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ICI Australia 

Now Orica

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A side gate view of the Botany complex (before ICI became Orica).

Origins of ICI in Australia

During the early part of the twentieth century, Government provided the means for prices to rise above open market levels (by tariffs and import licensing) widening the manufacturers' margin between the production cost and the selling price. Although these measures promoted some investment in Australia's chemical industry, it was the anticipated world wide shortages of key materials and the reduced competition associated with World War 2 that provided the major stimulus. War meant Australian-based manufacturers could anticipate even higher prices with reducing world trade. Monsanto of the USA and ICI of the UK began to establish and acquire manufacturing centres in New South Wales, Victoria and South Australia.

The Imperial Chemical Industries of the United Kingdom (ICI UK) was formed in 1926 from a group of four chemical companies. (The companies were Brunner Mond producing alkali and ammonia related chemicals; Nobel explosives; United Alkali - caustic soda, chlorine and related chemicals; British Dyestuffs Corporation - aniline-based dyes made from coal.). In 1928, the Australian and New Zealand subsidiaries and agents of these four companies became Imperial Chemical Industries of Australia and New Zealand Ltd (ICIANZ, from now called just ICI). Since 1950, ICI (UK) has released shares in its Australian subsidiary (ICIANZ) to trade as ICI Australia with 43 per cent public ownership.

Between 1936 and 1940, ICI began its investment in Australia by acquiring or establishing key chemical manufacturing plants in Victoria, New South Wales and South Australia. Those investments gave it a basis for dominating the Australian chemical industry for the next half century.

The major investments by ICI leading up to World War 2 were in agricultural chemicals, soda ash, phthalic anhydride, explosives, caustic soda and chlorine. Details of investments are as follows.

bullet Agricultural Chemicals

The purchase of the chemical business (excluding phosphate fertilisers) of the Commonwealth Fertilizer and Chemicals plant at Yarraville, Victoria in 1936, which included a chloralkali plant necessary to produce organo-chlorine chemicals.

This plant was progressively expanded to produce chemicals derived from caustic soda and chlorine, including pesticide chlorohydrocarbons such as DDT and BHC, herbicide chemicals, as well as aniline and diphenylamine to replace its purchases from Timbrol . The plant still operates to produce chlorine for Melbourne's water and sewerage with surplus chlorine used to produce Cerchlor- a chlorinated wax used as a fire retardant plasticer for electrical insulation.

bullet Soda ash (sodium carbonate)
A plant was commissioned at Osborne in South Australia in 1940 using the Solvay process. Soda ash is used in the manufacture of glass, soap and other chemicals, and indirectly, for water treatment and wool scouring. The company was sold in 1988 and became Penrice Soda Products Pty Ltd.
bullet Phthalic anhydride
Newcastle Chemicals was formed in 1940 as a joint venture with BHP at Newcastle, New South Wales (a major steel producing centre) to manufacture ammonium chloride, hydrochloric acid, b-naphthol and phthalic anhydride and its esters. The plant no longer operates and the phthalic anhydride is produced by ICI at Rhodes (formerly CSR Chemicals ).
bullet Explosives
The Australian Explosives and Chemical Co. Ltd at Deer Park, (near Yarraville, Victoria), owned by (Nobel became part of ICI UK), as an explosives and specialty chemical manufacturing centre. Explosives were supplied to Government ordnance factories.

The Deer Park plant was later extended to the production of other chemicals, such as urea formaldehyde and nitrocellulose for lacquers. Nitroglycerine, nitrocellulose and aniline were also manufactured and later diphenylamine used to manufacture phenothiazine (a veterinary anthelmintic and an antioxidant additive for rubber) - now closed.

bullet Caustic soda and chlorine
A then substantial mercury cell chloralkali plant (producing sodium hydroxide and chlorine) was commissioned in 1941 at Botany, New South Wales.

This chloralkali plant formed the nucleus for the progressive development of a broad range of chemicals. The chlorine was used to manufacture chlorohydrocarbons (carbon tetrachloride, tri- and per-chloroethylene [tetrachloroethylene]). The less valuable sodium hydroxide (in a sense by-product to chlorine but with a 50 per cent tariff) used to manufacture low value chemicals including sodium silicates.

bullet Other
In 1942 a carbon disulfide plant was commissioned to produce xanthates competing with Timbrol (later Union Carbide Australia).
In 1951 a formaldehyde plant was commissioned to produce formaldehyde using methanol as raw material. The formaldehyde was used to manufacture urea formaldehyde adhesives.
Although ICI diversified into a range of activities, the Botany complex became the hub of ICI's manufacturing activities in Australia.

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ICI at Botany

The Botany Bay site, just south of Sydney New South Wales, was established in 1940 with an electrolytic mercury cell chloralkali plant to produce chlorine and caustic soda made from salt (shipped from Queensland). Chlorine enabled the production of a range of chlorohydrocarbons used as insecticides, herbicides and solvents, and later to produce PVC synthetic resin. The co-produced caustic soda was less valuable to ICI but, with the benefit of an import tariff of 50 per cent, contributed to the chloralkali plant being a profit source and important nucleus for Botany for several decades.

