costs, which are a major component of chlor-alkali production, and low-cost ethylene feedstock for ethylene dichloride (EDC), which is another feedstock of PVC.
The businesses being carved out for divestiture – which could includes sales or partnerships – are US chlor-alkali, global chlorinated organics and global epoxy resins, along with associated brine and energy assets. Total sales of the businesses are around $5bn (€3.7bn).
Dow’s 50% stake in the Dow Mitsui Chlor-Alkali (DMCA) joint venture in Freeport, Texas, will be included in the carve-out. That joint venture plant will include chlorine capacity of 800,000 tonnes/year, and start-up is slated for early 2014.
Dow expects to execute one or more transactions on these businesses in the next 12-24 months.
“We are pleased with the early interest we have received from strategic buyers and partners,” said Liveris.
“These businesses are valuable and competitive within their industries today, which will attractive for the right owner,” he said.
“However, the value propositions of these cyclical commodity businesses no longer align to Dow’s future resource allocation given our narrowing strategic market focus and our strict resource prioritisation against our value growth drivers,” Liveris added.
Major US producers of PVC include Axiall, Formosa, Occidental Chemical, Shintech and Westlake Chemical.
PVC producers in Latin America include Braskem, Mexichem, Solvay and Pequiven. However, Solvay plans to exit the business.
In Asia, major producers include Formosa, Reliance Industries and Sinopec.
($1 = €0.74)
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