The styrene business has been increasingly difficult in recent years:
• CD and video sales went online, removing the need for polystyrene (PS) packaging
• Prices for the main feedstock, benzene, leapt in the mid-2000's, due to US gasoline market changes, forcing convertors to look at alternatives such as polypropylene
• Recycling became an essential part of the packaging 'offer', leaving PS behind
• Increased POSM/SMPO capacity meant styrene prices came under pressure
And one could go on.
The result has been, as discussed at our Conference last week, that the two 'inventors' of styrene, BASF and Dow, felt forced to establish new business models. Dow sold Styron to Bain Capital for $1.6bn earlier this year. BASF announced it would 'carve-out' its business as Styrolution from January 2011. And separately last month, Nova announced they would sell their share of the current INEOS Nova styrene joint venture to INEOS.
Now comes news that Styrolution will become a BASF/INEOS joint venture. Unlike Styron, it will not include the 'sexier' parts of the portfolio - such as expandable PS (widely used in insulation). Nor will it own the Nanjing activities in China. But, assuming anti-trust clearance, it will still be a €5bn ($6.8bn) business and large enough to control its own destiny.
Clearly Styrolution, like Styron, will have to do things differently in the future, if it is to regain a reasonable level of profitability. But both Roberto Gualdoni and Chris Pappas, the CEOs of the two new businesses, have solid track records in the petchem industry, and good teams alongside them.
The blog wishes them well, and hopes they succeed triumphantly.