The chloralkali plant has a production capacity of about 81 000 tonnes of chlorine and 86 000 tonnes of caustic soda.

Chlorine-using Chemicals
By 1954, the Botany plant was successfully producing a range of chlorohydrocarbons but with surplus chlorine capacity. With an available import tariff of 40 per cent, chlorine was used to produce two chlorine-using chemicals.

A carbon tetrachloride plant was commissioned, which at the time of its closure in 1990, (carbon tetrachloride is now generally banned as a carcinogen) had an annual production capacity of about 30 000 tonnes. Carbon tetrachloride was used as a solvent and raw material for chlorofluorocarbons.

Batch-scale manufactured vinyl chloride monomer (VCM) was polymerised to polyvinyl chloride synthetic resin (PVC). The process used expensive acetylene gas as feedstock with a capacity of just 5 000 tonnes of PVC per year. (The acetylene gas was produced from calcium carbide produced in Tasmania by fusing limestone and coke in an electric arc furnace. It closed in the early 1980s.) Nine years later in 1963, the acetylene-using plant was replaced by another using cheaper ethylene supplied from a new (commissioned 1960) naphtha cracker and a lower cost oxychlorination process to produce VCM via EDC.

Until closing in 1996, the PVC plant had an annual production capacity of about 60 000 tonnes (believed to be fully utilised) using about 34 000 tonnes of chlorine per year (ie. about 42 per cent of the chlorine produced at their chloralkali plant). At Laverton Victoria, ICI is extending its capacity to 140 000 tpa using imported VCM to maintain its market share in PVC. (ICI competes with Auseon at Altona who, also using imported VCM, is extending its production capacity to 100 000 tpa.)

Synthetic Resins
Polyethylene today is the largest volume synthetic resin manufactured in Australia produced by three companies and in three forms with ICI as the first manufacturer.

In 1957, ICI commissioned a patented high pressure and high temperature polyethylene plant with an initial capacity of 7 000 tonnes per year (producing about 3 000 tonnes). It was progressively expanded over the next four decades to about 90 000 tonnes and is still in operation after a redesign in 1989.

Note: In 1933, a patent by ICI (UK) to manufacture polyethylene from ethylene was registered using high pressure and high temperature technology. Twenty one years later in 1954, a much cheaper process was developed in Germany using a new catalyst (Ziegler catalyst). However, the new German technology was not adopted at Botany for another 37 years as ICI was able to claim an extension to its patent for its higher cost route (claiming lost profits during the war years). Reference J.E. Kolm, The Chemical Industry - Australian Contributions to Chemical Technology' in `Technology in Australia - 1788 to 1988', Melbourne 1988.
In 1960, three years after commissioning its polyethylene plant, a then substantial scale naphtha cracker was established at Botany with an initial production capacity of 60 000 tonnes of ethylene per year (ie. one year before the Altona petrochemical complex was established as ICI's major Australian competitor) . The immediate benefit was that cheaper ethylene, (previously made by dehydrating ethanol [produced by CSR by fermenting molasses]) improved the competitiveness of ICI's high cost polyethylene plant and other ethylene applications. Though practical then, it was obviously a very expensive route to produce ethylene - today ethanol is commercially produced from ethylene.

The comparatively large naphtha cracker helped reorientate the Botany plant from the slow growing chlorohydrocarbon chemical market, which it had been serving for two decades, towards the much faster growing synthetic resin (polyethylene, polypropylene and PVC) sector. The naphtha cracker was expanded over the next twentythree years to about 100 000 tonnes per year and then replaced in 1983.

Flow chart of development of ICI 1941 to 1962

Naphtha crackers and economic efficiency
The application of the feedstock produced by a naphtha cracker has an important bearing on competitiveness. A typical naphtha-using cracker, as then used at Botany, produces a range of hydrocarbon feedstocks, predominantly ethylene (about 60 per cent), C3 - propylenes (about 30 per cent) and a C4 stream - butane and butene isomer mixture (about 10 per cent of usable products). The competitiveness of a naphtha using petrochemical plants is dependent on the value of these three co-product feedstocks. For example, in 1986, the value of these co-products from naphtha exceeded the cost of the feedstock (ie. making naphtha crackers cheaper than gas-based units).

Initially, the potential amount of C3 feedstock produced at Botany may have been too low to justify a polypropylene plant (say then about 20 000 tonnes per year) although a polypropylene plant would increase the value (ie. reduce the opportunity cost) of operating the naphtha cracker. Though the amount of ethylene progressively increased, and with it the amount of C3 co-product feedstock, a polypropylene plant was not established at Botany for another nineteen years (in 1979).

Shell established Australia's first polypropylene plant 11 years after Botany installed its naphtha cracker with a capacity of 25 000 tonnes per year (a size which was about the minimum competitively sized unit for Australia at that time). Extrapolating back to 1960 (at the time of installing ICI's LPG/naphtha cracker), would imply a minimum competitive size for a polypropylene plant at about 20 000 tonnes per year. Regardless of the minimal scale, Botany's LPG/naphtha cracker was installed before all the feedstocks could be fully utilised, and would not be competitive (ie. not commissioned) without assistance.

