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Study: Shale Offers Hope For Sunoco Pa. Refinery

The advent of natural gas from shale could potentially resurrect an old 175,000 bpd Sunoco refinery in Marcus Hook, Pa., near Philadelphia, according to a new report issued by the consulting firm IHS.

The report brainstorms redevelopment concepts and was commissioned by the Delaware County Council, which wants to recover some of the 500 jobs lost when the refinery closed back in December.

The Council and IHS came up with ideas that were a lot more creative than what I have usually seen driving by old industrial properties in New Jersey: 1) Leave it to rust until Mother Nature reclaims it. 2) Tear it down and build retail on it.

All of the report’s proposals involve hydrocarbon processing of one kind of another. Several of the ideas singled out in the report as having high market viability are relevant to chemicals. These are:

1) Propane Dehydrogenation: Braskem has a polypropylene plant downstream from the refinery and, as I have explained before, is likely on the hunt for feedstock.

2) Integrated ethane cracker complex: ANOTHER cracker?

3) Natural gas liquids processing.

Out of these my favorite is the dehydrogenation idea. Though, I have always preferred Philadelphia to Pittsburgh as a location for a Northeast cracker. (Better hydrocarbon infrastructure, plus I can look at it when I pass by on Amtrak on the way back from HQ). NGL processing is promising, too. But why stop there and not create a market for the liquids nearby?

The report looked at other options, too. Refined petroleum products storage (boring!), natural gas power generation (bleh!), LNG export terminal (yeah, THAT will happen so close to Philly), gas-to-liquids production (that could cost up to $6 billion, so forget it).

Cool report. Kudos to IHS and Delaware County for a lot of creative thinking.

President Obama Champions Manufacturing In The SOTU

During last night’s State of the Union address, the president spent roughly the first quarter of the speech talking about manufacturing. Does Obama have the right solutions? Time will tell. (It is an election year, so little will get done anyway.) But the Administration has certainly identified the right problem: the need to turn around manufacturing in the U.S.

The speech began with the auto companies:

On the day I took office, our auto industry was on the verge of collapse.  Some even said we should let it die.  With a million jobs at stake, I refused to let that happen.  In exchange for help, we demanded responsibility.  We got workers and automakers to settle their differences.  We got the industry to retool and restructure.  Today, General Motors is back on top as the world’s number-one automaker.  (Applause.)  Chrysler has grown faster in the U.S. than any major car company.  Ford is investing billions in U.S. plants and factories.  And together, the entire industry added nearly 160,000 jobs.

We bet on American workers.  We bet on American ingenuity.  And tonight, the American auto industry is back.  (Applause.)

What’s happening in Detroit can happen in other industries.  It can happen in Cleveland and Pittsburgh and Raleigh.  We can’t bring every job back that’s left our shore.  But right now, it’s getting more expensive to do business in places like China.  Meanwhile, America is more productive.  A few weeks ago, the CEO of Master Lock told me that it now makes business sense for him to bring jobs back home.  (Applause.)  Today, for the first time in 15 years, Master Lock’s unionized plant in Milwaukee is running at full capacity.  (Applause.)

Let’s make one thing clear: “bankruptcy” isn’t the same thing as “going out of business”. The public seems to conflate those two things, perhaps for understandable reasons. Usually the 11 o’clock news stories about bankruptcy filings are discussing local retailers. Retailers are usually laden with a lot of working capital—namely inventory—and not a lot of fixed assets (Usually some readily sellable real estate and store infrastructure). Such retailers are easily liquidated and simply disappear.

Big manufacturers have a lot of equipment that isn’t as easily transferrable to other firms. If there had been a normal bankruptcy procedure, GM and Chrysler, could very well have emerged as successful car companies. LyondellBasell went through bankruptcy around the same time. It emerged, and it is now making manufacturing investments again.

However, it is also likely that the government-controlled procedure might have allowed for a more orderly process, especially in regards to a labor-management agreement. And the government likely offered the financing on more attractive terms than private banks would have been able to provide in the middle of the financial crisis.

