Lyondell plant closings may relieve glut – consultant

(adds paragraphs 1-3)

HOUSTON (ICIS news)–LyondellBasell’s plan to close plants should help balance global chemical supply and demand amid the recession, a chemical consultant said on Thursday.

“Some of these plant closures and maintenance operations that are being taken are actually not a problem, because they’re bringing supply and demand into better balance,” said Roger Shamel, president of the Consulting Resources.

“Longer term, we have more olefins capacity coming in the Middle East and Africa,” he added. “In the whole scale of things, it doesn’t seem like much more than a logical move given today’s economic climate and the outlook for more capacity coming online overseas. [The production] won’t be missed.”

LyondellBasell will continue to close plants worldwide as it seeks to lift its current cost savings by $700m and successfully emerge from Chapter 11 bankruptcy protection, the Netherlands-based polyolefins producer said.

The company said it had already announced almost 10 plant closures, mostly in the past six months, as part of a cost-cutting initiative which includes 3,000 job cuts – or 17% of the public workforce.

This included 4-5 plants in Texas, facilities in Maryland and Illinois, two in Canada and one in France, according to a company spokeswoman.

Lyondell said it would announce more plant closures in the coming months.

“Our goal is to do it as quickly as possible,” said company spokeswoman Susan Moore. “It could be that some of them aren’t finally determined until the second half of the year.”

“There are plenty of conversations that still need to take place with suppliers, landlords and works councils,” she added.

“There’s no particular business we’re targeting, it has to do with the individual situations of each plant and their profitability.”

Twenty offices and research and development sites would also be closed, while 2,000 contractor jobs would be cut, or around 30% of that workforce.

“Market conditions continue to be extremely challenging, and we are driving hard across all our organisations to enhance our earnings,” LyondellBasell chief operating officer, Ed Dineen, said in a statement on Wednesday.

The company had reported to the US bankruptcy court a $270m net loss in February for the businesses under Chapter 11 protection. The January net loss for these companies was $216m.

A total of 79 affiliates were placed under Chapter 11 bankruptcy protection on 6 January. Most of Lyondell’s operations in Europe and elsewhere are not part of that arrangement.

“We are pleased with our progress, but are committed to doing more and doing it more quickly.” Dineen added.

“I am confident that we will emerge from Chapter 11 as a stronger, more competitive company,” he said.

“We expect to submit a Plan of Reorganisation to the courts in August and we’ll want to say what our asset footprint is at that point. It all plays into the same goal of emerging from Chapter 11 by the end of the year, said Moore.

LyondellBasell has announced since late February the permanent closure of its PD glycol plant in Beaumont, Texas, and its Chocolate Bayou, Texas, olefins plant.

Last week it said it would permanently halt linear low density polyethylene (LDPE) production at Fos-sur-Mer in northern France.

For more on LyondellBasell visit ICIS company intelligence;
To discuss issues facing the chemical industry go to ICIS connect