During those nineteen years of undervaluing the potential C3 feedstock, (although obviously maximising it from ICI's perspective), Shell commissioned (1971) a 25 000 tonne per year polypropylene plant at their Clyde, New South Wales petroleum refinery. Two years later Hoechst established a 24 000 tonne plant at Altona, (expanded to 60 000 tonnes in 1979). The presence of two competing polypropylene plants, producing for a small domestic market and with a tariff on the chlorohydrocarbons (10 per cent higher than for polypropylene) promoted ICI's propylene to be underutilised. Propylene was used for two decades as a raw material for the chlorohydrocarbon chemicals (and some sales to CSRC for their oxo alcohol plant ) instead of an intrinsically more valuable use as feedstock for polypropylene resin.

The C4 feedstock stream was not used for six years until 1966 when a joint venture of ICI with the US Phillips Petroleum company was formed called Phillips Imperial Chemicals Pty Ltd. (The Phillips plant at Kurnell had been established six years after ICI's naphtha cracker and fiver years after the Australian Synthetic Rubber Company at Altona.) Located across Botany Bay at Kurnell, the venture produced synthetic rubber from ICI's Botany plant helped by a substantial tariff of 50 per cent. Sharing the small Australian market with the Australian Synthetic Rubber plant at Altona with access to cheaper feedstocks, the joint venture closed seventeen years later in 1983. ICI's C4 stream was after that processed in Japan and supplied under contract to Australian Synthetic Rubber Company (a subsidiary company of ICI's Altona-based competitor). Smaller amounts were also sold to Dow and Chemplex (now Huntsman Chemical Corp.) to produce styrene butadiene latex and ABS resins respectively.

Botany's LPG/naphtha cracker was therefore then and even now operating at an opportunity cost offset and made viable by price inflating taxes on competing imports. The Botany plant not only competed against overseas plants that were larger, but those that made better use of all the co-products, including the C4 stream.

Of course from the perspective of ICI, their LPG/naphtha cracker provided Botany with cheaper feedstocks improving competitiveness. With access to cheaper feedstocks, the new cracker contributed to the progressive closure of Timbrol/UCAL and it was particularly important for Botany to remain competitive against the Altona companies with access to cheaper feedstocks. It was nevertheless internationally uncompetitive and vulnerable without tariffs and anti-dumping assistance. ICI now obtains ethane from South Australia with a $300 million pipeline and spent $100m converting its Botany plant. ICI's competitor in Victoria (Kemcor) extracts only some of the ethane available to it from Bass Strait.

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Flow chart of development of ICI 1963 to 1979

Botany Development

Many low volume high cost chemicals began to be manufactured at Botany using cheaper feedstocks.

 bullet Ammonia and nitric acid

In 1964 plants were commissioned to produce ammonia, nitric acid, ammonium nitrate, urea and methanol (total capacity was about 64 000 tonnes). The plants were closed nine years later in 1973.
bullet 2,4-D and 2,4,5-T

These two herbicide chemicals, produced by chlorinating phenol, were produced through the 1970's.
bulletEthylene oxide

The availability of cheap ethylene feedstock enabled Botany to produce a range of fast growing chemicals. The first chemicals were made from ethylene oxde, a useful intermediate for surface active agents (detergent chemicals), polyols and hydraulic fluids.

An ethylene oxide plant was commissioned in 1966 progressively expanded to a current capacity of about 40 000 tonnes per year believed to be operating near full capacity. (Ethylene oxide is produced by reacting ethylene with oxygen). Typical of most Australian plants, it is small in comparison to world-scale plants that range to 300 000 tonne capacities (ie. up to ten-times larger) and of course with a substantial scale-related operating cost penalty. Production is helped by a 5 per cent import tariff and extensive use of Australia's anti-dumping legislation.

With some limited sales of ethylene oxide (eg. to Dow for polyol production), most of ICI's ethylene oxide production is reacted with a range of basic chemicals. Chemicals produced included glycols, (used in automotive coolants, plastics, chemical intermediates etc.), glycol ethers, (used in brake fluids, solvents and paints), ethoxylates (as detergent chemicals including nonyl phenol ethyxolate, solvents, emulsifiers, polyols used in polyurethanes) and triethanolamine (by reacting ammonia and ethylene oxide and used as a solvent and as a chemical intermediate).

Note that polyurethane is a reaction product of a polyol and an isocyanate. The technology for producing the isocyanate chemical is too complex to be competitively made in Australia's small market without any other competitive advantages.

Ethylene oxide is also exported by ICI (around $100 000 pa).

bullet Polypropylene

Over the next nineteen years, ethylene production from ICI's naphtha cracker increased (mainly used for polyethylene and ethylene oxide) and with that increased demand, the amount of co-produced propylene (C3) feedstock (then used to produce chemicals that could have been derived from cheaper feedstocks).

