December 2019 – Monthly Review
December 2019 – Monthly Review
Strictly the news this month. If I have time, I’ll publish a year-end editorial some time in the coming week. As always, most of the news content here comes courtesy of ICIS and what you see here is just a fraction of what is available if you subscribe. I do and you should consider it also: (https://subscriber.icis.com/). End of commercial.
Right at the beginning of December, Huntsman told ICIS that its propylene oxide (PO) and methyl tertiary butyl ether (MTBE) units remained down ]following an explosion at a neighbouring butadiene (BD) complex owned by TPC Group. Huntsman's PO plant has a capacity of 240,000 tonnes/year, and it produces tertiary butyl alcohol (TBA) as a byproduct, according to the ICIS Supply & Demand Database. TBA is dehydrated to produce MTBE. Huntsman's MTBE capacity is 650,000 tonnes/year.
"Although the PO/MTBE unit was not damaged, it remains idled for the time being because of certain dependencies with the adjacent site that was damaged by the fire," Huntsman said in a statement. The company did not elaborate on the nature of those dependencies. Huntsman is waiting to get access to the TPC site and is reviewing alternative ways to bring the units fully back online, it said. Meanwhile, it does not know how long the units will remain down or what the ultimate effect the shutdown will have on its earnings.
So far, Huntsman expects it will take a hit of a few million dollars to its fourth-quarter adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for continuing operations, the company said. This is largely related to sourcing PO. The other units at Huntsman's Port Neches complex have returned to their pre-blast operation levels, the company said. Huntsman is selling the complex to Indorama Ventures as part of a larger $2.1bn deal that includes its chemical intermediates and surfactants businesses. That deal is still on track to close in early 2020, Huntsman said. It recently received approval from the Committee on Foreign Investment in the US (CFIUS), one of the regulatory milestones the agreement needs to reach before the companies can complete the sale.
[caption id="attachment_1575" align="aligncenter" width="1024"]The Deal's Still on Track[/caption]
My alma mater, Pilot Chemical acquired Mexico’s fine chemicals company Organo Sintesis for an undisclosed sum, as reported mid-month. Organo manufactures products for the personal care, disinfection, sanitising, cleaning, oil and gas, and water treatment industries, serving customers worldwide. The acquisition will expand Pilot Chemical’s business into the Mexican market, as well as South and Central America, and it will provide growth opportunities for Pilot’s surfactants and antimicrobial businesses, the Cincinnati, Ohio-based company said in a statement. The deal includes Organo’s headquarters in Mexico City and a production site in Toluca, along with a workforce of nearly 100 employees. Organo will continue to be led by director general Federico Soto, who will report to Mike Clark, Pilot's president and chief operating officer. [I believe that this is the first step outside of the US for manufacturing at Pilot Chemical, so congrats and well done to the new team there. Taking a quick look at the website, it looks like quat based specialties and a CGMP plant – so nothing like the core anionics business at Pilot and more of a fit with Mason. Good for them!]
[caption id="attachment_1576" align="aligncenter" width="1024"]Looks like a good fit[/caption]
In the latest periodic update, ICIS reported that Sasol is increasing ethylene production rates at its Lake Charles Chemicals Project (LCCP) in Louisiana following the successful replacement of an acetylene reactor catalyst. The 1.5m tonne/year LCCP ethane cracker had achieved “beneficial operation” in August, but ran at only about 50-60% of nameplate capacity due to an underperformance at the plant's acetylene removal system. “This issue has now been resolved. The outage to replace the catalyst was successfully completed on schedule and within budget,” the company said in the update. Following the outage, the unit was started up smoothly and ethylene production rates are about 85-90% of nameplate capacity and increasing, it said. The quality of the ethylene produced also meets US Gulf Coast ethylene pipeline specifications, it added.
