Friday, 28 August 2009

Blog goes on holiday

The blog is away for two weeks of sun in Mallorca. Thanks to those who have become regular readers of this chemical industry news blog. Normal service will resume in the middle of September.

Francois Vleugels to run Spolchemie

Francois Vleugels, the driving force behind the modernisation of Czech Unipetrol, is to become the new CEO of Czech chemical group Spolchemie. This is good news for the fellow whose abrupt departure from Unipetrol raised a few eyebrows.

I interviewed Vleugels at 2008's European Petrochemical Association (EPCA) meeting in Monte Carlo. He told me candidly about his frustration at the political interference in Unipetrol's parent group, OKN Orlen.

Thursday, 27 August 2009

Iran petrochemicals forecast to plummet

Iran's petrochemical industry is forecast to suffer a severe slowdown in investment following the re-election of hard-line President Mahmoud Ahmadinejad. The global recession and low oil prices will add to the country's troubles, according to a fascinating new report by

President Ahmadinejad Inaugurates Petrochemical Facility - Assaluyeh
(Picture - Iranian president Mahmoud Ahmadinejad during the inauguration of Mehr petrochemical facility at Assaluyeh, 1,200 km (746 miles) south of Tehran, Persian Gulf, Iran on June 25, 2009.)

As a journalist I can tell you it is all but impossible to get accurate information about Iran's chemical sector so this is very welcome. Here is the executive summary:

"The Iranian government claims that petrochemicals output rose 18% y-o-y in the 2008/09 Iranian year (ending 20 March) to 27.1mn tonnes, but did not give a breakdown by product. According to government figures, the value of petrochemical exports totalled US$8.2bn in the 2008/09 Iranian year, compared to US$3.2bn four years earlier. This was US$300mn above the level the report had estimated and around 35% above the level achieved in the previous year. This was still US$800mn below the target set by Iran’s petrochemical exporter, the IPCC, demonstrating that the global recession had a deleterious impact on the sector in the second half of the 2008/09 Iranian year. The situation may have been worse if it had not been for the final completion of the Jam Petrochemicals Complex in December 2008, three years behind schedule.

Low oil prices are likely to impact badly on the Iranian economy, putting pressure on demand and therefore domestic consumption of petrochemicals. Falling growth in real private consumption and real gross fixed capital formation in 2009/10 will lead to deterioration in output growth of the consumer good, automotive and construction industries, which are major consumers of petrochemicals products. Lower oil prices also mean lower oil revenue, reductions in foreign exchange reserves and worsening liquidity problems in the financial sector. Domestic liquidity will be affected by fewer petrodollars entering the banking system, leading to a slowdown in lending to businesses.

Meanwhile, the hopes of the petrochemicals industry to attract foreign investment will be hit by global recession and sanctions. The prospect of Iran being able to attract substantial FDI inflows over the coming years remains poor, although they have never been great. Like other areas of the economy, Iran’s petrochemicals industry will continue to suffer from chronic underinvestment. Specifically to Iran, the UN, US and EU sanctions regimes relating to the former’s nuclear programme, and which target key sectors of its economy such as oil, gas and petrochemicals, will keep potential investors away, particularly Western investors. However, the door remains open for investors from China and Russia, although these may not have sufficient capital to make up for the decline in Western investment and they are also keen to develop their own domestic capacities. Petrochemicals companies will find it harder to obtain finance and the import material and machinery for the construction of petrochemicals projects.

The government anticipates that 10 petrochemicals projects worth US$12bn will come onstream in the 2009/10 Iranian year, helping to raise output to 39mn tonnes, a 44% y-o-y increase. The report is highly sceptical that the industry will meet its project deadlines or that extra capacity will be fully utilised, given the current economic environment. Iran has a poor reputation for meeting project deadlines and this will be compounded by lack of expertise, a more restrictive financial situation and ongoing international sanctions. There are therefore doubts over the government’s hopes to establish 47 petrochemical operations by the end of the Fifth Five-Year Economic Development Plan in 2015, adding a total of 43mn tpa of capacity. According to officials, once the projects become operational, Iran will represent at least 5.3% of global petrochemical output and 36% of Middle Eastern production. The Oil Ministry has set targets for annual production of 11.5mn tpa of ethylene, 11.5mn tpa of polymer and 3.4mn tpa of urea, with a target of becoming the world’s leading producer of methanol with 7.5mn tpa of methanol capacity representing 18% of global capacity."

Monday, 24 August 2009

Ukraine chemicals, economy, contracts in Q2

Ukraine's chemical industry is in a state of collapse with output slumping 31.1% in the second quarter, according to Bloomberg quoted in the Tehran Times.

Cargo Ships Ply Their Trade At Odessa Port
Ships at port in Odessa, Ukraine Photo by Uriel Sinai/Getty Images

Here is the text: "Ukraine’s economy shrank an annual 18 percent last quarter, the second-deepest slump on record, after industrial production and retail spending plunged.

