Solvay and Ineos submit revised remedy package to European Commission clearance process

MOSCOW (MRC) -- Further to the earlier decision of the European Commission to continue its evaluation of the proposed 50/50 Joint Venture between Solvay and INEOS in a Phase II investigation, the parties have jointly agreed to put forward a revised remedy package to address any competition concerns that have been raised by the European Commission, said Solvay in its press release.

The proposed remedy package, which was submitted to the European Commission yesterday, comprises the divestment of the PVC plants at Schkopau (Germany), Beek (The Netherlands) and Mazingarbe (France) along with the chlor-alkali, EDC and VCM assets at Tessenderlo (Belgium). These facilities are all currently operated by INEOS and are strategically important within the European chemicals sector. They have the ability to compete as successful stand-alone businesses under third party ownership.

The European Commission will now consider this remedy package alongside any further market testing it wishes to undertake ahead of making a final decision. Assuming such asset disposals are required to obtain Commission clearance this would be subject to full consultation with employee representatives.

INEOS and Solvay will continue to run their businesses separately until completion of the transaction, which is dependent on the above approvals and procedures.

As MRC wrote before, two of Europe’s biggest chemical companies agreed a joint venture that will create one of the world’s largest producers of PVC plastics by revenues in May 2013.

Solvay S.A. is a Belgian chemical company founded in 1863, with its head office in Neder-Over-Heembeek, Brussels, Belgium. The company has diversified into two major sectors of activity: chemicals and plastics. Solvay supplies over 1500 products across 35 brands of high-performance polymers – fluoropolymers, fluoroelastomers, fluorinated fluids, semi-aromatic polyamides, sulfone polymers, aromatic ultra polymers, high-barrier polymers and cross-linked high-performance compounds.

INEOS Group Limited is a privately owned multinational chemicals company consisting of 15 standalone business units, headquartered in Rolle, Switzerland and with its registered office in Lyndhurst, United Kingdom. It is the fourth largest chemicals company in the world measured by revenues (after BASF, Dow Chemical and LyondellBasell) and the largest privately owned company in the United Kingdom.
MRC

MOSCOW (MRC) -- BASF said it wants to research the potential for shale gas production in Germany and warned politicians not to endanger the competitiveness of Europe’s industry by adding to its already high energy costs, said the Financial Times.

The world’s biggest chemicals maker by sales is closely following the impact of shale gas discoveries in the US which have boosted US rivals such as DuPont and Dow Chemical via lower electricity costs and feedstock prices.

BASF would like to explore the possibility for "fracking" in Germany but must overcome widespread environmental concerns about the use of this technique in a densely populated country. Fracking involves the horizontal pumping of water and chemicals at high pressure to release stores of gas.

Environmental worries have already led to the phasing out of nuclear power in Germany and frustrated BASF’s desire to develop genetically modified crops there.

So far BASF says it has not faced competition problems because of US shale gas. The German chemicals maker has a large North American footprint – equivalent to 19% of sales – and has therefore benefited there from lower energy prices. It has also deliberately reduced its exposure to ethylene-base chemical production, which is a leading beneficiary of US shale gas discoveries.

Moreover, as the US chemicals industry produces for the local market, Europe has so far not faced a flood of cheaper US chemical products.

Bernstein Research last year calculated that the disparity between US and European gas prices put BASF at a margin disadvantage compared with US peers equivalent to a 7% gap in operating earnings.

EU politicians are pressing for changes to the EU emissions trading scheme as the market price of carbon credits has fallen to a low level. But BASF remains opposed to such intervention.

BASF said revenues and earnings would rise in 2013 thanks to a recovery in demand and measures to boost efficiency.

The German group was able to offset weaker chemical margins last year with higher earnings in oil and gas that provide a natural hedge when the economy slows.

Full-year sales rose 7% to EUR78.7bn but net income declined 21% to EUR4.9bn as the higher proportion of earnings from oil and gas boosted its tax bill.

Management proposed a dividend of EUR2.60, 10 cents higher than the prior year and equivalent to a 3.65% dividend yield compared with the average 2012 share price.

MRC

MOSCOW (MRC) -- After months of searching, Octal Petrochemicals has found a site for its first plant in North America, opting for a Cincinnati-area location that provides more than 130,000 square feet of space, said Plasticsnews.

News that the Muscat, Oman-based PET resin and sheet maker selected the site in West Chester, Ohio, about 20 miles north of the city comes from Cushman & Wakefield, which describes itself as the world’s largest privately held real estate services firm.

Octal’s West Chester location will use post-industrial recycled PET flake and resin to make reusable sheeting for the agricultural market.

