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Reliance
Exits Non-core Businesses and Looks for
Petchem Acquisitions
In order to focus on its core refining and
petrochemical businesses, Reliance Industries
Ltd. (RIL) will spin off its utilities,
financial services, and telecommunications
businesses as separate entities. Mukesh Ambani
will manage RIL and Indian Petrochemicals
Corp. Ltd. (IPCL), while his brother Anil
Ambani will take responsibility for Reliance
Infocomm, Reliance Energy, and Reliance
Capital. RIL continues to search for potential
acquisition targets, and also plans to invest
$9.7 billion (Euro 7.93 billion, Rs 426
billion) in oil and gas exploration, refinery
expansions, and new petrochemical projects.
The company is currently evaluating
Australia's Qenos and South Korea's KP
Chemical for potential acquisitions, and is in
the process of purchasing Pakistan PTA.
However, there have been reports that RIL
withdrew its bid for Pakistan PTA due to the
existing political uncertainties between
Pakistan and India. In the future, RIL will
shift its focus to the life sciences and
healthcare sectors.
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China
Gets Three New Large International
Petrochemical Complexes
By the end of 2005, China will have gained
three new petrochemical complexes producing
olefins and derivatives that are operated by
joint ventures between major Chinese companies
and overseas corporations. The plants operated
by BASF-YPC Co. (joint venture between Sinopec
and BASF) and Shanghai Secco Petrochemical
(joint venture between Sinopec and BP) came on
stream in June. CNOOC and Shell Petrochemicals
Co. (joint venture between China National
Offshore Oil Corp. and Shell Chemical) plans
to start up its facility in November.
Combined, the three plants will add 2.3
million tonne/year of Ethylene capacity, an
increase of 37 percent, according to SRIC.
Additional plants are in the works as well. A
joint venture between Fujian Petrochemical,
ExxonMobil, and Saudi Aramco broke ground on a
$3.5 billion complex that will produce
Ethylene, Polyethylene, and aromatics, with
completion expected in the first half of 2008.
Sinopec also announced a $10 billion program
to build four Ethylene plants with operations
to begin between 2007 and 2010. Dalian Shide
is reported to be discussing a joint venture
with Sabic to build a cracker as well.
Dushanzi Petrochemical recently received
approval for an Ethylene plant, with
completion expected in 2008. Shenhua Group and
Dow Chemical are investigating a
coal-to-olefins project, and Total
Petrochemicals is discussing construction of
an aromatics and Propylene-based plant. SRIC
reports that Ethylene capacity in China will
reach 20.8 million tonne/year by 2011.
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Acrylic
Acid Market Cooling Off
Demand for Acrylic acid has weakened and is
not expected to improve in the near future.
Some analysts attribute overly high prices as
a reason for the decline in demand. This
situation is in sharp contrast to the supply
imbalance that existed through early 2005.
Oversupply is not anticipated, though, because
demand remains stable at this point, and some
producers are planning to shutdown their
facilities for overhauls, which will reduce
the available supply during those periods. | | | |
CMP Information, the organizers of the international
CPhI shows, has acquired the Synthetic Organic
Chemical Manufacturers Association (SOCMA) trade show
Informex for $24 million (Euro 19.7 million).
According to SOCMA president Joe Acker, Informex has
reached a point where a professional trade show
operation is needed to manage the evolution of the
show to the next level. The sale also makes it
possible for SOCMA to focus more on its mission to
provide assistance to its members with regard to
developing commercial opportunities, monitoring
relevant legislation, and providing assistance with
compliance and other issues. CMP has indicated that it
may take Informex global. It has also committed to
retaining a planning committee comprised of SOCMA
members and providing member-only discounts and
priority booking status.
The rising price of Naphtha, the primary
feedstock for Brazilian petrochemical
producers, is negatively impacting margins, as
prices for downstream products fail to climb.
Lower than predicted domestic demand is also a
concern. The current political crisis, which
concerns accusations of corruption against key
members of the ruling PT Workers Party, is
further complicating the situation.
Devaluation of the Real has been one result,
and will likely cause an increase in debt
levels of many local companies and further
raise the cost of Naphtha and other feedstocks.
Many companies are responding by focusing on
exports, which have been strong and are
expected to balance the decreased domestic
demand.
Many chemical companies in Germany expect the
economy in that country to experience a
downturn over the next six months. According
to a recent survey by consulting group
Capgemini, less than a quarter of the
companies surveyed felt the economy would
improve. Most chemical, pharma, and life
science companies surveyed did, however,
expect both order volumes and exports to
increase in the second half of 2005.
The impact of the recent revaluation of the
Renminbi by the People's Bank of China (PBOC)
remains unknown at this point. The PBOC has
said that further adjustments may be
forthcoming. Many analysts believe that the
Renminbi needs to rise further to encourage
domestic consumption within China and help
reduce the country's reliance on exports. In
general, the revaluation has caused
uncertainty in many sectors of the chemical
industry. Anticipation of future revaluations
may be impacting demand growth. Reduced
margins for Chinese producers exporting their
materials are also an issue.
Despite lower prices and reduced demand in
Asia, Japanese chemical companies reported
higher sales and earnings for their first
fiscal quarter of 2005, which ended June 30th.
A stronger domestic market and higher prices
outside of Asia provided improved margins for
these sales. The Japanese economy is expected
to continue to improve through the remainder
of the year. Mitsubishi reported an increase
in quarterly profits of 16.1% as compared to
the first quarter of 2004. Sumitomo Chemical
experienced a 23.1% year-on-year rise in first
quarter operating profit. Mitsui saw operating
profits for the first quarter increase 10%
over the same period in the previous year.
According to the China Petroleum and Chemical
Industry Association (CPCIA), China's
petrochemical and petroleum industry grew in
value 30 percent to $50.7 billion (Euro 41.1
billlion, Rmb 411 billion). Despite this
growth, high crude oil prices caused the
sector to lose $752 million (Euro 608 million,
Rmb 6.1 billion) in the first half of 2005, an
increase in losses of 63.3 percent as compared
to the same period in 2004. Demand growth for
oil dropped slightly in the first half of the
year, as compared to a nearly 22 percent
increase in the first six months of 2004.
Demand growth for polyolefins in China also
fell in the first half of 2005 compared to
experiencing a 12 percent increase in the
first half of 2004. High prices caused polymer
converters to reduce operating rates or halt
production.
European Union regulations requiring the
reduction of Chromium (VI) content in cement
to below two parts per million is leading
cement producers to increase their use of
Ferrous sulfate as a reducing agent. The
overall Ferrous sulfate market is predicted to
rise from $62.8 million (Euro 51.8 million) in
2004 to $166 million (Euro 137 million) in
2005, according to consulting firm Frost and
Sullivan. Cement manufacturers are likely to
switch to a less expensive, moist grade of the
chemical instead of using the more costly
dried material. Producers are also expected to
focus R&D efforts on developing cements
that do not require the use of Cr(VI), which
would also then eliminate the need for Ferrous
sulfate. At least for the next 5 years,
however, demand for Ferrous sulfate is
expected to increase
