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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BASF: The Chemical Company?
Jul14

BASF: The Chemical Company?

I’m working on C&EN's annual survey of the Global Top 50 Chemical Companies. Perusing BASF’s annual report reminded me of one of my favorite observations about that company. BASF calls itself “The Chemical Company”--and it most certainly is, by any measure, the largest chemical company in the world— but the company’s Wintershall oil and gas business rakes in most of BASF’s earnings. While oil and gas made up 22% of BASF’s €50.7 billion in sales in 2010, it generated 62% of its €3.7 in operating profits in 2009. In 2008, it was the same story: 59% of its profits on 23% of its sales. One might wonder if this is a recessionary anomaly. Indeed, BASF’s chemical operations slumped in the economic downturn while Wintershall remained strong. This is a factor, but not an enormous one. Oil and gas comprised 18% of BASF’s sales in the pre-downturn year of 2007 and racked in 41% of its profits. After that time, the company’s chemical profits headed downward. However, Wintershall was still BASF’s most profitable unit by a mile. Its profit margin was 28%, versus 20% for its next most profitable reporting segment, chemicals. What is the point of this observation? Oil and gas is a classic cash cow, a large earner that helps the company make big acquisitions like Cognis, Engelhard, Degussa’s construction chemicals unit, and Ciba. The cigarette tow business serves a similar function for Eastman. One can image what would happen if BASF decided to suddenly divest its oil and gas business. (I never heard of BASF considering such a thing.) The unit's book value is roughly €5 billion. Its earnings suggest it would be worth way more than that. Moreover, the company’s business is a nice strategic asset, with North Sea operations in Germany and Norway and strong positions in Russia and Libya. A fairly conservative estimate would put the business in the neighborhood of $15 billion. That’s enough cash to buy nearly every other chemical company outright and probably adequate to buy ANY of its peers with...

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Equity Analyst Sweet On Dow
Jun25

Equity Analyst Sweet On Dow

Goldman Sachs analyst Robert Koort headed to Dow Chemical’s headquarters in Midland, Michigan, to talk to top execs. He came back smitten, reiterating his buy rating on Dow’s stock. Dow has been transforming itself from a commodity chemical to a specialty chemical company. The keystone was its purchase of Rohm and Haas last year. CEO Andrew Liveris has been hammering the transformation message to shareholders. He wants his company to be a high-growth, long-term investment, not a fast-money, cyclical play for speculators once or twice a decade. He must have been pleased when he read this in Koort’s report to clients: “We believe Dow shares remain somewhat stigmatized by its commodity chemical past as many investors fail to appreciate the transformation that has occurred, resulting in a much heavier weighting towards intermediate and specialty chemicals.” Aw! It is the sort of thing that I would say to my wife over a flickering candle on a night out without the kids. Koort theorizes that Dow’s transformation will be soon be vindicated by the much anticipated downturn in the ethylene chain caused by the deluge of new Middle Eastern capacity. When that happens, Koort says, Dow’s earnings from specialties will carry the day and investors will finally get the point. Perhaps, but only if the downturn is very dramatic. It might not be. Koort said that executives hinted as much when they “laid out a case for better than expected results in the ethylene chain.” Such a case can surely be made, at least from a Dow perspective. There is a slow, albeit timid, economic recovery underway that will absorb some new capacity. This recovery might be given plenty of time. All this capacity was originally supposed to start up years ago, but regional players have had difficulty ramping up the latest generation of plants. Who’s to say all this gets straightened out in the next couple of months? As for Dow, it has a strong position in North America. There, shale gas has helped make regional industry more competitive globally. The Middle Eastern capacity will have a bigger impact on higher-cost naphtha based producers in Europe in Asia. (Dow does, however, have three ethylene crackers in Europe and a JV in Thailand). Dow also makes ethylene and polyethylene in Bahia Blanca, Argentina. The country doesn’t offer the most secure natural gas feedstock supply in the world. But with Braskem soon to command a monopoly in Brazil, South American plastics converters will cherish Dow more than ever before. Now I’m sounding romantic. But indeed, there might be silver linings for Dow either way the downturn plays...

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Eastman Not Closing Ethylene After All
Jun22

Eastman Not Closing Ethylene After All

Here’s a sign that the U.S. petrochemical industry is becoming more competitive: Eastman Chemical has reversed a decision to close ethylene capacity at its Longview, Texas, complex. Eastman had been running four ethylene units at its Longview complex: one with about a billion lb of annual capacity of olefins; another two with a half million lb of capacity apiece; and another cracker, older and smaller than the others. In 2007, following the sale of its polyethylene business to Westlake Chemical, which remains a customer of Eastman’s Longview ethylene, Eastman decided to shut down the three smaller units at the site. It closed the smallest unit in 2007 and one of the half-million-lb units in 2008. However, it never closed the other half million lb unit and it now plans to bring the cracker that it closed in 2008 back in service by the first quarter of 2011. Earlier this month at the JP Morgan Diversified Industries Conference, CFO Curt Espeland said that fortunes have turned around for the Longview units. These plants use mostly propane as a feedstock and turn out a lot of coproduct propylene. The plants have benefitted from the abundance of shale gas in North America, which has kept prices for light, natural gas feedstocks low. “Propane in North America is expected to be pretty available and advantaged on a cost basis compared to the naphtha crackers,” he said. Also, Espeland expects the propylene market to remain tight. North American crackers are favoring lighter feedstocks, namely ethane, and are thus producing less propylene. Refineries, which have been running at low rates because of a cruddy gasoline market, have also been putting out less propylene. Now, I am not 100% certain about whether Espeland means that propane is available because of abundant supply as a natural gas liquid or because other ethylene crackers are opting to go as light as they can, using ethane instead of propane as a feedstock. In either case, other companies are going after propane/propylene arbitrage as well. For example, pipeline firm PetroLogistics is repurposing an ExxonMobil ethylene cracker it purchased a couple of years back into a propane dehydrogenation plant. It plans to start up this...

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