"This was a six-to-eight month process of performing the proper studies and analyzing which markets made the most sense for Octal to place its first North American plant," said Mark Collins, a member of Cushman & Wakefield’s tenant advisory group based in Dallas, in a statement.

"We worked very closely with our alliance firm partners at Cincinnati Commercial Realtors to find the right mix of location, incentives and opportunity for Octal. This was a collaboration at every phase of the process, and that's important when you're dealing with an important, international client who is new to the market," Collins said.
The West Chester site includes both warehouse and office space and is located in an industrial park. Duke Realty owns the building.

As MRC wrote before, Octal Petrochemicals is setting up a project in Saudi Arabia to manufacture polyethylene terephthalate (PET) dairy cups and trays for dairy and poultry industries. Octal Petrochemicals will be investing USD20 million for the downstream project, which will generate USD70 million revenue per annum, once it goes on stream.

Octal’s new location will complement the company’s existing PET manufacturing site in Salalah, Oman, which has current production capacity of 1 million tons per year.

Octal Petrochemicals last year said that the value of the company's exports stands at USD100 million per month or about 2% of the gross domestic products of the Sultanate and 15% of the non-oil exports. The company has achieved remarkable revenue growth — from USD500 million to USD1.5 billion over a six-year period only after being rated as one of the biggest four producers of PET resin and PET sheets.
MRC

MOSCOW (MRC) -- Lotte Chemical Titan is in plans to shut a polypropylene (PP) plant for maintenance turnaround, as per Apic-online.

A Polymerupdate source in Malaysia informed that the plant is planned to be shut in May 2014. It is likely to remain off-stream for around one month.

Located in Pasir Gudang, Malaysia, the plant has a production capacity of 200,000 mt/year.

As MRC wrote earlier, Lotte Chemical Titan already shut its PP plant on February 5, 2014 for a brief outage and restarted it on February 6, 2014.

Besides, Lotte Chemical is also likely to take off-stream a cracker for maintenance turnaround in April 2014. It is likely to remain off-stream for around four days. Located in Yeosu, South Korea, the cracker has an ethylene capacity of 1 million mt/year and propylene capacity of 480,000 mt/year.

The Lotte Group currently has a presence in Indonesia via its subsidiary, Honam Petrochemicals, which acquired Malaysia’s polyolefin major Titan Chemicals in July 2010. Included in the acquisition was Titan’s Indonesian subsidiary - PT Titan Petrokimia Nusantara (TPN), which has a polyethylene (PE) production capacity of 450,000 tonnes/year
MRC

MOSCOW (MRC) -- Uncontrolled devaluation in Ukraine virtually stopped all deals in the polyethylene (PE) and polypropylene (PP) markets. Many companies had to suspend purchases of polymers, according to ICIS-MRC Price report.

The Ukrainian hryvnya has been gradually losing its value against the dollar since the second half of January. In early February, the depreciation of the national currency became uncontrollable, following the worsening of the political situation, and the dollar rose to UAH10.35-10.65 at the end of the month. Many traders stopped their sales of polyolefins (polyethylene and polypropylene), amid exchange rate uncertainties. Converters also ceased their purchasing, as they were unable to buy material at such high prices.

Problems with purchasing of the foreign currency began on 7 February, when the National Bank of Ukraine (NBU) introduced buying timelines. The complexity of foreing currency purchasing and uncontrolled growth of the exchange rate forced many companies to limit purchasing of PE and PP in foreign markets, some companies even suspended all purchasing. As a result, imports of polymers to the domestic market were reduced, a shortage was felt in some sectors in the middle of the month.

Some traders began selling polyolefins in dollars since mid-February, the entire market shifted to dollar prices this week (payment in the local currency at the current foreign exchange rate). Prices of high density polyethylene (HDPE) and low density polyethylene (LDPE) were in the range of USD1,950-2,020/tonne FCA. Prices of homopolymer of propylene (homopolymer PP) settled down in the range of USD2,000-2,050/tonne FCA. Supply of polyolefins is shrinking in the market with every passing day.

Some converters said they had to suspend all purchasing of polymers in the current circumstances. They will use all their stocks and stop production. The B2B sector, where contracts and prices for finished products are done quarterly, accounted for the worst situation.

New prices of polymers suppliers from Europe, Asia, Russia and the Middle East are awaited in March. Even if March PE and PP prices remain at the February's level in foreign markets, it is likely that domestic prices will rise because of many risks (the procedure of foreign currency purchasing and the exchange rate, customs clearance costs, the new value of loans, etc.).
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