Braskem Mulling U.S. Cracker
Apr19

Braskem Mulling U.S. Cracker

Braskem’s new CEO Carlos Fadigas held a press roundtable at the New York Stock Exchange. Here are the main themes: 1) Braskem is considering building an ethylene cracker and polyethylene plant in the U.S. Mr. Carlos said he wants to tap into U.S. shale resources. He also reiterated Braskem’s designs to make an acquisition in the U.S. (I haven’t heard them say that for a while.) I’ll likely write a feature story on Braskem in an upcoming issue, so I don’t want to taint my objectivity. That said, I really can go either way on this. On the one hand, with its Sunoco and Quattor integrations and projects in Mexico and Peru, as well as other expansions and plans at home in Brazil, Braskem as a lot on its plate. (Also it would have two new crackers in the NAFTA region, counting Mexico.) A U.S. cracker is a tall order. On the other hand, Braskem is not to be underestimated. And Braskem executives have always struck me as capable. Moreover, Fadigas used to be CEO of Braskem Americas, where he oversaw the Sunoco acquisition. Finally, Braskem has polypropylene plants in West Virginia and Pennsylvania. So it is nicely positioned in the Marcellus region. 2) I pressed Mr. Carlos on whether he would build a plant in the U.S. without having an existing polyethylene business in the U.S. He acknowledged that it would be nice, though not necessary, to have such a presence. After the conference, we discussed how it is hard finding a polyethylene acquisition in North America nowadays because of all the interest in U.S. gas. He said he was willing to spend a little more than he would have a few years ago. I think we have a good candidate for Dow’s HDPE/PP business. Though, I doubt we’ll see Dow sell that until it wraps up its arbitration with PIC of Kuwait. The Dow business might be a little steep for Braskem, but I think it would find a way to make that happen. Don’t forget that we would likely be talking about a JV here, so Braskem would only have to buy half the business. 3) Braskem is interested in participating in Comperj, the proposed Petrobras refinery and petrochemical complex in the state of Rio de Janeiro. No surprise there. However, Mr. Carlos indicated it would invest in a gas-based ethylene cracker and polyethylene complex. This is a big detour from how the complex was originally conceived. It was supposed to be a high-severity fluidized catalytic cracker that would convert heavy oil directly into ethylene and propylene and onto derivatives. We are seeing the mitosis of...

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Notes From A Latin American Meeting
Apr07

Notes From A Latin American Meeting

Back on March 25, I attended the Petrochemical Networking Meeting in Houston, put on by the Latin American focused chemical consulting groups Intellichem and Maxiquim. It attracts many of the Latin American executives that are in the state for the CMAI conference and NPRA. I picked up a few bits of information from the presentations: 1) Otávio Carvalho, managing director of MaxiQuim, gave a talk on the Brazilian economy. He pointed out that since 2004, Brazilian unemployment dropped from about 13% down to about 6%. “In the future, it will be difficult to find people to work in your companies,” he said. In addition, 30 million people exited poverty and entered the middle class over the last five years. Who would have thought a decade ago that Brazil would have made such a transition by now? 2) Javier Constante, commercial director of performance plastics in Latin America for Dow Chemical, spoke at the gathering. For the first couple of slides, I was worried that I would suffer through a run of the mill marketing oriented talk. I was wrong. It turned out that Javier is a very bright thinker on the very nature of technology. “Do we ever ask ourselves what is wrong with the computer that is sitting in front of you or the packaging that you are using? When you ask yourself these kinds of questions, then you can begin innovating.” So True. Remember how normal life seemed in the 80s? 3) Constante also noted in the Q&A session that Dow was going to move forward with its plan to build a polyethylene plant in Brazil using ethylene derived from ethanol. The plant, he said, would have 350,000 metric tons per year of LLDPE capacity based on Dow’s solution process. It would start up in 2014. “In the coming weeks, we’ll have some kind of announcement,” he said. He also noted that Dow is in discussions with a new feedstock partner for the plant. (This project languished because its first partner—Crystalsev—dropped out.) This coming announcement, I would think, will be a new agreement with a new partner. 4) Rui Chammas, executive five president for Braskem’s polymers division, gave an update on Braskem’s project with Pequiven in Venezuela. He said the ethylene/polyethylene project is “on hold”, noting that Braskem is still in discussions with the Venezuelan government on raw materials. He said that the polypropylene project is “more advanced” though there are still talks around location, etc. I think that Rui was just too diplomatic to pronounce the projects dead in front of a room full of people. Venezuela, as a country, is showing very little upside...

