LyondellBasell CEO Patel tackles trade, M&A and circular economy

Source: ECN


After a period of restructuring and optimising existing operations, LyondellBasell has sought the capability to juggle multiple balls. It has gotten its wish, as CEO Bob Patel navigates global trade issues, mergers and acquisitions (M&A) and the circular economy, along with the most ambitious new projects programme in its history.

Global polyethylene (PE) trade patterns are shifting and supply chains are adjusting as a result of the US-China tariffs but overall demand is not being impacted, he noted.

“Trade patterns are shifting as China sources from other regions and [US producers] are shifting to markets that are vacated,” said Patel in an interview with ICIS on the sidelines of a meeting of the Societe de Chimie Industrielle in New York.

“Supply chains are adjusting but there is a bit of inventory volatility as a result. Where product has landed [in China] and has to be redirected, there is price volatility. But we think that is [transitory],” he added.

Looking at supply/demand fundamentals, operating rates are still high in the low 90% range for global PE, he noted.

“Our view is that global demand in the near term is fixed, and that’s not going to change because of trade. Supply is fixed as well. And supply/demand is pretty well balanced,” said Patel.

He also noted that China’s imports of US PE for re-export are not impacted by the 25% tariffs – only those for domestic consumption. This amount of US PE sent to China that is converted and re-exported as finished products is substantial, although less than 50%.

China’s domestic demand for plastics will continue growing regardless of tariffs, as continuing urbanisation creates greater need for finished plastics such as food packaging, he said.

One scenario is that Middle East PE producers shift some product away from Europe and into China, while US producers sell more into Europe as well as other regions. “We are positioned well, as we also produce in Europe and know what it takes to be successful there,” said Patel.

One consequence of the China tariffs on US high density PE (HDPE) and linear low density PE (LLDPE) is that companies reconsider building new crackers in the US.

“With energy price volatility and trade uncertainty, one outcome is that new crackers in the US could be reconsidered, and companies may rethink marketing plans if China is not the main destination for [PE] exports,” said Patel.

LyondellBasell is building its 500,000 tonne/year Hyperzone HDPE project in La Porte, Texas, US, which is slated to start up by mid-2019. It is also building a propylene oxide/tertiary butyl alcohol (PO/TBA) project in Channelview, Texas for start-up by 2021.For Chinese consumers and the global PE market, prices could rise as a result of the tariffs.

La Porte

“Given where operating rates are, it could be that the global price rises. If you are a seller of PE in China that is importing from the US and now have to import from somewhere else, you are moving up the cost curve. So do those [higher] costs get passed on or do the intermediaries absorb them?” said Patel.

However, if the trade war between the US and China drags on, this could hit economic growth rates, he noted.

“As it continues, tariffs are essentially a tax and that’s an inefficiency that tends to slow growth. Over time, tariffs impact growth,” said Patel. “On [US-China] trade, we have to see if this is negotiation and transitory or whether we’re going to see more regional [trade] activity.”


On the M&A front, LyondellBasell’s discussions with Brazil-based Odebrecht regarding a potential acquisition of Braskem “have been very constructive”, said Patel. “We are working through due diligence.”

LyondellBasell and Odebrecht announced on 15 June that they entered into exclusive discussions regarding a potential transaction between LyondellBasell and Braskem.

Odebrecht is the controlling shareholder of Braskem, while Brazil’s state-operated oil and gas company Petrobras is the other major shareholder, with preferential rights to retain or increase its stake in the event Odebrecht agrees to a sale of Braskem.

Petrobras’ chief financial officer (CFO) said in an August interview with Bloomberg that the company could decide to buy Odebrecht’s stake in Braskem.

The upcoming Brazil presidential election in October is creating a large element of uncertainty as the local real currency weakens, he noted. “We are watching and thinking through outcomes,” said Patel.

An acquisition of Braskem would give LyondellBasell a huge presence in Brazil and Latin America. It would have the entire Brazil domestic polyolefins market and also pick up the premier PE producer in Mexico through Braskem’s 75% stake in Braskem Idesa. Braskem also has PP production plants in the US and Europe, and is the only company building a new PP plant in the US.