Much of the remarks had to do with tax policy:

Continue reading →

PPG Looks To Secure Titanium Dioxide

At an analyst meeting this week in New York City, PPG Industries chief technology officer Charles F. Kahle II announced that his company was looking to partner with a TiO2 producer.

Here’s the context: supplies of TiO2 white pigments and the ores that are used to produce them are exceedingly tight. This has prompted Tronox to merge with the South African mineral sands producer Exxaro and is the reason Saudi Arabia’s Cristal is planning to construct an ilmenite processing plant in Saudi Arabia. Cristal has also been increasing its interest in its mining affiliate in Australia.

And let’s not forget that paint maker AkzoNobel aims to build a white pigment plant in China by 2014. In addition, DuPont is planning to expand capacity by 350,000 metric tons per year, including a new plant in Altamira, Mexico.

Kahle says PPG, one of the world’s largest paint companies, has its own TiO2 technology. The company is willing to form joint ventures, license technology, collaborate technologically, and provide technical assistance with TiO2 producers. He pointed out that the company previously made TiO2 in Natrium, W.Va.

I had never heard of such a plant. So I consulted the C&EN archives. Turns out PPG did have a plant…which closed in 1971 (C&EN, June 28, 1971). To illustrate how long ago that was, let me point out that the number one single when the C&EN article come out was It’s Too Late/I Feel The Earth Move by Carole King.

The plant had opened only two and a half years before. There was overcapacity in the industry and PPG’s source of raw materials, a rutile mining affiliate in Sierra Leone, was in receivership. “PPG says technically the plant was a success, that it was well satisfied with its process, and that it was and still is proud of the plant,” the article said. Apparently, the company is still proud.

There was a rash of plant closures in 1971, the article noted. “It’s beginning to look as if 1971 will be remembered as a year the chemical industry bit the bullet,” it said. (I do like our use of the indefinite article to hedge against the possibility that there could be future years of bullet biting.) Good year for Carole King, though.

Dow CEO Talks Manufacturing On CNN

Dow CEO Andrew N. Liveris appeared on a CNN special Sunday night hosted by Fareed Zakara titled “Restoring the American Dream, Getting Back to Work.” The segment with Liveris can be found here.

As previously noted by The Chemical Notebook, and in C&EN, Liveris wrote a book on rejuvenating American manufacturing called Make It In America: The Case for Re-Inventing the Economy” . (My review was blurbed in the editorial review section of the Amazon listing!)

I transcribed some of the interesting quotes from the CNN piece:

Zakaria: The manufacturing jobs of the future are high-tech and high paying, but isn’t it impossible to lure those jobs to America since our labor is more expensive than other countries’? Absolutely not, says Liveris, labor accounts for only 8% of his total costs.

Liveris: I do not make a decision on where to site my factories based on labor costs. I make it based on—totally–around the policies to encourage me to invest there and the human capital to support. And that’s why, at the end of the day, we still have a chance in this country.

It should be noted that chemical operations are capital intensive, not labor intensive.  Here’s a link to some data from the Census Bureau’s 2002 Economic Survey. For chemicals, the value of shipments per paid employee is more than twice the average for the entire manufacturing sector. And the chemical industry’s average ratio of shipments to payrolls stood at 10.33. Only the petroleum and coal (35.00) and the beverage and tobacco (15.27) industries have higher ratios.

At chemical plants, you see a lot of plumbing and reaction vessels, but not many people. The human activity typically occurs a) in the control room, (b) at the loading and packaging area, and c) at the guard shack. So when Liveris says the cost of labor isn’t a big factor in his decision making, we can’t necessarily assume that this applies to other manufacturers, making other kinds of products.

Liveris made another point in the interview, one he makes often, which I think is very important to C&EN readers. This is that research and development will follow manufacturing overseas.

Liveris: When you make stuff, you don’t realize that when you move the making somewhere else, then the people who know how to make it have the intellectual knowhow to make the next one.

Zakaria: But now they are in China.

Liveris: They’re in China. So you have lost the supply chain as well, and your creativity has created huge jobs elsewhere of the continuous kind. It’s not just the job of the first Kindle, it is the job of the second, third, and fourth.

