INSIGHT: Oxiteno deal would cap Indorama's 18-year expansion in Americas

Author: Al Greenwood

2021/07/22

HOUSTON (ICIS)--Thailand-based Indorama's pursuit of the Brazilian surfactants producer Oxiteno would be the latest addition in a string of acquisitions and construction projects that built up the company from nothing to becoming one of the major producers in North and South America.

Oxiteno's owner, Ultrapar, confirmed in mid-June that it had entered exclusive talks with Indorama.

The two companies are still discussing financial terms, and they have not signed any contracts or sales agreements, Ultrapar said.

Oxiteno makes ethylene oxide (EO), ethylene glycol (EG) and surfactants.

Indorama did not immediately respond to a request for comment.

If the company moves ahead and closes on the deal, it would further expand Indorama's surfactants business in the Americas, which it first acquired in 2020. Indorama is already one of the region's major producers of polyethylene terephthalate (PET) as well as upstream monoethylene glycol (MEG) and EO, a chemical also used to make surfactants.

Indorama entered the Americas market in 2003, when it acquired the StarPet PET plant in Asheboro, North Carolina. It was the first of many overseas plants that Indorama would acquire over the years.

At the time of the acquisition, the plant had a capacity of 50,000 tonnes/year. Indorama would expand that site's PET capacity to 266,000 tonnes/year.

It would build more PET capacity in Decatur, Alabama. The first line started up in 2009 and a second in 2010, according to Indorama.

It obtained Decatur's feedstock from a nearby purified terephthalic acid (PTA) complex that was owned by BP at the time. Indorama would later buy that plant in 2016.

It made other deals to expand its PET capacity in other parts of North America.

In 2010, it agreed to buy INVISTA's PET plants in Spartanburg, South Carolina and Queretaro state in Mexico.

In 2018, it agreed to buy a PET plant in West Virginia from the bankrupt producer Mossi & Ghisolfi (M&G). Far Eastern New Century ultimately won the bidding and acquired the plant in 2018.

That same year, Indorama completed the purchase of M&G's PET plant in Brazil.

Indorama teamed up with Alpek and Far Eastern New Century to form a joint venture that bought M&G's unfinished PET complex in Corpus Christi, Texas. That site would also produce PTA once it is completed.

It is unclear when the joint venture will complete the Corpus Christi project.

UPSTREAM ACQUISITIONS AND PROJECTS
Indorama would pursue other upstream acquisitions and projects, not all of which would proceed smoothly.

In February 2012, it reached a deal to acquire Old World's EO and EG plant in Clear Lake, Texas, giving its US PET operations access to nearby feedstock.

That same year, Indorama revealed that it was considering developing an ethane cracker in the US with a partner. This would further integrate Indorama's PET capacity with low-cost feedstock.

At the time, many companies were considering cracker projects in the US, where the gap between ethane and naphtha prices gave that country's ethylene plants a huge cost advantage against much of the world.

The talks went nowhere, and Indorama would end up buying an idled gas cracker in Westlake, Louisiana from Occidental Petroleum. It signed the agreement in 2015.

At the time, Indorama expected it would resume operations at the plant in 2017. Instead, commercial production would not start until 2020, nearly five years after Indorama signed the sales agreement.

In 2015, it bought a PTA plant in Montreal, Canada from CEPSA Quimica.

On 6 January 2020, Indorama announced the completion of the $2bn acquisition of Huntsman's EO, EG and propylene oxide (PO) plants. That deal included plants in Port Neches, Chocolate Bayou and Dayton in Texas as well as Ankleshar, India and Botany, Australia.

Indorama would later increase monoethylene glycol (MEG) capacity at Port Neches.

The Huntsman plants also produced methyl tertiary butyl ether (MTBE) and surfactants. If Indorama acquires Oxiteno, then it would further build on that surfactants position.

SNAPSHOT OF OXITENO
Oxiteno has plants in Brazil, Mexico, the US and Uruguay. The company's products include EO, EG, surfactants and glycol ethers.

Production in Montevideo is 81,000 tonnes/year and it includes sulphonate and sulphate surfactants used in home and personal care products.

The US plant is in Pasadena, Texas, and it should have a capacity of 120,000 tonnes/year of mixed products by 2022-2023. The plant's nameplate capacity is 170,000 tonnes/year, but that figure assumes that the unit will produce just one product and not a mix.

Oxiteno's Mexican plants are in Coatzacoalcos, Veracruz state and Guadalajara, Jalisco state.

Its Brazilian plants are in Camacari, Bahia state; Maua, Santo Andre and Suzano, Sao Paulo state; and Triunfo, Rio Grande do Sul state.

The following table shows Oxiteno's financial performance over the past few years, including earnings before interest, tax, depreciation and amortisation (EBITDA). Figures are in millions of Brazilian reais.

m reais 2020 2019 2018
Revenue 5210.7 4254.2 4748.4
EBITDA 631.3 209.7 640.2
Adjusted EBITDA 784.8 221.6 640.2

Insight article by Al Greenwood

(adds sentence, paragraph 13, clarifying that while Indorama had agreed to buy the plant, Far Eastern won the subsequent bidding and acquired the unit)