INTERVIEW: Indorama eyes integration gains with Oxiteno acquisition

HOUSTON (ICIS)–Indorama Ventures’s $1.3bn acquisition of Oxiteno provides it with another link in the production chain it has spent the past two decades building, providing the company with integration across product lines, geographies and even growing seasons.

Over the years, Indorama has built a business in the Americas around chemicals upstream and adjacent to polyethylene terephthalate (PET). It acquired plants and businesses that make purified terephthalic acid (PTA), ethylene and ethylene oxide (EO).

In January 2020 it acquired Huntsman’s surfactants and intermediates business, which was more of a downstream acquisition for Indorama, said DK Agarwal, CEO, PET and feedstock business, Indorama Ventures. He made his comments in an interview with ICIS.

The acquisition gave Indorama its first surfactants business.

Oxiteno expands on that business, making Indorama the largest producer of nonionic surfactants in the Americas, with 32% of the total 2.6m tonnes/year of capacity in the region. Prior to the Oxiteno acquisition, Indorama had 9% of the region’s surfactants capacity.

Indorama will have plenty of general and administrative expenses it can eliminate through synergies. Indorama already has a business in Brazil that makes PET, so it can reduce some back-office expenses, Agarwal said.

However, he expects much of the value of the Oxiteno deal will be created through integration. It complements Indorama’s existing businesses in many ways with little overlap.

The following table lists the locations of Oxiteno’s plants and those that Indorama acquired from Huntsman.

INDORAMA

Port Neches, Texas

Chocolate Bayou, Texas

Dayton, Texas

Ankleshar, India

Botany, Australia

OXITENO

Pasadena, Texas

Montevideo, Uruguay

Coatzacoalcos, Mexico

Guadalajara, Mexico

Camacari, Brazil

Maua, Brazil

Santo Andre, Brazil

Suzano, Brazil

Triunfo, Brazil

INTEGRATION OPPORTUNITIES
The geographic reach of the combined company gives it access to several regional end-markets. The US is a large market for surfactants used in oilfield chemicals, said Alastair Port, president, integrated oxides and derivatives, Indorama Ventures.

For mining, Australia, Saudi Arabia, South America and Africa are important markets, he said.

North and South America are large markets for surfactants used in agricultural chemicals, Port said. Home and personal care represent the largest end-market for surfactants, and Indorama expects demand to continue growing in developing economies.

The following breaks down the 2020 sales of the combined companies by end-market.

Source: Indorama

Oxiteno’s Pasadena plant provides Indorama with a higher value use for the EO produced by its US plants. Indorama is the largest merchant seller of EO in the country, so it has plenty of the chemical to spare.

The Pasadena plant also  gains a resilient source of EO, a selling point for customers that want a dependable supplier of products, Agarwal said.

At the same time, Oxiteno’s Brazilian operations could provide monoethylene glycol (MEG) to Indorama’s PET operations in that country.

Oxiteno’s plant in Pasadena is a relatively new one featuring hight-tech loop reactors, Port said. That will allow Indorama to make more specialty surfactants.

The deal creates seasonal synergies. Most of Oxiteno’s business is in South America, where agricultural growing seasons are opposite to those in North America. With Oxiteno, Indorama can sell surfactant to the agriculture market year-round.

Agriculture, as well as coatings, are strengths of Oxiteno’s, and Indorama can supply those to its North American markets, Port said.

These are among the cross-selling synergies that the company will develop.

GROWTH IN SUSTAINABILITY, PO
Oxiteno’s plants in Brazil open up the opportunity to incorporate renewable feedstock.

Oxiteno already uses palm kernel oil to make oleochemicals. Brazil’s ethanol could be dehydrated to make ethylene, something Braskem has been doing for more than a decade.

That renewable ethylene could then be converted into EO, a feedstock for surfactants.

Such feedstocks could help Indorama meet its ambitious sustainability goals.

Indorama’s customers have their own sustainability goals, and the company’s surfactants can help those companies achieve them, Port said.

Detergents can lower temperatures for washing, and surfactants can reduce the energy needed for oil production, he said. They can improve the performance of lubricants.

“A lot of our products bring increased sustainability,” Port said.

Longer term, Indorama may consider downstream applications for its propylene oxide (PO), which it acquired with the Huntsman deal, Port said. Indorama is making propylene glycol (PG) with the PO, but it could use it to make surfactants or, potentially, polyols.

For now, Indorama main focus will be on integration and capturing synergies.

The following chart from Indorama shows how the business’s products complement each other.Interview article by Al Greenwood

Thumbnails shows bottles of detergent, which are made with surfactants. Image by Shutterstock