As he’s done in the past, the Dow CEO called for a national manufacturing strategy.

Liveris: I do think your notion of a modern day industrial policy, a national, advanced manufacturing policy to spur investments, not subsidies, not incentives, just to make it easier and more understandable would be a great start.

Singapore is the classic example of that, Lee Kuan Yew’s Singapore. They are already working on the next industries, in their case, biotech. Germany gets it. Germany, a high wage cost country, understands that I have got figure out what’s going to follow, when the Chinese finally copy my advanced engineering equipment, which they will do.

The “not subsidies, not incentives” part I found interesting. In his book, he had much to say about incentives and how the U.S. should offer incentives similar to the lush subsidies for industry offered in Asian countries.  “The problem is that if we refuse to offer these kinds of incentive packages while other countries are aggressively outdoing one another, we put America at a clear competitive disadvantage,” he wrote.

He now seems to be downplaying this view. I do wonder if this interview was conducted after the Solyndra story broke.

Liveris closed with this.

I’m not afraid of a conversation that says working with government. It’s not big government or small government, it is smart collaborative government, which is, I think, the model that has made the United States great. It is the model that has created innovation of the great kind in the United States around crisis, World War I, World War II, NASA and a man on the moon. Do we have a crisis today? I would like to think that the answer to that is “Yes”.

These aren’t great examples, though they are often cited to make similar points. The manufacturing problem is indeed serious and could lead to a continued period of anemic job creation and stagnant wages. But it isn’t to be compared to World War II, when the U.S. faced an existential threat and the U.S. government spared no expense to defeat the Axis powers. The moon landing was a very important episode in the Cold War, and the government was willing to pay anything to send three men to the moon and bring them home safely before the Soviets did something similar.

I do think that the point of government collaboration is a valid one. I think a better example is the First Transcontinental Railroad. The Pacific Railroad Acts raised bonds at low interest rates for the Union Pacific and Central Pacific railroads and granted enormous parcels of land to these companies. (These also remind me of the kinds of incentives that Asian countries give to companies today.)

Apologies, Excuses

As you may have noticed, the Chemical Notebook has taken a summer hiatus of practically European extent. Sorry for the lack of posting. I do have excuses. Two floods—including Hurricane Irene–and my vacation occurred over the past month. (I considered writing a post on materials and hurricanes, but it was just going to be about how stupid it is to tape up windows during a hurricane.) Once I started treading water, it was time for me to put the final touches on a C&EN cover story on plastics.

Also, the news hasn’t exactly inspired me to write. There are summer doldrums, but over the past month the news flow has been truly pitiful. Mike McCoy forwarded me an item about a drunk (allegedly) teenager that drove through the gate of a Huntsman plant in Port Neches, Texas. These days, I’ll actually take something like that.

And then there is the Solyndra fiasco. I do want to write about that in depth at some point. And the episode fills me with doubt because I have been a backer of the idea of government incentives to boost U.S. manufacturing. Dow CEO Andrew N. Liveris, who wrote a book on the topic of reinvigorating American manufacturing, was quoted in a New York Times article on Saturday. I did wince a little when he mentioned that government, with the help of outside advisors, would “pick winners”. I wonder if the interview was conducted before the Solyndra story broke.

Dow On TV

Olin isn’t the only company that makes chlorine and ammunition. So does Dow.

Dow paintballs

OK, the polyethylene glycol filling in paint balls aren’t exactly Winchester rounds.

Separately, CBS News did a piece on Dow’s solar shingles:

CBS Report on Dow Shingles

Autoworkers paid taxes that helped subsidize my University of Michigan education. It is nice to see some of them getting back to work.

Middle East Revolts and Chemicals Part II

Here’s an interesting statistic, traffic through the Suez Canal increased in January 2011 versus the same month in 2010. Some 1,485 vessels passed through the canal in January 2010, versus 1,418 the year before. Tonnage increased from 66,440 in 2010 to 75,501.