By 1979, production of C3 had reached a level where a competitively sized polypropylene plant could be justified by ICI. There was now adequate local demand and little growth for chlorohydrocarbon chemicals made from the C3 stream. A $60 million 50 000 tonnes per year polypropylene plant (initially producing about 35 000 tonnes) was commissioned at Botany. The plant has been expanded to a current capacity of 70 000 tonnes per year (the LPG/naphtha cracker can produce 100 000 tonnes of propylene).

Note, given that LPG/naphtha crackers are only competitive against ethane-based units by utilisation of the co-produced feedstocks C3 and C4, only the polypropylene plant justifies its operation using naphtha.
The plant competes against polypropylene plants operated at Shell refineries at Clyde, New South Wales (80 000 tonnes, to be expanded to 120 000 tonnes) and Geelong, Victoria (60 000 tonnes). Typical new plants being installed around the world range from 100 000 to 150 000 tonne capacities.
bullet Polyvinyl chloride

In 1979, ICI commissioned a PVC manufacturing plant at Laverton, Victoria to polymerise imported vinyl chloride monomer (VCM). Costing $36 million, the VCM polymerisation plant has a capacity of about 60 000 tonnes per year (believed to be currently operating at near capacity). The plant is isolated from other chemical manufacturing plants and about 4 kilometres west of the Altona petrochemical complex (where Geon, formerly BFGoodrich, has been operating a similar plant since 1961 producing about 62 000 tonnes of PVC per year and using imported VCM since 1980).

The polymerisation process adds little real value to the VCM which is hazardous and expensive to transport but made viable by a tariff of 30 per cent (5 per cent by 1996) on PVC.

The reason for establishing this isolated low value adding plant is unclear. One interpretation is that ICI could have legitimately invoked its right to seek a tariff on VCM to protect its VCM synthesis plant at Botany (ie. analogous to tariffs on imported styrene for polystyrene). Such a tariff would have contributed to the closure of BFGoodrich reliant on imported VCM for which it would have had to pay a tariff of 30 per cent. Instead, it appears to have been more profitable for ICI to take advantage of the 30 per cent tariff and allow Goodrich to remain in competition. ICI forewent income and scale (ie. lower costs) benefits for its Botany synthesis plant in favour of profits derived by spending $36 million on a plant simply polymerising hazardous and expensive to transport VCM that serves to increase Australian PVC resin prices.

It is not clear if this was an engineered initiative of ICI or simply the implicit consequence of tariffs. Whatever the interpretation, it points to another costly aberration of protectionism supporting low value adding high cost plants in favour of more competitive plants that were paid for through tariff-inflated prices.

New Ethylene Plant
By the 1980s, the Botany plant had experienced two investment phases. The first phase started in the 1940s with the manufacture chlorohydrocarbon chemicals, and the second about two decades later with the manufacture of polyolefin plastics.

At this time, the first development phase at Botany was well and truly in decline as signalled by closures of some chlorohydrocarbon manufacturing units and stagnation of others. 

In 1983, ICI extended the second phase by commissioning a new ethylene production unit that used naphtha/LPG gas feedstock.

The investment was described as a white elephant in industry circles and fundamentally uncompetitive. However, in 1978/79 the chemical industry was due for a review of protection rates and a negotiated deferral in return for this investment enabled the retention of a range of uncompetitive chemical activities owned by ICI. 

This deferral split the petrochemical sector between Altona sitting on adequate ethane, and Botany that would one day have to build a pipeline from South Australia. 

The $400 million ethylene cracker has a nominal capacity of 250,000 tonnes of ethylene and 100 000 tonnes of propylene per year. The investment allowed ICI to retire its twenty-two year old and by then small (high cost) naphtha-based unit that had not been providing enough feedstock for its expansion program (purchasing supplementary feedstock from Shell's Clyde plant).

Although a single stream unit, the ethylene plant has six cracker units enabling the use of naphtha and LPG in variable ratios ranging from 30:70 to 70:30 according to product requirements or relative feedstock prices. However, this flexibility cost ICI $40 million and the complex is now three-quarters ethylene-based.

Note the ratio of C2 compared to the co-produced C3 and C4 is influenced by the ratio of LPG to naphtha with more ethylene produced from LPG. This flexibility cost $40 million (arguably without contributing to Botany's international competitiveness). Of course for ICI, the flexibility enabled it to remain competitive in Australia, to support its polypropylene plant (established four years earlier in 1979) and avoid having to purchase propylene (from Shell at Clyde) for its half, and soon total ownership of the CSR Chemicals plant.
Botany's Feedstocks and Scale

The Botany plant has been using expensive feedstocks. This was publicly promoted to the Industries Assistance Commission in 1986 when ICI said it could reduce the variable cost of its olefines (ie naphtha-based production) by $100 per tonne (say about 15 per cent the cost of polyethylene) if it had access to feedstocks at the same terms as its competitor in Victoria. It uses naphtha purchased from the Caltex refinery at Kurnell (across Botany Bay from ICI's plant) and LPG shipped from Bass Strait.

