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 Asia.