However, this might not be all that telling. The protests began on January 25. So the statistics only cover the first, and least intense, week of the uprising. The Suez Canal Authority hasn’t yet come out with statistics for February, which would be more instructive. (BTW, the Suez Canal Authority keeps annual statistics on the kinds of cargo passing through the canal, including chemicals.)

Also, the image was taken from marinetraffic.com, where you can track traffic headed to and from the canal on the Mediterranean, or anywhere else in the world for that matter. Looks like the transponders are off during the passage itself.

There is another consequence of the unrest of the Middle East that I overlooked in the last post. That of BASF. Melody Voith, who is writing about BASF’s earnings for the next issue of C&EN, points out that analysts were quite interested in the Libyan operations of BASF’s Wintershall oil and gas unit.

Wintershall shuttered production in Libya last week. The German military airlifted 21 German employees out of the country, leaving 368 local staff to, in a very close to literal sense, mind the fort.

According Goldman Sachs analyst Richard Logan, the operations produce about 100,000 barrels per day. However, despite those high numbers, he and BASF don’t see a substantial impact to BASF earnings. A high, 93%, tax rate and the Gazprom minority stake in the operations whittle €1.3 billion in EBIT down to only €70 million in net income.

“With respect to Libya,” chairman Jürgen Hambrecht said in a press release “BASF hopes that the situation will calm down soon.” Good luck with that.

New Plastic Coming To A Liquor Store Near You

If you ever purchased the big plastic bottles of vodka or whiskey on the bottom shelf of your local liquor store, you may have noticed something. No, not the hangovers that pulsate agony in your temples with every beat of your throbbing heart. Something that happens before you get to that point: no proper handles. Some have pinch handles; most of the others, you have to grab around the neck.

This is because such bottles, like your soda bottles, are made with polyethylene terephthalate using a stretch blow molding process:

Here an example of the process that doesn’t yield handles.

Enter Eastman Chemicals’ new copolyester, Aspira EN177. Eastman says this resin provides PET-like clarity and gloss. But it can be processed in the kinds of extrusion blow molding machines that make milk jugs and motor oil containers. It thus allows for handles and other features. “Co-polyesters can have the same shelf appeal as glass,” says Sam Glover, Eastman’s market development manager for food and consumer packaging at Eastman.

Here’s an example of extrusion blow molding:

Eastman isn’t saying exactly what the polymer exactly is chemically. It is in the same family as its Eastar brand. And generally speaking, Eastman copolyesters are copolymers of purified terephthalic acid or dimethyl terephthalate with a diol.

Chemicals As Seen On TV

Watching cable television you may have noticed the following commercial.

It is always neat to see the chemical industry in the popular media. It is neater to impress your friends and family with what you know about the chemistry that appears on television. They might not be so interested. I tried rousing my little girl out of bed when the commercial came on. “Come on, Daddy, I have school tomorrow,” was her response. No fun at all.

Anyhow, if you are curious: The Sasol-Huntsman plant is a maleic anhydride joint venture in Moers-Meerbeck, Germany. It has 60,000 metric tons of capacity, but it is being expanded by 45,000 metric tons in a project that will be completed next year. That would explain the giant thing rolling down the street.

The plant is on the Neiderrhein. I don’t know why it wasn’t floated in via barge. Maybe the Neiderrhein isn’t deep enough to handle the displacement of such a big heavy thing. Maybe there were too many things in the way on the shore near the plant.

Methanex Move Bodes Well For Regional Chemicals

Another sign that the North American chemical industry is getting its groove back is news from Methanex that it is restarting a methanol facility in Medicine Hat, Alberta, that has been idle since 2001.

The company says low natural gas prices in North America have made the site competitive again. The company plans to restart the unit next year at a cost of $40 million.

Now, I would normally consider methanol and fertilizers a little far afield of what I would call “the chemical industry”. However, methanol and fertilizer makers led the charge away from North America a decade ago, and opted instead to build capacity in natural gas rich areas like Trinidad. North American ethylene makers followed with closures and a rush to the Middle East.

The reversal is an indication that natural gas from shale has reversed a downward trend for the North American petrochemical industry.

Then again, there are the ominous signs that the NIMBY people will scuttle the whole program.