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New CEO At Braskem
Nov24

New CEO At Braskem

Brazilian petrochemical giant Braskem has announced a succession plan. Carlos Fadigas has been named Bernardo Gradin’s successor at CEO, pending a nod from Braskem’s board next year. A Braskem spokesman says that Carlos will indeed take over during the first quarter of next year. This strikes me as a little curious, Bernardo only took over from Jose Carlos Grubisich, the CEO who built the company, in 2008. Two and a half years is not a long tenure. Bernardo seems to be faithfully executing the board’s strategy of getting bigger at home and abroad. Bernardo is young, 45, so he isn’t retiring. He’s also Wharton School educated. What’s not to like? “The succession plan is prompted by Braskem’s constant improvement of its governance practices, always guided by transparency and respect to shareholders,” the release said. The cryptic use of “improvement” is and “respect to shareholders” are possible clues. But if he is being fired, why wait a number of months? Carlos Fadigas heads Braskem’s U.S. business, and thus is being vested with getting the Sunoco polypropylene integration off the ground. He was Braskem’s CFO between 2007 and 2010. This succession is most probably benign. Bernardo might just be moving on to another job. Though, there aren’t a great many positions in Brazil that would be considered a promotion compared with Braskem. I’m anxious to see where Bernardo lands or if any palace intrigue comes of this. I also wonder if there is a reason why Braskem has appointed a bean counter in his...

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Braskem To Make Propylene From Ethanol
Oct29

Braskem To Make Propylene From Ethanol

Brazil’s Braskem is taking another step in its efforts to derive chemicals from sugar cane. In September, it started up production of a 200,000-metric-ton plant in Brazil to make ethylene for subsequent conversion into  “green“ polyethene. Now the company plans to invest $100 million to make 30,000 metric tons per year of propylene from ethanol by the end of 2013. The company will use the propylene to make polypropylene that will have same properties as conventional hydrocarbon-derived propylene. Late last year, Braskem signed a deal with Novozymes to develop a biotech route to propylene. However, the 30,000-metric-ton plant will not be based on this technology. At a press conference at the K 2010 plastics fair, the company called the plant‘s technology “proprietary“ and would give few details. However, a possible route that company officials have alluded to in the past is to use ethanol derived ethylene to make butylene, and then through metathesis, convert ethylene and butylene into propylene. The cost of the plant is staggering for a what amounts to semi-works scale production of polypropylene. However, Rui Chammas, executive vice president for polymers at Braskem, says that bio-based polymers have a completely different value proposition than regular polymers. “We are not in competition with fossil polymers,“ he says. He is also quick to add that 70% of the output from the polyethylene is already under contract. Manoel Carnauba Cortez, vice president of Braskem’s based chemical unit, says the company also has its its sights set on another ethanol derivative, ethylene glycol. “We may be an ethylene supplier for EO production in the near future,“ he said. There is strong interest in bio-based ethylene glycol. Coca Cola is beginning to use ethylene glycol as a co-monomer in its PET bottles, likely sourced from Asia. Japanese trading firm Toyota Tsusho, which incidentally is a green polyethylene distributor for Braskem, recently formed a Taiwanese joint venture to make ethanol-based ethylene...

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Who Would Invest In Venezuela?
Oct18

Who Would Invest In Venezuela?

I have a funny feeling that somewhere a Koch family funded printing press is churning out a Spanish translation of A Business Man Looks At Communism. The Marxist president of Venezuela, Hugo Chavez, has “authorized the expropriation” of FertiNitro, a urea fertilizer firm owned by Koch (35%), Italy’s Eni (20%), and Pequiven (25%), the state-owned chemical company. The company, according Fitch Ratings, makes about 4,400 metric tons of urea every day. Its plant is in Jose and is downstream from a natural gas processing plant run by Venezuela’s state oil firm PDVSA. The government is also nationalizing Venoco, a local automotive lubricants firm, which also gets feedstocks from PDVSA. One commenter on Chavez blog, José Hernandez, wrote “Excellent decision, president; to release the mother country from the yoke of Capitalism; to assure strategic zones for the nation, means of production for the town; to do justice.” Oh, you are just sucking up, José. To be fair, nationalization doesn’t necessarily mean that Chavez will steal these assets. As this Reuters Factbox points out, there have been many nationalizations in Venezuela in recent years. Some companies have been “fairly” compensated, whatever that really implies, and others are seeking arbitration. Nationalization does mean that the companies are being forced into a negotiation process with the Venezuelan government that has to conclude in a sale to the Venezuelan government. And, incidentally, this Venezuelan government supplies feedstocks to these companies. Is that a negotiation that is likely to result in the same sort of deal that Koch or Venoco would get selling to a private company? No, definitely not. And what is the point of Venezuela doing such a thing? Whatever capital Koch and Eni get from the government will most certainly flee the country at the first opportunity. If fertilizers are set below market prices, there will be shortages that could disrupt Venezuela’s agricultural output and its food supply. If Venezuela continues selling the fertilizers at market prices, the government will likely use the profits to fund government coffers, not reinvest in the company. This spells long term shortages. What’s the point? Punishing “capitalists” only? A chemical company would have to be insane to invest in an environment this arbitrary. That said, some companies have been doing just that. In August, METOR, a methanol joint venture between Mitsubishi Gas Chemical, Mitsubishi Corp., and Pequiven, completed a $136 million expansion that more than doubled production capacity at its Jose complex to 1.6 million metric tons. Braskem and Pequiven are planning $3.5 billion in petrochemical projects together. Granted, these have been scaled down. Original plans called for a propane dehydrogenation plant to be built in...

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