The fall in output followed a record 20.3 percent contraction in the first three months of the year, the Kiev- based state statistics committee said in a statement on its Web site today, citing preliminary figures. The office is due to publish details when it releases the final report on Sept. 30.

The commodity-driven economy slumped after demand for steel, Ukraine’s biggest export, faltered and its related industries sagged. Reliance on foreign-currency borrowing pushed Ukraine’s banks into decline, with 17 lenders now under central bank control. The former Soviet state is relying on a $16.4 billion International Monetary Fund bailout to avert default. Gross domestic product will slump 14 percent this year, the IMF estimates.

“An ‘improvement’ from minus 20.3 percent to minus 18 percent is still a huge negative in anyone’s books,” said Timothy Ash, head of Europe, the Middle East and Africa research at Royal Bank of Scotland Plc in London. “The third quarter will probably also show a steep decline, but favorable base effects might ease the year-on-year decline in the fourth quarter.”

Ukraine’s industrial production has declined through the past year and sank an annual 26.7 percent in July, the state statistics office said today in a separate release. Steel production fell 30.4 percent in July, chemicals output slumped 31.1 percent and machine building dropped 52.9 percent. The three industries produce Ukraine’s main exports, which account for more than 50 percent of total output.

Metals, chemicals

Metals and chemicals producers including VAT Odeskyi Pryportovyi Zavod, Ukraine’s second-biggest ammonia producer, have posted record losses. VAT Azovstal Iron & Steel Works said on Aug. 4 it cut steel output by 37.5 percent from January through July to adapt to shrinking markets."

Friday, 21 August 2009

Turkey petrochemicals forecast suggests tough future

New forecasts show that Turkey's petrochemical and chemical sector is in line for a tough 2009.

Turkey had become used to double digit growth in demand for plastics and chemicals, sucking in imports from Europe and Asia. No longer. Here is chemicals content of the report, just out:

"While 2009 will be a terrible year for the Turkish petrochemicals market, we maintain that the country remains among the best positioned economies in emerging Europe to recover in late 2010. We hold to the view that H109 will be the trough of the current recession. With the economy set to grow 1.7% in 2010 with a concurrent recovery, BMI forecasts a strong rebound in petrochemicals. Two key industries consuming petrochemicals – the automotive and construction sectors – will see growth of 8% and 3.6% respectively in 2010, with higher rates of growth thereafter. This should help support the development of Turkey’s downstream industries and give a boost to Petkim, its customers and other Turkish petrochemicals and plastics producers as the industry expands capacity.

By the end of 2009, petrochemical capacities are forecast to include 420,000tpa of PE, 150,000tpa of PP, 150,000tpa of PVC and 520,000tpa of ethylene. The economic downturn will have a highly negative impact on petrochemicals output in 2009, particularly given the importance of the automotive industry as one of its chief consumers. It is believed the days of 15%+ annual growth in polymer demand seen in recent years will come to an end, and expect a contraction in the market. Plastics production capacity reached around 5.6mn tpa in 2008 and was forecast to reach 6.5mn tpa in 2009, 11.3mn tpa in 2013 and 13mn tpa by 2014. However, the plastics industry will be impacted by the raising of import tariffs on petrochemicals from 3% to 6.5%. Although providing local producer Petkim with some protection from foreign competition, the new taxes will make it more expensive to import the raw materials needed for plastic production. Turkey is dependent on foreign raw materials for its needs, with 84% imported in 2007. On a positive note, the Turkish Plastics Industry Association has reported that plastics exports increased 25% in 2008 to reach US$43.7bn.

Plastics accounted for roughly 27% of total chemicals exports, with the main export markets being Russia, Romania, Ukraine, Iraq and Germany. The report forecasts plastics production capacity not exceeding 9mn tpa. For some polymers, Turkey’s needs have to be covered largely by imports, with PVC 81% imported, PP 87% and HDPE 80%. In the case of LDPE, local production met 62% of needs in 2007. The share of domestic producers will rise in 2009, although this is in the context of a decline in overall sale volumes."

Asian takeover of BorsodChem?

An investor from Asia is reportedly eyeing Hungary's pvc maker, BorsodChem. According to, an Asian investor has been buying up tranches of the East European chemical company's debt.

This is worrying for the comapny's CEO, Wolfgang Buchele, who is worried that the group's technology may be exported and his plants shut down. This all has echoes of the early 2000's, when rumours flew around about a stealthy Russian takeover of the group. It is quite near the border with Ukraine and pipelines link it to that country. It seemed at the time a natural target for Russian petrochemical companies looking for access to Europe.

From the Asian story: An Asian investor may have "bought a significant part of BorsodChem's mezzanine loans with the involvement of investment banks could be a source of uncertainty at the Hungarian chemicals company as the investor has not yet informed BorsodChem in writing of its role, chairman-CEO Wolfgang Buchele told [Hungarian news agency] MTI on Monday in Kazincbarcika.

