25 August 2009 15:31 [Source: ICIS news]
By Will Beacham
LONDON (ICIS news)--Chemical sites and clusters are facing unprecedented pressures during the economic downturn. The whole concept - where different players occupy a site or cluster, sharing services, feedstocks and finished products - relies on a sense of cooperation between the various players.
During the good times, this works well. Players benefit from the reduced cost of shared infrastructure such as power, steam, security and even maintenance. Close proximity to customers and suppliers means lower transport costs and less risk when moving hazardous products.
But during a downturn as severe as this one, chemical companies everywhere are re-examining their manufacturing strategies. With global demand for chemicals still down by up to 25%, many will be asking whether it makes more sense to concentrate production at core, wholly-owned sites, rather than satellite facilities which may be part of clusters or shared sites.
When a company pulls out it can have a knock-on effect across the cluster.
A look at the case of the ?xml:namespace>
In July, Spanish group La Seda de Barcelona announced the shutdown of its 500,000 tonne/year purified terephthalic acid (PTA) plant. Earlier that month, US-based producer Dow Chemical said it would close its 320,000 tonne/year ethylene oxide (EO) and 275,000 tonne/year ethylene glycol (EG) facility. The news sparked further closures by UK-headquartered Croda, which said it would cease production at the site.
In the past two years, SABIC has closed an aromatics unit and INIVISTA said it would cease adipic acid production at the site by the end of 2009.
SABIC is due to bring on stream a new 400,000 tone/year low density polyethylene (LDPE) plant in August, which will soak up some of the cracker's ethylene capacity once production is fully ramped up. But this still leaves SABIC with a great deal of excess from the cracker.
The closures are undermining the future of petrochemical production at the site for the very reasons a cluster works well in the good times. Services shared between fewer players are more expensive, while the lack of feedstocks can kill downstream production, as the
There is a convincing argument for government intervention in such situations. A strong chemicals industry is the backbone of a thriving manufacturing economy. Governments can work in many direct or indirect ways to support a cluster during the downturn.
Being based mainly around the US Gulf coast, chemical clusters there are very well connected by pipeline networks. This makes them less vulnerable during the downturn as they have more flexibility to find feedstocks or sell offtake elsewhere if a player pulls out.
Whichever side