AkzoNobel chloromethanes expansion aims to tap into robust end demand - exec

Source: ICIS News

2018/07/05

LONDON (ICIS)--AkzoNobel’s chloromethanes capacity expansion in Frankfurt, Germany, responds to the firm’s convincement that end user demand for that chemical will keep a healthy growth in years ahead, according to an executive at the Specialty Chemicals division.

Jurgen Baune, general manager of the Chlor-Alkali & Chloromethanes business at AkzoNobel, said The Carlyle Group, which in March agreed to acquire the company’s Specialty Chemicals division for €10.1bn, fully backed the plan for the expansion.

Baune would not disclose, however, figures for the expansion’s capital expenditure (capex) nor the projected production capacities post-overhaul.

According to ICIS data, prior to the expansion the site produced approximately 90,000 tonnes/year of carbon tetrachloride, 33,000 tonnes/year of chloroform, 55,000 tonnes/year of methyl chloride and 60,000 tonnes/year of methylene chloride.

The producer plans to increase the total capacity for chloromethanes production at Frankfurt by 50% over the next five years.

Chloromethanes are used as intermediates in the production of pharmaceuticals, agrochemicals, refrigerants, silicone polymers, and fluoropolymers. They are also key important raw materials for the construction and automotive industries, water treatment, cookware, and electronics.

“We see a global growth for methyl chloride [and all chloromethanes] at approximately 2-3% per year [and there is] more and more consumption of methyl chloride,” said Baune.

“[Consumers] are concentrating more on their downstream production chain, and the production of methyl chloride over more commodity producers. We are a strong producer to take over this role to be a more raw material producer.”

The Carlyle Group is expected to close its €10.1bn acquisition by the end of this year. Baune said the expansion at Frankfurt had full backing from the fund.

“The contact with Carlyle is already quite positive. They have a deep understanding of our organisation and industry. For the future, we had our five-year plans and they bought in to this five-year plan,” said Baune.

“This expansion is part of this plan. It’s a positive development to do it together with Carlyle.”

The executive added that AkzoNobel has the advantage of being “the only company” purely backwards integrated, able to start the production process with salt, the raw material for producing chlorine and also for methyl chloride.

“We have the whole chain in our hands and that makes us fairly competitive,” he said.

AkzoNobel has recently finalised the first phase of its expansion plans, with larger capacities to produce methylene chloride, chloroform and carbon tetrachloride.

“Erection and ground breaking [for the second phase of the expansion] will be anywhere in mid-2019,” said the executive.

The expansion is expected to be operational in the second half of 2020.

Baune described Frankfurt as AkzoNobel Specialty Chemicals’ “anchor site” and praised its chemicals infrastructure.

“At another location we would have the full scope of infrastructure needed, and the investment would be much higher and we would need to hire more staff. From a cost point of view it makes more sense to add this additional capacity to the Frankfurt plant than building a new one at AkzoNobel,” he said.

“We have invested recently €140m in a new membrane plant – concerning the chlorine production, using the most energy efficient technology, which is another positive strength we have […] [We are] strong in Frankfurt, we have quite a flexible production over there.”

He explained the use of raw materials at the site had two alternative routes: one using chlorine and methane, another using hydrochloric acid (HCl) and methanol.

“If you have a good pricing on the HCl part you go on that route […] There is quite some surplus in the market for HCl. We have the opportunity to drive the operations on HCl rather than chlorine.”

In regards to downstream demand and applications AkzoNobel expects "opportunities in the chemical and pharma sector", where methyl chloride is used as solvent.

Another chloromethane, methylene chloride, has had healthy demand both in Europe and overseas this year.

The market has been relatively stable in comparison to last year when a number of outages caused shortages in Europe.

The structural market balance of European methylene chloride edges between stability and tightness, depending on production in the region.

When one producer has an issue, the market balance soon destabilises.

Baune noted that the closure of INOVYN’s Runcorn, UK, plant in 2016 “had some impact” on the market.

European methylene chloride supply is currently balanced-to-tight, with supply constraints easing, according to sources this week.

European producers previously said, after AkzoNobel’s initial announcement in October, that they were concerned the upcoming expansion could create length in the market.

However, Baune’s take was that the market might remain tight in the near future, based on global growth expectations, the strength of the economy and the remaining impact of Runcorn’s closure.

Picture source: AkzoNobel

Interview article by Eashani Chavda