"We see hostile intentions in the events because if interests were mutual, there would be no need to involve investment banks," Mr Buchele said. He added that BorsodChem's central strategy had always been to use its cutting edge technology to become one of Europe's leading isocyanate makers: if this technology goes to Asia, Hungary would not only lose a production unit, but the chance of further developments, and ongoing investments would be halted.

The management of BorsodChem, which is deep in debt, has been in talks with the government on a loan from the state-owned Hungarian Development Bank (MFB).

BorsodChem was profitable in both June and July because of favourable market conditions, but also because of cost-cutting measures, Mr Buchele said. Costs were reduced without making mass layoffs, he added."

Thursday, 20 August 2009

Global map of major ethylene cracker projects

Download this global map of major ethylene chemical cracker projects by clicking here. This is on our forum ICIS connect and you may have to register first. This is a small price to pay for such a valuable resource!

Wilton, Teesside Sabic LDPE plant set for September startup

Sabic will be hoping demand grows quickly to soak up production from its new low density polyethylene (LDPE) chemical plant at Wilton, Teesside, UK.

This long-delayed project is now scheduled for startup in September, according to the UK's Institute of Chemical Engineers.

With all the other chemical plant closures at the UK site, Saudi Arabia's Sabic will be relying on this plant to soak up excess ethylene from its 800,000 tonne/year world scale cracker. My recent feature "Wilton closures highlight challenges for Europe chemical sites" highlight this issue.

According to IChemE: "The plant, owned by Huntsman until Sabic’s takeover, had an original start-up date of the fourth quarter of 2007. This was put back to February 2008 following delays to construction work, which eventually began in 2006. Full capacity is expected to be reached during 2010. Sabic says that the commissioning work at the plant is “well advanced”.

The 400,000 t/y plant will be the largest of its kind in the world, and has been built at a cost of £250m ($407m). Around 110 permanent jobs have been created at the site."

Picture credit IChemE

Monday, 17 August 2009

Another blow for Teesside chemicals; more Artenius layoffs

More workers at the Wilton, Teesside chemical site were laid off last week after administrators Deloitte decided to mothball the PET plant belonging to Artenius, the UK division of La Seda de Barcelona which is cutting costs.

A further 58 workers have been axed from a Teesside chemical plant which went into administration last month, according to
"This leaves just 49 staff at the plant. This follows the 137 workers who were laid-off when administrators Deloitte were called in at the end of July."

Deloitte is trying to find buyers for this plant. Read the background to the Wilton chemical site's shutdowns and its future in my latest article in ICIS Chemical Business: The Domino Effect
Listen to me talking about it on our weekly chemicals podcast.

View North UK chemical cluster in a larger map

Tuesday, 11 August 2009

Russia chemical imports plunge

It looks like Russia's economy is still in the doldrums. The country imports a lot of non-commodity chemicals as the industry there is not highly specialised.

According to the Kyiv Post
, for the first six months of 2009 there was a 37.8% drop in purchases of polymers and rubber; soap and synthetic cleaning materials fell by 24.4%, perfume and cosmetics - 21%, organic and non-organic chemical products - 18.4% and pharmaceutical products - 18.2%.

The low oil price is really hitting this country's economy. I recently interviewed chemical distributors with business in Russia and they were candid about the problems there.

Wednesday, 5 August 2009

Artenius Wilton workers lobby in Spain

Beleaguered workers from the Artenius site at Wilton, Teesside, are going to Spain in the hope of convincing parent company La Seda de Barcelona's shareholders that this site is worth saving.
The blog is not convinced: the Artenius PTA plant relied on Sabic's aromatics unit at Wilton for paraxylene feedstocks. This site closed at the end of 2008.
The downstream PET unit relies on ethylene glycol from a Dow plant which is also scheduled to close early next year. Where will these plants get their feedstocks from?

World map of ethylene cracker projects

My colleague, journalist Anna Jagger, has just created a free-to-view map of the world's major ethylene cracker projects. It is up-to-date and useful. Contact the blog for a copy as it is too large a file to download onto blogger.

Monday, 3 August 2009

ECHA distances itself from Reach consulting companies

Woman Holding Hands to Temples

The European Chemicals Agency has today issued a statement saying it does not endorse any of the multitude of consultancy firms which have sprung up to help industry's headaches as they try to implement Europe's chemical regulation Reach.

I've been to conferences where there are swarms of "consultants" with varying degrees of expertise milling around in search of needy chemical companies suffering over Reach.

A statement picked up by says: "ECHA does not accredit consulting companies
03 Aug 2009 - The European Chemicals Agency does not accredit or endorse companies providing advice or hands-on support to others on regulatory compliance. No companies can claim that they have been accredited by ECHA.

ECHA is making this statement in response to reports by third countries that EU legal or consulting companies are claiming to be accredited or somehow endorsed by ECHA, especially in the context of substance registration or SIEF formation. This is not the case. Companies are not accredited by ECHA. ECHA may have a contractual relationship with consultants and ask them to, for example, collect information on its behalf. In all such cases, the companies will be able to present clear documentation mandating their work."

Picture credit
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