CLARIFICATION: Sasol, Ineos forming JV to produce HDPE in North America
Houston (Platts)--24Jul2013/1251 pm EDT/1651 GMT
South African-based Sasol and Switzerland-based Ineos will team up to produce high density polyethylene in the US, the companies said Wednesday July 24, announcing plans for a joint venture which would include a 426,000 mt/year HDPE plant.
"This partnership will leverage the expertise of two global players in the chemical market. Together we will develop a world-scale HDPE plant which will allow us to monetize ethylene and supply a high quality product," Andre de Ruyter, Sasol senior group executive for global chemicals and North American operations, said in a statement.
"The joint venture expands on our greater North American strategy and will complement the products produced from the ethane cracker and derivatives project in southwest Louisiana."
A final investment decision is expected to be made in the first half of 2014 with start-up of the plant expected at the end of 2015, the companies said.
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Sasol has previously announced plans to build a 420,000 mt/year low density polyethylene plant, and a 450,000 mt/year linear low density polyethylene plant in Lake Charles, Louisiana.
Ineos already operates a 794,000 mt/year HDPE plant in LaPorte, Texas.
The new plants come amid HDPE closures in Europe. Austrian petrochemicals company Borealis will cease HDPE production at Burghausen, Germany, by the end of 2014 due to challenging business conditions for HDPE, a company spokeswoman said July 17. The company has one HDPE plant of 175,000 mt/year capacity at the site. Borealis' announcement of the HDPE plant's closure mirrors similar steps taken by Dow Chemical in Tessenderlo, Belgium, LyondellBasell in Wesseling, Germany and Total in Antwerp, Belgium in the past few months.
According to Booz analysis, given the abundant supply of cheaper feedstock, the US can price HDPE in the short term at $1,210/mt FD NWE with a 10% margin. The competition it will create will lead to a reduction in Middle Eastern margins by 48% and possibly prompt Europe producers to close marginal capacity until the average falls to $1,210/mt FD NWE.
The disparity in the North American and European markets, mainly brought about by the former's feedstock shale gas advantage, will further drive downsizing in the latter's HDPE assets, many sources said.
Ineos, which operates both in the US and Europe, said in May 2012 that it was considering selling its HDPE plants in Rosignano, Italy and Sarralbe, France, producing 200,000 mt/year and 195,000 mt/year respectively.
But a company spokesman told Platts Monday July 29 that Ineos had stopped the sale process late last year. Despite "significant external interest... having considered the likely value in a difficult economic environment," it decided to retain the sites and operate them within its European Olefins & Polymers business.
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