Interview story by Tracy Dang
HOUSTON (ICIS)--East West Copolymer has completed the acquisition of Lion Copolymer's styrene-butadiene-rubber (SBR) plant in Baton Rouge, Louisiana for an undisclosed sum, the company's chief executive said on Tuesday.
Lion announced in December that it would temporarily shut down the SBR plant because of unfavourable economic conditions. The company confirmed in January that it had a tentative agreement to sell the facility to East West, a company formed by former Lion CEO Greg Nelson, and the plant was restarted in March.
"We completed the actual signing of the papers last week," said Nelson, now CEO of East West, who spoke via telephone. "The reason for the delay was we had to get some additional equities we needed to get done. We wanted to get the plant restarted, so we had an agreement to start operations [under new management] while we were waiting for the closing of the papers."
Nelson said that East West wanted to restart the idled 140,000 tonne/year plant because it had a 70-year-old history with long-tenured employees who had been dedicated to the business, and the company's union allowed it flexibility that Lion did not previously have.
"We thought we had an opportunity to optimise the plant and run it smarter to where we can still make it profitable," Nelson said. "While we were negotiating, we did a lot of work to try to get it to run better and also try to optimise cost."
Additionally, the company had seen an increase in demand, and feedback from its customers suggested that the second half of the year would be much stronger than the first.
"In terms of what's causing it, overall, the economy is doing better, and a lot of people are more bullish about the manufacturing sector," Nelson said. "It looks a lot stronger than it did last year, and that's driving a lot of optimism."
US SBR buyers had said that the plant's re-entry into the market was welcoming news, as it should help alleviate some tightness in supply and relieve upward pressure on prices.
However, many market participants questioned whether East West would carve out enough share of the market to support business in a sustainable manner, especially since many customers had closed supply negotiations for the year at the end of 2013.
"We have customers who have been with us for 50 years or maybe longer, and they have been working with us so we can get volumes," Nelson said. "Some people have found ways to fill the void – some from North American suppliers and some from imports. As we come up, we'll probably see some back out of imports."
As far as securing enough feedstock butadiene (BD) amid tight supply, Nelson said that the company has not had problems getting material to restart production.
"Even though BD supply is tight in North America, we've been getting BD from Asia, South Korea and other places – some coming in from Europe. But BD is also available in North America," he said. "I'm not saying it's been easy, but we've had no problems getting BD."
Looking forward, Nelson said he is optimistic about the market and the future of the company.
"We feel very excited for the opportunity to restart the business, and we feel that in time, we will make the business profitable and sustainable for our customers," Nelson said. "We hope to be around for another 70 years."
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