Dow To Sell PP to Braskem

DOW Chemical is to sell its polypropylene (PP) business to Brazil’s Braskem for $340m, according to our colleagues at ICIS news.

The blog is digging around for the implications for Dow in Asia.

For the time being, however, here are some initial thoughts….

Included in the sales are two plants in the US and two in Germany with a total capacity of more than 1m tonnes/year, according to a news release from Braskem.

Capacities include a 195,000 tonne/year facility in Cologne, Germany; a 250,000 tonne/year Schkopau unit in Germany; its 135,000 tonne/year Seadrift plant in Texas, US, and its 250,000 tonne/year Freeport, Texas, facility in the US.

Dow had classified PP as non-strategic because it felt that it had neither the scale nor the technology to compete with global giants such as LyondellBasell, the blog understands.

The sale to Braskem, however, does not include Dow’s PP licensing and catalyst businesses. Will they now be sold separately?

A focus at Dow is on other propylene derivatives such as acrylics, propylene oxide (PO) and epichlorohydrin and acrylics. Dow is in the process of starting-up its first commercial propylene oxide-only plant in Thailand. The PO/styrene monomer route no longer makes sense for the US major as it sold its styrenics business to Bain Capital last year.

Andrew Liveris, Dow CEO, said that a benefit for exiting PP was that it would be able to move from a propylene deficit to a balanced position. Dow has well-advanced plans for propane dehydrogenation(PDH)-to-propylene facility at Freeport, Texas, due for start-up in 2015. It may build another PDH plant in the US, based on its proprietary propane route to C3s, by 2018.

US propylene markets look set to remain result of the switch to lighter cracker feeds and lower fluid catalytic cracker operating rates on weaker gasoline demand. Being in deficit in C3s, therefore, doesn’t really add up.

In addition, the rise of shale gas supply in the US is resulting in increases in propane and ethane supply.

It will be interesting to observe what Dow does with its high-density polyethylene (HDPE), also viewed as non-core.

The future in PE for Dow seems to lie in low-density PE and in octene-grade linear low-density (LLDPE).

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