Sasol said that low density polyethylene (LDPE) from the LCCP has been commissioned, with beneficial operation expected later this month. The company defines beneficial operation as production of on-spec material for at least 72 hours continuously. The remaining three downstream units under construction to complete the integrated LCCP site - Ziegler Alcohols and Alumina; Alcohol Ethoxylates; and Guerbet Alcohols - remain on cost and schedule, it said.
[caption id="attachment_1578" align="aligncenter" width="800"]Moving a lot better at Sasol[/caption]
For those keeping track, the US / China tradewar grinds on and affects chemicals. Just a reminder that ICIS keeps a live topic page on the matter here. https://subscriber.icis.com/news/petchem/news-article-00110241140
We don’t often write about DEA here as it is a small part of the surfactants market. However, ICIS notes that the European ethanolamines market may already be adjusting to the idea of lower diethanolamine (DEA) offtake into the downstream global glyphosate sector in 2020. [I’m assuming you know why that is - A ruling this year by a US judge that Bayer's weedkiller Roundup - which contains glyphosate - is carcinogenic, is likely to impact on US demand and could also have a knock on effect globally. ]. Some suppliers are already cutting DEA out of their production process as much as possible, but also looking for other end uses. DEA is primarily used in the production of glyphosate, a herbicide, but is also used as a surfactant intermediate for products used in in personal care applications, in polyurethane production, in gas treatment and as a corrosion inhibitor. Glyphosate volumes are likely to shrink over the next year as concerns surrounding usage in weedkiller continue to grow. While glyphosate is not widely used in Europe, the loss of a DEA export market could be a problem for European producers. Last year, total DEA exports out of Europe were 61,700 tonnes.
[caption id="attachment_1579" align="aligncenter" width="660"]Throttling the DEA market[/caption]
ICIS takes a look ahead at the fatty alcohols market and concludes that European fatty alcohols are likely to see more stable demand for 2020. There are still some concerns that an economic downturn is on the way. This would typically drive down demand for several products, including surfactants. The traditional cracker maintenance period in the second quarter is expected to impact EO and PO supply and in turn could limit demand for fatty alcohols. There will likely be a peak in buying interest just before and just after the maintenance period. No major production issues are anticipated in 2020. There was one unit in maintenance in December but this was expected back on line in the New Year.
Feedstock palm kernel oil (PKO) imports remained healthy at the beginning of the fourth quarter, though a significant hike in prices seen heading towards the end of 2019 could impact the level of imports sent over in 2020.
[caption id="attachment_1580" align="aligncenter" width="1024"]I wouldn't try to read too much into this graph[/caption]
At the end of the year, ICIS published a pretty nice M&A review, which you should read. It notes that the year started strong with Sika’s acquisition of fellow construction chemicals specialist Parex, and Evonik’s methacrylates business selling to private equity firm Advent International for €3bn, a price tag so far above guidance that it required fresh regulatory disclosures.
Also European chemicals firms remain intent on pushing into more specialised sectors and away from commodity chemicals, and that continues to drive M&A appetite, with a flurry of late fourth-quarter activity in the ingredients and cosmetics sectors. Most notably, International Flavors & Fragrances announced a merger with DuPont’s nutrition and biosciences division to create a $45bn giant in the sector.
Here’s a useful summary of some of the key deals in the sector.
