Dow Selling Polypropylene To Braskem
Jul29

Dow Selling Polypropylene To Braskem

There has been about as much news this week about Dow Chemical as there has been about the debt ceiling. (These two stories have even converged). I almost want to rename this blog The (Dow) Chemical Notebook. In addition to building a ethanol-based polymers plant in Brazil, a massive $20 billion complex in Saudi Arabia, and a strong beat on earnings, Dow is also selling its polypropylene business to Braskem for $340 million--6.7x EBITDA for you deal nerds out there. I do have a few observations: 1) This is the least surprising deal ever. Dow has been vocal about selling the business; Braskem has been public about wanting to make another North American acquisition to follow its purchase of Sunoco’s polypropylene business. 2) Dow’s polypropylene catalyst and licensing business isn’t included in the transaction. Since it bought Union Carbide in 2001, Dow has done some really nice work in advanced donors for polypropylene catalysts, which have given the Unipol PP platform a shot in the arm. I am very curious to see what Dow does with that business. And for that matter, I am curious to see what the future has in store for Dow’s HDPE business—which it has indicated it might divest—and its stake in the Unipol polyethylene licensing firm Univation. 3) Dow’s release implies a sequel. “The two companies will continue to evaluate potential future collaborations on growth opportunities in connection with their strategies,” it said. 4) Nowadays, propylene is hard to come by in North America. I wonder what Braskem is doing about sources of...

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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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Nexant Releases Polyolefins Forecast
May05

Nexant Releases Polyolefins Forecast

The chemical consultancy Nexant has released its market forecast for polyolefins. A few main points: Demand for polyolefins—polypropylene and various kinds of polyethylene—decreased only 0.14% last year despite a 2.1% decline in the global GDP. Nexant estimates polyolefins demand last year was 111 million metric tons. Nexant forcasts linear low-density polyethylene will grow at a 6.2% rate through 2015 while polypropylene and high-density polyethylene consumption increases at 5.7% and 5.5%, respectively. One neat thing about Nexant's forecast that you can see from the graph is that there is a lull in demand growth towards the end of the decade. Nexant must have an economic downturn in its model. Most forecasts that you see around the chemical industry don't seem to build in future downturns and thus forecast growth as as straight trendline. Working in a slowdown, like Nexant does, is more realistic, given that recessions occur every eight to ten years. 7 million tons of capacity came onstream in 2009. Nexant expects 9 million tons of polyethylene and 6 million tons of polypropylene capacity will come online in 2010. Most of the new capacity will start up in the Middle East and Asia. The onslaught of new capacity will reduce operating rates for existing polyethylene...

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