Had ICI not invested in its 1983 ethylene unit, the Altona complex would almost certainly have expanded (as announced but subsequently withdrawn in 1989) using cheaper feedstocks than were available to ICI.

Note during this period there had been active lobbying against a scheduled review of assistance on the chemical industry. The value of the deferred review to ICI until it began in 1985 (and not implemented until 1987) made a substantial contribution to the cost of this underperforming cracker (that also became a centre piece for justifying continued assistance.)
Naphtha is always more expensive than the gas alternative especially when oil prices are high. Therefore, during the OPEC oil price hikes of the 1970s, many naphtha-based reactors around the world became uncompetitive and closed. Today's naphtha crackers remain competitive against gas-based units as the higher cost of feedstock is offset by effectively using C3 and C4 co-products.
Note according to Chem Systems (European Chemical News, February 23, 1987) in 1986, co-product credits exceeded the cost of naphtha. The credit made naphtha-based polyethylene plants competitive against zero value ethane units located in the Middle East.
However, although ICI uses the C3 co-produced feedstock for the higher valued polypropylene, it has to sell or effectively undervalue the potentially valuable co-produced C4 feedstock. The C4 has been shipped to Japan for processing (and returned through Bass Strait, the source of ICI's LPG/naphtha feedstock) for use at Altona (for synthetic rubber) or cracked to lower value feedstock (C2 or C3). It is clearly an inefficient use of naphtha derived co-feedstock (ie. poor co-product credits or netback) that contributes to the fundamental weakness of Botany both internationally and compared to its Altona competitor.
It could be argued that ASR's C4-using rubber plant should have been located at Botany permitting the oil-based SCAL 1 cracker at Altona to be closed (although styrene would have to be freighted from Victoria's Dow or Huntsman plants). That is not to justify the manufacture of synthetic rubber in Australia but perhaps illustrating one of many anomalies attributable to Australia's protectionist era.
Scale and Capacity Utilisation
Typical world-scale ethylene crackers range to around 750 000 tonnes with operating cost advantages of at least 15 per cent over Botany's plant. Competitive plants also use cheap natural gas, (as available to Altona) or more fully utilise the co-produced feedstocks.
A report prepared by the ACIC, of which ICI is a member, concluded that a 15 per cent tariff, as suggested by the Industries Commission, would lead to the closure of the Botany site (and of CSRC) (Industries Assistance Commission Report 1986 on the Chemicals and Plastics Industries, Volume 1 page 285. However, ICI has indicated (IAC ibid. page 286), that it would not necessarily abandon the entire site. One strategy would be to close the ethylene cracker, the polyethylene and polypropylene plants, but continue to operate with the other (and older) plants (ie. PVC, chloralkali, ethylene oxide and derivative plants). Tariffs are now being reduced well below the levels which were promoted by ICI as leading to such closures but perhaps signalled the then relative profitability (or bargaining positions) of the Botany production units.
The Botany cracker is significantly larger than the crackers at Altona. Though smaller than world scale plants and at a feedstock cost disadvantage, fully utilised it is competitive with the Altona crackers though using cheaper feedstock.

The penalty of underutilising installed capacity is significant that can more than offset any feedstock and scale advantages. Expressed another way, the marginal cost of production near full capacity is low which was an important influence on subsequent investments (and retentions) at Botany.

Until 1992, the cracker could produce about 50 per cent more ethylene than it required for its ethylene-using plants. To minimise the penalty of scale underutilisation, ICI found it profitable to export low value ethylene (expensive to transport). Their new LLDPE plant will reduce surplus capacity (helped by any rationalisation at Altona as Australian production capacity of LLDPE exceeds market requirements). Nevertheless, as the LLDPE plant is not operating at full capacity, the ethylene cracker still incurs a penalty for less than capacity production. The penalty of less than full scale production justifies the operation of their PVC and EO plants.

The small PVC and EO plants are sensitive to levels of assistance. One the other hand, collectively using about 37 000 tonnes of ethylene, closure would reduce the utilisation of the ethylene cracker. This penalty will slow rationalisation moves.

If the Botany cracker had access to cheaper feedstocks and/or more fully utilised the feedstock co-products, ICI would probably have adopted a different strategy for its ethylene-using activities at Botany. A much larger LLDPE plant may have been installed (see next), perhaps even replacing the ageing LDPE plant and the ethylene required by its small PVC and EO plants. Internationally competitive, substantial exports of LLDPE resins would have been possible in a manner similar to Shell's polypropylene activities. Instead, reflecting its fundamental lack of competitiveness, a cautious domestic market oriented investment was adopted. The LLDPE plant (and the upgraded LDPE plant) will remain sensitive to anti-dumping measures and perhaps import tariffs.
Polyethylene Plant
In 1990, having operated its new LPG/naphtha cracker at two-thirds capacity or exporting surplus ethylene at marginal prices for seven years, ICI began to construct a 100,000 tonne per year linear low density grade polyethylene (LLDPE) plant costing about $100 million. The plant is cheaper to operate than the low density polyethylene (LDPE) plant with which it divides available ethylene feedstock. (The LLDPE plant uses lower cost technology developed 37 years earlier (and used by Union Carbide [later Compol before consolidation as Kemcor Australia] at Altona since 1972). The thirty-year old 90 000 tonne per year LDPE plant also had its technology upgraded.
Although large for Australia, on an international perspective, the plant is only of modest size as plants with capacities of more than 250,000 tonne per year commonly constructed.

