In January 2007, Huntsman Corporation announced that Huntsman Chemical Company Australia Pty Ltd, a part of the Huntsman's Base Chemicals and Polymers division, has completed the previously announced sale of its Polyester Resins (composites) business assets to Nuplex Industries Ltd (Nuplex) for A$9.6 million (approx. U.S.$7.5 million) in cash plus the value of inventory and other stock in trade at the completion date, for a total transaction value of A$20.3 million.
The transaction further includes additional consideration payable over a three year period upon achieving certain associated earnings targets. The assets sold include HCCA's polyesters, vinylesters and gelcoats manufacturing assets. Annual sales from the business total approximately A$53 million.
Monsanto Australia began in the 1928 as a manufacturer of pharmaceutical chemicals and progressively diversified into chemicals made from phenol and later from benzene supplied by Australia's steel plants. Over the next two decades, production shifted from phenol to styrene-derived chemicals. Strategic alliances and its linkage helped Monsanto gain advantage over the former operations of the Australian companies Timbrol and CSR Chemicals in styrene chemicals.
After purchase by the Consolidated Press Holdings (Kerry Packer group of companies) and trading as Chemplex, it could claim to be the largest Australian-owned chemical manufacturing company. In 1993, doubts were identified about the benzene-using industry in Australia when Shell Australia was quoted in European Chemical News (17 May, page 18) as having considered a benzene extraction plant at one of its refineries but is "uncertain whether a local and dependent market can be found". Also in 1993, one-half of Chemplex was sold to the Huntsman Chemical Corporation of the USA (with sales of US$5bn in 1998) for A$70 million. In 1993 as well, Consolidated Press and Huntsman Chemical Corp purchased the USA-based Texaco Chemical.
In December 1998, Huntsman Corporation operation , purchased the surfactants business of Orica at Botany, New South Wales for A$155m. The surfactants are ethylene oxide based and includes the ethylene oxide plant (30 000 tpa capacity).
Styrene monomer produced in an average scale plant (100 000 tonnes per year) built 1977. The plant alkylates largely imported benzene with ethylene manufactured on site. The styrene is believed to be applied as follows;
Phenol is produced in a 20 000 tonne plant built 1963 largely sold to the Australian market of about 15 000 tonnes with exports of 5 000 tonnes. About 12 000 tonnes of acetone is co-produced of which about one-quarter is exported. The cumene process is used starting with benzene and propylene.
Its raw materials are largely imported (85 per cent of aromatic feedstock). It has exported surplus styrene and ethylene to avoid capacity underutilisation. Huntsman has said it has plans for increasing its styrene production by 40 to 50 per cent by debottlenecking and declared plans for an expansion of polyester production - both plans have been deferred. Its favourable purchase price by Huntsman Chemical Corporation of the USA will extend its prospects especially as its new half owner is a major world supplier of styrene polymers that will help overseas sales.
Changes in gasoline formulation or demand for BTX could promote the extraction of benzene from local gasoline at local refineries that could help the company. In the interim, Huntman has to compete against lower cost overseas plants located near raw material supplies. The 5 per cent import tariff and anti-dumping legislation will remain important for the company.
The phenol (and acetone) production has a weak outlook given the small scale of production, the limited local market and again dependence on imported raw materials. The import tariff and anti-dumping legislation will be important influences.
The World War two stimulated demand for many pharmaceuticals especially for newly developed antibiotics. In 1942, the West Footscray site began to manufacture a range of sulpha antibiotic drugs such as sulphanilamide and sulphaguanidine.
Although small on an international comparison, during the 1940s, the Monsanto plant became the most elaborate chemical manufacturing plant in Australia. The site used benzene (from BHP steelworks), sodium hydroxide (from ICI Yarraville), sulphuric acid (from Commonwealth Fertilizers at Yarraville), aniline (from Timbrol at Rhodes) and carbon dioxide (from Australian Oxygen Company) to manufacture complex pharmaceutical chemicals. The pharmaceutical chemicals produced included salicylates (aspirin), phenacetin and acetanilide that required phenol as the starting chemical. Phenol was also chlorinated (eg. to pentachlorophenol) for use in antiseptics and modified, as agricultural chemicals (including 2,4-D). Comment
Phenol was also used to manufacture phenol formaldehyde plastic resins in competition with the ICI (Deer Park, Victoria).
Phenol, initially required for the synthesis of pharmaceuticals, formed the nucleus for the development of the West Footscray site as a major chemical manufacturing centre. From the 1940s, phenol was used to produce phenol formaldehyde, urea formaldehyde and melamine formaldehyde synthetic resins, bisphenol A, rubber chemicals (antioxidants and stabilisers), chlorophenol antiseptics, 2,4-D and 2,4,5-T herbicides.
