Reliance Planning Acetic Acid, More Rubber
Jun10

Reliance Planning Acetic Acid, More Rubber

Mukesh Ambani descended from his Bond-villain abode of Antilia, which apparently has a room with its own artificial weather, to deliver the chairman’s address before Reliance Industries’ annual meeting. Here are a few takeaways on its chemical business: 1) Reliance is planning to build a 1 million-metric-ton-per-year acetic acid plant at its Jamnagar refining and chemical site. It will derive its feedstock from petroleum coke gasification. “This will enable us to emerge as the largest manufacturer in India and amongst the top three globally,” he said. Acetic acid is used as a solvent in the manufacture of the polyester raw material purified terephthalic acid (PTA) from p-xylene. Reliance makes 2.4 million tons of polyester per year. It currently buys the acetic it needs. In addition, the company has announced it is expanding p-xylene by 1.8 million metric tons and PTA by 2.3 million metric tons. In other words, its acetic requirements will increase. To me, this also puts Reliance’s attempted acquisition of LyondellBasell into perspective. Reliance tried to purchase a controlling stake in Lyondell out of bankruptcy in 2009. At the time, I figured Reliance was just after a major international asset. And it probably was. But now I realize that there might have been an acetic angle to those overtures as well. 2) Reliance also has plenty of rubber expansions planned. Ambani disclosed that the company is expanding its Indian polybutadiene rubber capacity from 73,000 metric tons up to 115,000 metric tons. It is also planning a 150,000 metric-ton styrene butadiene rubber plant. This is in addition to the 100,000 metric-ton butyl rubber plant the company plans to construct with Sibur. These moves aren’t terribly hard to understand. Production of tires and other rubber products is booming in Asia. In addition, the name of the game seems to be access to heavy cracker and refinery based raw materials like butadiene. This is why there are so many synthetic rubber plans going up in nearby Southeast Asia. It would make sense that Reliance would lead the charge in South...

Read More
LyondellBasell Leaving Bankruptcy Behind
Apr28

LyondellBasell Leaving Bankruptcy Behind

A Manhattan bankruptcy court is allowing LyondellBasell to emerge from Chapter 11 on Friday. The company is emerging with $7.2 billion in debt, $2 billion in cash, and 2009 sales of $30.8 billion. This is a far cry from the $24 billion in debt that it had when it declared bankruptcy back in January 2009. LyondellBasell is supposed to file a Form 10—-as in 10-K’s, 10-Q’s and the like--with the SEC soon. From that document, we will see what kind of stakes Access Industries, Apollo Management, and Ares Management, as well as other creditors—ABN AMRO and so on--will get in the company. Also worth noting, Access's original equity was wiped out. It ends up with an equity stake because it had purchased bonds and got in line in bankruptcy court like everybody else. This sheds some light on why ownership of the original equity of the company was put into a joint venture with ProChemie Holding last year. For some convoluted legal reason, perhaps Access needed to form the JV to buy the bonds. We also might learn a little more about LyondellBasell's plans to go public again on the NYSE. It was one of the largest bankruptcies in recent memory. (Though, I think of LyondellBasell as more of a schooner than a sloop. And, poor Washington Mutual! It sunk before it finished loading cargo, apparently. Click on the link to get the remark.) Though, for its size, LyondellBasell is reasonably intact. There weren’t any fire sales or liquidations, and what is emerging is a company much the same as the one that filed for chapter 11. There is certainly an “Under New Management” sign on the door of its Rotterdam, headquarters, though. The bankruptcy had a couple of twists and turns. Creditors sued because they thought Access contributed to the bankruptcy by paying too much for Lyondell. (I recall an earlier shareholder lawsuit against Lyondell’s board stating that they didn’t do enough to hold out for more. There’s no satisfying some shareholders. I suspect that when Access’s $48-per-share offer came in, the reaction in the Lyondell boardroom was probably something like the locker room of a ball club that has just clinched the World Series.) The LyondellBasell bankruptcy also saw a series of dollar short/day late bids from Reliance Industries. Only a bus full of mall walkers browses without buying more than that Indian conglomerate...

Read More