Botany had a feedstock cost disadvantage compared to Altona but is operating at a larger scale with reserve production capacity (ie. ICI had not been obtaining full return on its 1983 investment). In other words, the marginal cost of ethylene at Botany was at least comparable if not lower than at Altona (see 14). Altona withdrew its intention to expand its plant about the time of ICI's announcement.

Flow chart of ICI 1996

Ethylene dichloride for exports (to utilise chlorine production capacity). (It represents part of the PVC plant commissioned 1957 with a nameplate capacity of 55 000 tonnes that used about 27 000 tonnes of ethylene. Activity used to sustain outlet for chlorine. Closure of chloralkali plant led to closure of EDC plant. PVC produced from imported VCM.

The 1941 installed mercury cell chloralkali plant was closed down in 1997 with a smaller replacement to manufacture chlorine for Sydney's domestic water and sewerage needs.

Polypropylene nameplate capacity of about 100 000 tonnes depending on choice of LPG and naphtha feed stock, commissioned 1979 with a nameplate capacity of 70 000 tonnes. Operation closed down in 1997 with propylene sold to Basell's Clyde operation.

The ethylene oxide plant, (straddling the first and second phases of Botany's development) is likely to continue to operate while the complex remains viable given firm demand for ethylene oxide surfactants and its derivatives.

The modest scale (therefore marginally competitive) 100 000 tonne LLDPE (polyethylene) plant, commissioned 1992, could have been larger and more competitive by releasing the ethylene currently used by the three decade old LDPE and EO plants. horizontal rule

In October 1997, ICI announced that it would discontinue the manufacture of ethylene dichloride which had been exported to provide an outlet for chlorine co-produced with caustic soda from its Botany Bay chloralkali plant. In the prior year it had discontinued the production of VCM and PVC at Botany in favour of imports for its Laverton VCM polymersation plant.

Also in 1997, ICI announced it would cease the manufacture of polypropylene. It would continue to refine the propylene from Kurnell and would sell it to Basell for polymerisation at Clyde NSW.

History (also see the history)

ICI's petrochemical manufacturing facility, and original major investment in Australia, is located at Botany, New South Wales. Since 1940, the Botany petrochemical site had become the largest single chemical complex under control of one company in Australia, employing about 800 personnel. The effective production nucleus of the Botany complex has shifted from its now five decade old chloride plant to the naphtha cracker established in 1983. bullet

The chloralkali plant is not only comparatively expensive to operate, it also pollutes. ICI placed a full page advertisement in the Weekend Australian of August 4-5 1990 defending the fact that the plant (in effect) releases about one tonne of mercury every seven years into Botany Bay as it was required for water chlorination. Give that the plant had a tariff of 50 per cent for its first 34 years of operation (and 40 per cent for the next 13 years) resulting in prices up to 100 per cent above world levels, it should have been profitable.

The Botany complex was enabled in 1940 by import tariffs (up to 60 per cent, and import restrictions). It entered a second cycle in around 1980 by deferred import tariff reductions and a then large but under-utilised LPG/naphtha cracker. Since 1996, the complex has begun its third cycle to become an ethylene-based plant based on South Australia's ambitions to establish an ethane-based chemical industry. 

In 1996, the LPG/naphtha cracker was converted to use ethane using a A$250m, 1400 km long pipeline from South Australia. The draw off of ethane from the South Australian reserves exceeds current production. It now competes with the Altona complex in Victoria using Bass Strait ethane for the Australian market in polyolefin polymers. It has since been sold.

In December 1999, Orica sold the line for $124 million (in line with book value)  to a consortium of UniSuper and National Australia Asset Management. 

It is today largely a petrochemical complex now centred on an ethane cracker with a nameplate capacity of 250 000 tonnes ethylene (and originally 100 000 tonnes of propylene) commissioned 1983 to use naphtha/LPG.

Principal products

bulletLDPE polyethylene in a modest scale plant built 1957 (upgraded 1990), capacity 90 000 tonnes; bulletLLDPE polyethylene in a modest scale plant built 1992, capacity 100 000 tonnes; bulletEthylene oxide in a small plant built 1966, capacity about 40 000 tonnes (using about 11 000 tonnes of ethylene). (Now owned by Huntsman Corp). The cracker provides;
bullet Ethylene up to about 237 000 tonnes with nameplate capacity of 250 000 tonnes (cf. world scale of 400 000 to 750 000 tonnes) for;

Ethylene oxide plant commissioned 1966 with a nameplate capacity of about 31 000 tonnes (cf. world scale plants of about 300 000 tonnes) requiring about 20 000 tonnes of ethylene. Now owned by Huntsman Corporation.
bulletLLDPE polyethylene plant commissioned 1992 with nameplate capacity of 100 000 tonnes (cf. world-scale of 250 000 tonnes);
bulletLDPE polyethylene plant commissioned 1957 upgraded 1989 with nameplate capacity of 90 000 tonnes (cf. world scale plants of 200 000 tonnes);

Botany outlook

The Botany complex has undergone three significant years, 1940 with its beginnings, 1983 with an investment in a major LPG/naphtha cracker that might otherwise have seen the progressive closure of the plant, and in 1996 with access to ethane from South Australia that is shaping the plant to be ethylene based.