For two decades phenol was produced using the sulphonation route. Comment
This involves sulphonation of benzene followed by the hydrolysis to phenol. Although a comparatively inefficient process, it is still used in some countries for small scale production.
Facing increasing demand, Monsanto sought a more cost efficient larger scale process. Due to inadequate demand for the co-produced acetone, the later to be adopted cumene process using benzene (available from coking plants at BHP steel plants) was rejected in favour of a newly developed but complex route involving cyclohexanol. The cyclohexanolbased plant was commissioned in 1963 but five years later in 1968, it was replaced by the previously rejected cumene process. This quarter-century old small phenol plant is still used at West Footscray.
Phenol production is about 20 000 tonnes per year of which about 5 000 tonnes (25 per cent) is exported. Previously forming the nucleus for a broad range of chemicals at the site, phenol is now confined to the manufacture of phenol formaldehyde moulding compounds, and is sold to other industry (eg. to Nufarm to produce 2,4-D and 2,5-T herbicides previously manufactured by Monsanto).
The cumene process alkylates benzene with propylene to produce cumene as an intermediate. The cumene is oxidised to phenol with acetone as the co-product.
About 12 000 tonnes of acetone are co-produced and sold of which about one-quarter is exported.
Phenol is manufactured from benzene (about 17 000 tonnes of which 80 per cent is imported) and propylene (about 9 000 tonnes purchased from Kemcor, Shell or ICI). The production of phenol therefore competes with styrene for the limited and decreasing Australian supplies of benzene feedstock. The phenol plant is comparatively small and operates without any international comparative advantage so that its production may be described as a vestige of Monsanto's previous activities.
Monsanto soon established itself in the Australian polystyrene market. Given locally available benzene and substantial tariff assistance, the way was clear for Monsanto to manufacture styrene.
The manufacture of styrene also requires ethylene that was then scarce, expensive to transport and in Australia expensive as it was made by dehydrating ethyl alcohol. In 1958 the Petroleum and Chemical Corporation (Australia) Ltd (PACCAL) at Silverwater, New South Wales began to manufacture gas from petroleum to supplement Sydney's domestic and industrial gas needs (which until now had been made from coal). About one-sixth of the gas produced was ethylene required to produce styrene. In 1961, eight years after establishing its styrene monomer polymerisation plant in Victoria, Monsanto formed a joint venture with PACCAL, called Australian Petrochemicals Ltd (APL) with a plant at Silverwater to produce styrene monomer. The venture was a major setback for CSR Chemicals .
The newly formed APL practically ended CSRC's entry into polystyrene production as APL was located less than 5 kilometres from its plant at Rhodes that had been polymerising imported styrene to polystyrene (page 116). CSRC appeared to have failed to convince PACCAL to supply its ethylene by pipeline to its nearby Rhodes plant.
When Monsanto (as APL) began to manufacture styrene monomer, it automatically led to the imposition of a 40 per cent tariff on the styrene. Duty free imports of styrene monomer by CSRC (a concession essential for its viability) could only continue under a discretionary Ministerial Determination.
With Monsanto moving north to New South Wales in 1961, in the same year CSRC formed a joint venture company with Dow Chemical. The venture was to manufacture styrene and later polystyrene at the Victorian Altona complex (only a few kilometres from Monsanto's West Footscray plant).
APL operated for thirteen years until it became uncompetitive against natural gas (and about the time of the OPEC oil price increases that made oil-based gas plants, such as PACCAL, uncompetitive). In 1974, APL (and PACCAL) were closed down. For the next three years Monsanto again resorted to producing polystyrene from imported styrene (so that for those three years Dow had exclusive but short term access to BHP's benzene). CSRC had by then sold its interest in the joint venture with Dow.
In 1977, Monsanto formed a joint venture with BHP called Hydrocarbon Products Pty Ltd, and commissioned a new styrene manufacturing plant at its West Footscray site. Monsanto's strategic alliance with BHP as its benzene supplier, like the one with PACCAL for the supply of ethylene, again confirmed its strong competitive position in Australia as a polystyrene manufacturer in this instance to Dow's disadvantage.
The raw material feedstock was BTX - an abbreviation for the production mixture of benzene, toluene and xylene produced in the coal coking process. BTX is reformed to benzene and was now only available in Australia from its new venture partner BHP. BHP was Australia's only manufacturer of benzene and BTX supplying Dow for its styrene plant. (Ampol's Matraville plant, which also produced benzene, had closed in 1974.)
In response to Monsanto's second alliance, Dow was now obliged to import its benzene feedstock (from Japan). Monsanto found it to its advantage to form a joint importing arrangement with its competitor Dow as it required more benzene than BHP could supply. The required ethylene was supplied by pipeline from the nearby Altona Petrochemical Company that could complement or replace production from its own ethylene plant (which used ethane and is currently in use).