Growth of the circular economy is one of the most important trends impacting LyondellBasell and its business strategy, the CEO said.

The plastics industry, and LyondellBasell itself, has to act in the face of public and regulatory pressure to reduce plastic ocean waste and play a full part in boosting recycling of plastic packaging, he noted.

“Plastic is a great sustainability story. But that’s not enough – we must stop thinking that we just have to tell that story better. We must do more to clean up what’s there and, long term, think about how we remove [plastic waste] completely and play our part in the circular economy.”

Patel said a group of five chemical companies has formed an alliance which aims to engage with the entire plastics value chain on how it can tackle the circular economy. This includes brand owners, converters, waste collectors and the oil and gas sector.

The group plans to form a non-profit organisation in the US, which is independent of the American Chemistry Council (ACC) where he is chairman.

“The aim is to think not just about innovation and the prevention of waste but also [figure out] what to do with the waste that is already in the environment. There is a recognition that the entire value chain has to engage, and we want to bring all the individual initiatives under one umbrella. It’s a monumental issue but one which can be resolved over time,” Patel said.

The move follows discussions at the ACC’s annual meeting in Colorado Springs in early June.

Patel highlighted moves LyondellBasell has made to become more circular. In early 2018 through a 50/50 joint venture with resources management firm SUEZ, it acquired European plastics recycling company Quality Circular Polymers (QCP), which mechanically converts consumer waste into 25,000 tonnes of polypropylene (PP) and HDPE with an objective of boosting that to 35,000 tonnes later in 2018 and 100,000 tonnes by 2020.

“What makes this unique is that we have a JV with a waste handling company – Suez brings us segregated and washed bales of PE waste. We would like to produce new, recycled products, that help raise the amount of recycled content in packaging. Unilever and P&G both have targets for this.”

The company is also working with the Karlsruhe Institute of Technology in Germany to develop recycling at a molecular level. This allows mixed plastic waste to be broken down into a feedstock for chemical production.

“They do basic work on molecular recycling which produces a feedstock we can feed back into the front end of a cracker to make ethylene and polyethylene. This is a much longer road – mechanical recycling can be mobilised quickly but longer term, molecular recycling is the real answer,” said Patel.


LyondellBasell is also coming fresh off the completion of its $2.25bn acquisition of US-based plastics compounder A. Schulman in August. The $19.4bn merger between Lyondell and Basell back in December 2007 is providing lessons for the integration of Schulman, the largest such deal the combined company has made, noted the CEO.

Those lessons learned from combining Lyondell and Basell are more recent than the closing date would suggest. The companies announced the closure of the merger during the same month that the US entered its worst downturn since the Great Depression.

The financial turmoil that followed delayed integration. LyondellBasell would file for bankruptcy protection under Chapter 11 in January 2009 and emerge from bankruptcy 16 months later.

At the time, integration simply was not possible, Patel said. But once the crisis transpired, the company could concentrate on creating LyondellBasell.

Patel oversaw the restructuring for several LyondellBasell business units during the integration process, and some of the same key members who were with him during this process are also on the Schulman integration team.

“The muscle memory of the company in terms of integration is still there,” he said.

When LyondellBasell did proceed with the Lyondell and Basell integration, it first focused on what assets and businesses the company should keep and how to optimise what remained, Patel said.

One of the company’s priorities was becoming safer and more reliable, Patel said.

In fact, Patel’s predecessor, Jim Gallogly, frequently began investor calls by talking about LyondellBasell’s safety performance.

Another part of LyondellBasell’s integration process was shedding businesses and restructuring, he said.

Restructuring was particularly complex at the company’s European operations.

For growth projects, LyondellBasell decided to avoid acquisitions and greenfield projects. Instead, it focused on debottlenecking.

One of the company’s crackers in the US was actually designed with expansion in mind, making this an ideal debottlenecking project to pursue, Patel said.

The timing was also just right. The US was going through a boom in energy production, made possible by the advent of shale gas. This boom increased supplies of ethane and other natural gas liquids (NGLs), the predominant feedstock for US crackers.