The outlook for the Botany complex is therefore as an ethane-based petrochemical operation. (In October 1997 it announced closure of polypropylene plant as a legacy of its naphtha origins. Also being replaced is the mercury cell chloralkali unit producing caustic soda and chlorine. The chlorine now being used for hydrochloric acid, hypochlorite and water chlorination since closing the VCM and later the EDC plants.

The joint venture with Kemcor means that Orica now almost has a minority interest in the Botany site.

By international standards, Botany is a modest scale petrochemical complex, which competes in the Australian market with the polyolefins produced at the Altona complex. With ICI's major investments in other chemical activities including fertilisers, explosives, paints and speciality chemicals, Botany is no longer the centre of ICI's corporate future in Australia. Combined with increasing urban pressure on the Botany site, its future is closely tied to the viability of its two polyethylene plants.

Since establishing itself in Australia in 1940, ICI has displayed a high degree of flexibility, a preparedness to diversify and to divest marginal investments. ICI's corporate flexibility, access to technology and excellent government and public relations skills, have contributed to Botany being in operation today. Without tariffs, the 1983 ethylene cracker would not have been commissioned. (Indeed, it was instrumental in the deferral of a review of import tariffs in 1979).

ICI now brings ethane by pipeline 1400 km from the Cooper Basin in South Australia costing some $250 million that has been estimated to reduce cost by $40m per year. As variously expressed, Botany serves to restrain development at the Altona complex that is well located to increase the use of Bass Strait ethane. The use of ethane also requires re-engineering at Botany that would normally have promoted the cessation of the use of naphtha that remains in use to provide propylene for its polypropylene plant.

It is still keen to invest with declared intentions in petrochemicals in the north of WA.
Plant efficiency
In August 1997, ICI indicated plans to take advantage of the deregulated gas and electricity market by installing a A$285M, 370 megawatt cogeneration plant for Botany. It will be used by ICI to recycle heat and steam to their operations as well as for Amcor Australia Paper recycling mill.
The energy efficiency is projected at 62 per cent which is about one-third higher than a dedicated power plant. Subject to government approval, construction is planned to begin March 1998. On 7 May 1997, ICI Plc, the British blank of ICI Australia announced the planned sale of its 62 per cent share holding in ICI Australia valued at A$2.3 billion (i.e.. valuing the company at A$3.8 billion). Its sale would represent about one third of the world-wide planned divestments of ICI valued at A$6bn and is occurring at a time of its acquisition of the speciality chemical business of the Unilever Group though to be largely funded by debt.
bullet ICI Plc will acquire the speciality chemicals businesses of Unilever for $8 billion (£4,935 million) cash, comprising: National Starch, a world leader in industrial adhesives and number 1 in speciality starches; Quest, one of the world's leading fragrance, food ingredient and flavours companies; Unichema, a global leader in oleochemicals (and represented in Australia as manufacturer of fatty acids and glycerol); and Crosfield, a major producer of silicates, zeolites and silicas.


ICI (UK) has progressively focussed on speciality chemicals which are not only higher value added than commodity chemicals, they are also less volatile in price. ICI Australia on the other hand, has been increasingly focussing on commodity chemicals (though it owns Dulux paints and Selleys Chemicals). The changing focus being instrumental in the divestment. Evidently shareholders anticipated the reverse, i.e. the purchase of ICI of ICI Australia's 38 per cent issued shares, as the share price of ICI Australia fell 8 per cent on the announcement. ICI (UK) indicated it would review ways for "existing commercial relationships'' between its groups to be maintained.

Given the balance of the shares in ICI Australia are publicly listed, an overall reduction in the foreign ownership of the company can be anticipated.

A subsequent announcement indicated that ICI Australia could not only retain its name, but "forge a new identity" in overseas markets.

According to ICI Australia, the company would be free to compete in its traditional markets without reciprocal competition from its departing blank in Australia and Asia.
horizontal rule

The ICI Australia chairman was recorded as saying (our emphasis) "We are fairly optimistic that we are not going to be disadvantaged with the sale". (Australian 9 May 1997). On the 12th that Dow Chemical could be a purchaser and on the 13th, denying intentions to sell its 72 per cent owned ammonia and ammonium nitrate manufacturer Incitec.

ICI Australia will continue to focus on the core commodity chemical business activities (perhaps encouraged with increasing licensed technology costs).

