UpdateUS takes wait-and-see stance on LyondellBasell

07 January 2009 22:07  [Source: ICIS news]

By Leela Landress and Lane Kelley

(Adds polyol and Kirby Corporation reactions, Moody’s ratings downgrade)

HOUSTON (ICIS news)--US chemical players adopted a wait-and-see approach on Wednesday regarding LyondellBasell’s filing for bankruptcy protection in the US.

However, the filing might counteract downward price pressure on US polyols, buyers said.

“The Lyondell bankruptcy could affect polyol prices because they are a key PO [propylene oxide] supplier,” a buyer said. “We’ve heard they will continue to operate, but polyol price decreases could be affected because they will need to be as profitable as possible.”

PO is a highly reactive chemical used as an intermediate for the production of numerous commercial materials. The largest derivative of PO is polyether polyols, one of the main components used in the manufacture of polyurethanes.

Flexible polyol bulk delivered transaction prices were in a range of $2,579-2,756/tonne (€1,908-2,039/tonne) according to global chemical market intelligence service ICIS pricing.

Major US polyol producers include Dow Chemical, BASF, Bayer, Huntsman and Shell.

The filing by LyondellBasell affiliate Lyondell Chemical listed debts of $19bn (€14bn) and assets of $27bn, according to court documents.

One of Lyondell Chemical's largest creditors, barge shipping firm Kirby Corporation, plans to keep towing barges for the firm despite Lyondell's bankruptcy filing this week, a Kirby spokesman said.

Houston, Texas-based Kirby is ranked 18th among Lyondell's 50 largest creditors, owed $6.17m, according to the bankruptcy filing.

Kirby earned $41.7m in the third quarter of 2008, or almost seven times the money due from Lyondell, which is one of the barge firm's largest customers and most likely will continue as a client, said Kirby spokesman Steve Holcomb.

"We'll continue to do business with them, though it may be on the spot market rather than contract because I'm sure our contract with them was voided because of the bankruptcy," Holcomb said.

"The question is, how much of that trade receivable will we get back from them under the bankruptcy court," Holcomb added. "The most we stand to lose is some part of that $6m."

Another shipper, Norway-based Stolt Tankers, is 36th among Lyondell creditors, owed $3.15m, according to the filing.

Other US petrochemical market players said they see no immediate change resulting from LyondellBasell’s filing, but were keeping an eye on the situation.

“They supply us,” a polyurethane foam producer said. “It seems to be business as usual but a sad day for the chemical industry.”

Naphthenic specialty base oils producer Nynas told customers it will be business as usual for that sector following news of Tuesday’s bankruptcy filing.

Nynas markets more than 3,000 bbl/day of naphthenic oils produced at LyondellBasell’s Houston refinery.

“In our view this is and will continue to be a viable and mutually profitable arrangement that has worked well for both parties since it began in September 2006,” said Nynas general manager Jay Flint.

“In the interim be advised that Nynas is in a very strong financial situation and will be working with our business partner to assure its success over the long run,” Flint said in a letter to its customers.

The bankruptcy filing so far has not changed the day-to-day operations at LyondellBasell, a major polyethylene (PE) and polypropylene (PP) producer, a trader said.

“It might if they start breaking up the company,” he added.

In related news, Moody’s once again downgraded LyondellBasell and said it expects to soon withdraw its ratings for the international petrochemicals major.

($1 = €0.74)

Additional reporting by Heather Doyle, David Barry and Stefan Baumgarten

For more on LyondellBasell visit ICIS company intelligence
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ICIS Copyright © Reed Business Information 2009

Author: Leela Landress
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