Debottlenecking projects would allow LyondellBasell to quickly expand capacity to take advantage of this growing supply of NGLs.

These incremental expansions as well as restructuring were LyondellBasell’s game plan from 2010-2013, Patel said.

Afterwards, the company pursued larger growth projects, such as new plants and the Schulman acquisition.

One of the rationales behind acquiring Schulman was that it gave LyondellBasell more outlets for its PE and PP.

As a major compounder, Schulman also serves several end markets such as agriculture and packaging.

LyondellBasell did have a compounding business prior to the acquisition, but it was based solely on PP, and a significant portion of its revenue came from the automotive industry.

Schulman also provides LyondellBasell with several product lines it didn’t have before, such as thermoset resin compounds and products based on polyesters, nylons and elastomers.

“We haven’t owned it long enough to really know the value creation potential,” Patel said. “At the moment, we are very open minded about everything we have acquired.”


LyondellBasell CEO Bob Patel on Thursday 13 September accepted the 2018 ICIS Kavaler award in a special event in New York, as the company embarks on an ambitious growth plan less than a decade after emerging from bankruptcy protection.

Patel was voted the winner by his peers, senior executives in the ICIS Top 40 Power Players listing in 2017. Previous winners include BASF CEO Kurt Bock (2017), INEOS chairman Jim Ratcliffe (2016), former Dow Chemical CEO Andrew Liveris (2015), former LyondellBasell CEO Jim Gallogly (2014) and former PPG CEO Charles Bunch (2013).

Patel Award

During his acceptance speech, Patel talked about how LyondellBasell progressed from bankruptcy to expansion as well as his own personal journey, from helping his mother run a doughnut shop in the US growing up, to becoming the CEO of one of the world’s largest polyolefins producers.

“My first reaction was one of disbelief and surprise,” Patel said about receiving the award.

It was less than a decade ago that LyondellBasell filed for bankruptcy protection under Chapter 11, in January 2009. The US had entered the low point of its worst downturn since the Great Depression.

LyondellBasell would emerge from bankruptcy protection 16 months later.

Many elements were in place to make LyondellBasell succeed. The company’s leadership acted not only out of concern for themselves, but also for their colleagues, Patel said.

Throughout LyondellBasell, there was grit, determination, concern for others and a sense of community.

In those early years, the company would embark on a programme that stressed safety and reliability as well as incrementally increasing capacity through debottlenecking projects.

These piecemeal additions allowed LyondellBasell quickly to add capacity equivalent of a new cracker.

The company would begin a more ambitious growth programme after Patel’s appointment as CEO was announced at the end of 2014.

The programme would include a new HDPE plant, a new PO/TBA project and the acquisition of compounder A. Schulman.


Patel’s role in this turnaround started in 2010, when he decided to join the company after a 20-year career at Chevron Phillips Chemical. He decided to take the position because it would provide him with an opportunity to contribute to turning around a company and to learn something new.

LyondellBasell would certainly provide him with both. The company needed people willing to contribute during its recovery, and even in 2010, it ranked as one of the world’s major producers.

LyondellBasell would provide Patel with many ways to contribute and many things to learn.

Over the years, Patel said he learned from many people, both professionally and personally. He singled out his grandmother, his mother and his uncle, who sponsored his family when they emigrated from Mumbai to the US. Patel was 10 at the time.

Patel’s mother had been a teacher in India, but her credentials would not transfer to the US, he said.

“She had to do whatever she could to get the family on its feet.”

She saved enough money to buy a doughnut shop in Cleveland, Ohio. One summer, she wanted to visit India, and Patel volunteered to run the shop so she could make the trip.

She gave him a list of things to do and a binder filled with the names of customers who sometimes could not pay until they received their paycheck. He asked her what they would do if the customers never did pay back the shop.

“That just means they need the money more than we do,” she said.

Lessons like this, from his mother as well as his supervisors, taught him about service to others, treating people with respect and work ethic, Patel said.

They were lessons he took from his childhood to LyondellBasell.