ICI Australia grew up as an investment of a diversified UK-based blank at a time of very high import tariffs that enabled a range of activities regardless of competitiveness and relationships. Its diversified operations are unique in Australia.

This diversification was supported by integration of activities and government relations


There was an element of integration of activities including the manufacture of plasticisers and vinyl acetate monomer at Rhodes NSW for their paints and plastics divisions, other speciality chemicals for paints and resins, pigments at their jointly operated PMA, sodium silicate and sodium carbonate for surfactants and other activities and research support services that helped mesh the company together. Many of these have closed and, in today's perspective second to other issues such as marketing skills.

ICI began in Australia with a Botany chloralkali business. We believe that Botany could be sold given that it is essentially now a polyethylene operation. Kemcor could be a potential buyer. Already Australian Vinyls Corporation that imports VCM for conversion to PVC is on the market signalling Orica's reduced interest in its now under performing plastics division. It points to the remarkable transition that has occurred in Australia's industry since the late 1980's that is not only reflected in products, employment but also in the attitude and character of its management.

Government assistance and relations

During the first part of the half decade in Australia, ICI was particularly strong in government relations and it grew supported by high levels of various forms of protection then available (import licensing, tariffs and anti-dumping protection). Its strong government relations team provided a common link to its operations. It could trade a loss in one division (probably as its 1983 LPG/naphtha cracker) as a arbitrage for maintained tariffs with the consequent benefit to its other divisions. Government assistance is now a reduced priority.
Divisions today
bulletExplosives, with ammonia linking the fertilisers manufacture of its subsidiary Incitec with its ammonium nitrate plant at Yarwun. bulletComment. In competition with Wesfarmers and with Dyno Nobel who has declared interest in establishing foothold on fast growing sector.

including bulletchloralkali - caustic soda, and chlorine (now largely for water treatment and a chloroparaffin product at Yarraville, Vic). bulletsodium cyanide (Yarwun). · bulletethylene oxide and derivatives, including surfactants, glycols and hydraulic fluids (Botany). · bulletother (e.g.. Cerechlor at Yarraville, speciality chemicals Valchem at Wangaratta). bullet Ethylene oxide manufacture is a vestige of its surfactant interests that since saw its closure or divestment of soda ash and silicate manufacture. It remains in operation given ICI's surplus ethylene production capacity that could see ethylene be applied to manufacture of polymers. Ethoxylates are sold to surfactant manufacturer Albright and Wilson who is also one of the largest ethoxylate manufacturers in Europe.

bulletpolyethylenes at Botany (polypropylene closed).· bulletPVC (imported VCM) at Laverton North as Australian Vinyls Corporation which is now being promoted for sale.· bulletHoritech film manufacturing (Deer Park)

bulletConsumer products
bulletSurface finishes (paints and varnishes - Dulux etc) · Water based house paints at Rocklea, Qld · Clayton, Victoria - manufacture of a range of solvent-based & water-based paints, powder coatings and Laverton, Victoria - manufacture of paint resins. bulletHome market adhesives, sealants (Selleys). Adhesives, sealants etc (Selleys Chemical Company) at Padstow NSW and Huntingdale, Victoria.
bullet Comment. Dulux can now compete compete with ICI PLC in world markets (principally UK being extended by ICI Plc).

bulletAdvance Sciences
. bulletManufacture of the commodity urea and phenol formaldehyde resins at Deer Park, Victoria for use in composite wood (particle and ply). In competition with Borden Australia both using methanol from BHP. bulletSome specialist pharmaceuticals. bulletScientific (laboratory) instruments GBC (part interest). There is today reduced economic or management synergies holding divisions together which could expose three potential divisions with sub-divisions;

A. Consumer products where manufacturing is secondary
    1. Paints; and
    2. Home market preparations (ie. Selleys);
    B. Chemicals and polymers
    1. Plastic resins - polyethylenes at Botany and PVC at Altona/Laverton (which is on the market).
    2. Ammonia chemicals
      1. ammonia
      2. urea
      3. ammonium nitrate
    3. Urea formaldehyde adhesives (though could be regarded as an ammonia chemical).
    C. Other bulletChloralkali bulletEthylene oxide chemicals. A possible scenario for Orica is for it to focus exclusively on value added products and explosives with the production of ammonia linking it to the manufacture of sodium cyanide and the urea formaldehyde adhesives.
Ceramics business sold
  1. Carpenter Technology Corp (CRS) announced in June its intention to buy the structural ceramic component and powder business of ICI Australia Ltd for US$16.5 million (A$21m) pending a definitive agreement and due diligence.
  2. ICI Advanced Ceramics employs about 200 people with sales of about A$27 million. It provides alumina- and zirconia-based structural ceramic parts for medical instruments, valves and fittings for the pulp and paper and chemical industries, and tooling. Carpenter is a speciality metals manufacturer many of which are used for similar applications.

  3. ICI Ceramics operated the Z Tech ceramics plant in Western Australia is now owned by Millennium Chemicals (after a purchase by Hanwha).




bulletHistory of Australia's chemical industry  

bulletUniversity of Melbourne.


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