A chemical company may maintain production or capacity to produce raw materials to provide competition or threat of competition to negotiate favourable prices with its suppliers especially expensive to transport feedstocks. The West Footscray plant has that capacity and can act as buffer for the Altona complex to absorb surplus (cheaper) ethylene.
In 1989, the chemical manufacturing division of Monsanto Australia (including the plant on the Parramatta River at Rozelle, New South Wales that packaged Monsanto's glyphosate herbicide made at West Footscray, Victoria) was purchased by Consolidated Press Holdings (part of the Kerry Packer group of companies).Renamed as Chemplex, it became for a short time the largest Australian-owned chemical company. Borg-Warner Chemicals (operating at Dandenong, Victoria) was also purchased and renamed Marplex. Marplex is a manufacturer of ABS synthetic resins (estimated at around 15 000 tpa) using imported acrylonitrile and butadiene, and styrene purchased from Chemplex). The purchase integrated broadly similar technology using common raw materials.
In 1993, Kerry Packer's Consolidated Press Holdings sold a half share of Chemplex to Huntsman Chemical Corporation of the USA for just $70 million and will trade as Huntsman Chemical Corporation. Huntsman is the largest US manufacturer of polystyrene operating some thirty four plants around the world with 5 000 emloyees with a turnover of US$4bn.
Later in 1993, Consolidated Press Holdings and Huntsman Chemical Corporation (as Huntsman Financial Corp) purchased on a 50:50 basis Texaco Chemical, the chemical division of Texaco Inc for A$1.63 billion (U$1.06 billion, ie. for 70 per cent of annual turnover of U$1.46 billion) to be known as Huntsman Corp and managed by Huntsman. Texaco had been unprofitable marketing chemicals including ethylene, propylene, and ethylene glycol as well as additives for fuels and lubricants.
In 1995, Huntsman Chemical purchased the resins business of the US Ferro Corp (for between $5m and $10m). Ferro manufactures pigment, paste and polyester gel coat and Huntsman had been its major customer.
In 1997 it sold Marbon chemicals a manufacturer of ABS terpolymer plastics located at Dandenong Victoria.
In other words, about four-fifths of the aromatic raw materials used for the manufacture of styrene and phenol is imported. The declining supply from BHP is likely to have been a factor in the dissolution of Hydrocarbon Products Pty Ltd.
|Ethane by pipeline from Bass Strait. Their ethylene plant has a production capacity of about 30 000 tonnes per year and is an alternate source to ethylene supplied by Kemcor Australia (incorporating APC). The LUMMUS technology is used to crack the ethane with steam.|
|Other feedstocks include, propylene (about 9 000 tonnes) supplied by pipeline from Kemcor or by road from ICI Botany or Shell at Geelong, phthalic anhydride from the ICI plant at Rhodes, and imported butadiene and acrylonitrile.|
The phenol plant exports about one-quarter of its acetone and phenol (like most other exports of assisted goods, on a marginal price basis). It is a high cost unit and remains in competition through the benefits of tariffs and anti-dumping protection. As it also competes with the styrene plant for expensive imported benzene raw material and uses propylene freighted to the site, the small high cost phenol unit is vulnerable to closure with the progressive further reductions in tariff assistance.
Although it has a weak long term position, its purchase by a large producer of polystyrene will provide access to new markets, reduce marketing costs and perhaps some premium based on recognition of the Huntsman name. These advantages may provide a basis for it to add more value to its styrene, further processing it to polystyrene and other styrenics as complements to its principal's overseas-made products. During 1997, Huntsman formed Polystyrene Australia - a joint venture company with Dow Chemicals to market styrene polymer resins.
Cost saving measures is assist competitiveness as reflected in reducing employment from around 900 to below 700 persons in the last couple of years.
In summary, Huntsman Chemicals in Australia has a future as a manufacturer relying on largely imported raw material to supply a small market. It may be anticipated to remain in production helped by government assistance, a favourable purchase price by Huntsman (needs only modest profits to make a satisfactory return on their investment) and, through its new part owner, a lower cost entry into world markets (and perhaps even a small premium for the Huntsman name on its products). It would obviously be helped by the Australian manufacture of its principal feedstock benzene.
In the US, Reformulated Gasoline with reduced aromatics content, has been promoted by legislation in some States. There is some prospect for the extraction of benzene from petrol in Australia that could easily produce enough production in Australia to satisfy the needs of Huntsman. Such outcome could secure the company's future for some time. In the absence of that development we would agree with the implication of the 1993 article where, Shell Australia was quoted in European Chemical News (17 May, page 18) as having considered a benzene extraction plant at one of its refineries but is "uncertain whether a local and dependent (our emphasis) market can be found". (Though this comment preceded its purchase by Huntsman.)
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