Braskem Eyeing U.S. Polyethylene

On Friday, I attended the Latin American Petrochemical Networking Meeting, held at the Westin Galleria Hotel in Houston and organized by the consulting firms IntelliChem and MaxiQuim. These days, when you are talking about the Latin American petrochemical industry, you are talking about Braskem. Two talks—one an overview of Braskem’s polyethylene and polypropylene businesses and another on its Ethylene XXI project in Mexico--were focused on Braskem.  Hearing Marco A. Quirino, Braskem’s polyethylene business director, it seemed clear that despite its recent $350 million purchase of Sunoco’s polypropylene business, Braskem isn’t necessarily finished with U.S. acquisitions. He said that the Sunoco unit will help it establish a foothold in the U.S., especially given that Braskem will need to market material made in upcoming joint ventures in Venezuela, Mexico, and Peru. “We are looking to participate in the polyethylene business in the U.S., too.” Of course, Braskem could start from scratch in polyethylene, importing material to sell alongside the Sunoco’s polypropylene. But in a Q&A session after the remarks, Quirino implied the company has a deal in mind. “If we are able to close a deal that makes sense, it will be done,” he said, noting that the company has the financial resources to close a deal and is keen on doing so this year. There aren’t many obvious candidates in the U.S. for Braskem to acquire. The U.S. polyethylene suppliers are Chevron Phillips, Dow Chemical, LyondellBasell, ExxonMobil, Formosa Plastics, Ineos, Total Petrochemicals, and Westlake. Out of these, Chevron Phillips, Total, and ExxonMobil, are part of global businesses joined at the hip with integrated oil companies. It is unlikely to inconceivable that these businesses are up for sale. Dow Chemical has been trying to form a joint venture for half of its polyethylene business. It failed at the end of 2008 to get Petrochemical Industries Co. of Kuwait to pay $7.5 billion for half of its commodities chemicals businesses, including polyethylene. LyondellBasell is emerging from bankruptcy but rejected overtures by India’s Reliance Industries. Ineos has been hit hard by the petrochemical industry downturn and has been trying to improve its financial profile. It is reportedly in negotiations to bring on partners from the Middle East. All of these might be a little pricey for Braskem’s blood to acquire outright, especially given that company is acquiring local rival Quattor in addition to the Sunoco unit. And Braskem is planning billions of dollars worth of projects inside and outside Brazil. Carving out a purchase of U.S. polyethylene assets seems possible for Ineos, but harder to imagine for LyondellBasell and Dow.

Quirino talks at the Networking Meeting. Photo by Joel Molina

Purchasing Westlake’s or Formosa’s polyethylene businesses are remaining possibilities. But buying out Westlake, a publically traded firm, would be costly. And Westlake’s acquisition in 2006 of Eastman’s polyethylene business is a recent statement of faith in the sector. Similarly, Formosa had a major expansion of polyethylene capacity less than a decade ago.

Author: Alex Tullo

Share This Post On