SellerCompany/divisionBuyerSectorPriceParexParexSikaConstructionSwfr2.5bn*EvonikMethacrylates opsAdvent InternationalPlastics€3bnInnophosInnophosOne Rock CapitalIngredients$932mBlackstoneArmacellPAI PartnersFoams, insulation€1.4bn*BASFPigmentsDICPaints, coatings€1.15bnLORD CorpLORDParker HannifinAdhesives, coatings$3.68bnGolden Gate CapitalArrMazArkemaSpecialty surfactants$570mHuntsmanChemical intermediatesIndoramaPO, GE, ethanolamines$2bnVersumVersumMerckSemiconductors€5.8bnPolyOnePerformance productsSK CapitalConstruction, packaging$775mLANXESSChrome chemicalsBrother EnterprisesLeather treatmentNot disclosedClariantMasterbatchesPolyOnePigments$1.6bn*HitachiChemicalsShowa DenkoAdvanced materials$8.8bn
Evonik has been somewhat successful with sophorolipids commercially and has spoken extensively at my conferenceson the matter. Right at the end of the year Unilever announced that they have launched a dishwashing liquid using rhamnolipid produced by Evonik. It is the first time the naturally occurring and biodegradable surfactant has been used in a household cleaning product. The rhamnolipid is included in dishwashing brand Quix, which Unilever launched in Chile earlier this year. Rhamnolipid is 100% renewable and biodegradable but is also ultra-mild on skin, which sets it apart from other surfactant options. “Our R&D team had been aware of Rhamnolipid for some years, but the technology and the science weren’t at a point where we were able to scale it and it remained an invention in a lab, until now,” says Peter ter Kulve, president of Unilever’s Home Care. “That’s why we are so delighted to be partnering with Evonik. Together, our teams have worked hard to deliver a sustainable and safe product with even better performance.”
[caption id="attachment_1581" align="aligncenter" width="740"]This is a big deal for biosurfactants[/caption]
As a follow-up to last month’s piece on dioxane, CBS New York reports - In a little over a year from now, cleaning products containing the contaminant 1,4-dioxane can no longer be sold New York. The chemical has been found in drinking water wells and is considered a likely carcinogen, CBS 2’s Carolyn Gusoff reported. Some well-known cleaning and cosmetic products will have to change their formula to remain on store shelves in the Empire State Gov. Andrew Cuomo signed a bill into law that prohibits the sale of thousands of products that contain more than a trace of 1,4-dioxane. “Whether you hold it in your hand, apply it to your face or drink it in your water, it can cause cancer,” said Assemblyman Steve Englebright, D-East Setauket. Englebright, a scientist, sponsored the bill, after Long Island turned up the highest detected levels in the entire country. With no federal standards for the chemical, he said the state had to lead the way and does not expect the products to disappear from New York. “Those products need our market to remain viable, so they will make adjustments in the manufacturing process,” Englebright said.
[caption id="attachment_1582" align="aligncenter" width="1024"]They've dealt with far worse[/caption]
The American Cleaning Institute, which represents more than 100 companies, called the law ill advised. It blames contaminants in drinking water on products from decades ago, adding today’s product levels are so low, lowering them further is not feasible. “The passage of this bill will not have addressed the issue at hand and it could take safe and essential cleaning products off store shelves,” the ACI’s Brian Sansoni told Gusoff during a phone interview. The law gives manufacturers until 2022 to adjust their formula. Environmental groups said it is possible to make cleaning products that don’t produce the 1,4-dioxane. “The industry doesn’t want to remove the 1,4-dioxane, but they can. We can no longer live in a day and age where we are shampooing our hair and bathing our children in cancer-causing chemicals,” said Adrienne Esposito of the Citizens Campaign for the Environment. Water customers will soon be paying dearly to strip the contaminant already in Long Island’s ground water from decades of industrial dumping. Notices just sent to Suffolk County water customers reveals a new $20-per-quarter surcharge.
The utility said it supports the new law to prevent 1,4-dioxane from reaching ground water in the future and sponsors said the product ban will eventually save municipalities millions by preventing continued contamination. [I will say no more on this. See last month’s blog for relevant opinion]. You can be assured that this matter will be covered and discussed in depth at my conference in May.
And finally in the news. P&G has been involved in the stealth of a range of water free cleaning products for home and personal care, marketed under the DS3 brand. Very cool. These videos give you the basics. The concept is – you have water already at home so why buy it (the water) in the shop and schlep it home with you in your gas-guzzling minivan? Fair point. Can someone tell me what the ingredients are?
and
That's it for now. Have a great 2020.