JV between Kraton, Formosa Petrochemical falls through

By Nina Ying Sun
Assistant Managing Editor

Published: October 16, 2012 6:00 am ET

Related to this story

Topics Materials, Suppliers

HOUSTON (Oct. 16, 1:15 p.m. ET) — Kraton Performance Polymers Inc. of Houston has exited its joint venture deal with Taipei, Taiwan-based Formosa Petrochemical Corp. (FPCC), seeking instead to expand hydrogenated styrenic block copolymer (HSBC) manufacturing capability in Asia on a stand-alone basis.

The company is focusing on locations in the region that were identified during the site-selection process conducted in 2010 and early 2011, Kraton said in a news release.

Kraton opted not to extend the previously announced Framework Agreement with FPCC, which expired Sept. 30. The agreement had governed the formation of a proposed 50/50 joint venture to build, own and operate a 66-million-pound HSBC plant at FPCC’s petrochemical site in Mailiao, Taiwan.

The project was delayed, first by the wait for environmental permit approval, Kraton said. After the permit was finally approved in July, FPCC considered the conditions to be too restrictive and limiting on its overall operation in Mailiao. 

However, an Oct. 11 report from Taiwan’s Economic Daily said FPCC was going to file an appeal by Oct. 12, after the environmental protection authorities once again rejected FPCC’s proposal and indicated additional restrictions.

“We believe a significant amount of the engineering and design work conducted to date will be applicable to the alternate location,” said Kevin Fogarty, Kraton’s president and CEO. “Moreover, given our significant liquidity and the strength of our balance sheet, we are well-positioned to develop and fund the project on a stand-alone basis.”

He added that Kraton will explore expansion projects within its current operating capability to possibly bridge, if necessary, the timing for the new stand-alone HSBC production.

The company noted it is “not possible to estimate with certainty” the project cost or the time line for an alternate, stand-alone location. It added that the options under consideration are within industrial sites where Kraton should have access to existing infrastructure and utilities, thus minimizing overall project expenditure.

Industry consultant Roger Young said the setback has significant impact on Kraton’s capacity in the midterm. While Kraton’s release mentioned China as one of the considerations, Young said concerns over intellectual property protection might rule that option out. “That is unless the China option offers an attractive supply of butadiene, a key feedstock for HSBC,” he said.

A Southeast Asia location, such as Thailand, Indonesia and Malaysia, is likely to be the final selection, Young said. He is Asia-Pacific vice president for Robert Eller Associates LLC.

Young also noted there is excess capacity of HSBC in the Asia region. Presently, most of the local production remains in commodity grades, and won’t pose immediate threats to Kraton’s large portfolio of specialty grades.

But Young said Asian producers are catching up, though it might take them five to 10 years. “They are getting into some of the specialty materials and doing things that are really out of the box,” he said.

During the third quarter, Kraton expects to incur a one-time pre-tax charge, not to exceed $10 million, associated with the write-off of a portion of the project costs incurred to date.


Comments

JV between Kraton, Formosa Petrochemical falls through

By Nina Ying Sun
Assistant Managing Editor

Published: October 16, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

Investment firm specializes in emerging polymer firms in Ohio

August 21, 2014 3:20 pm ET

A plastics market veteran is working with an investment firm and a research foundation to help commercialize polymer technology in the Buckeye State.    More

Image

Bayer, SCAC partner on water reuse project

August 21, 2014 12:48 pm ET

Bayer MaterialScience (BMS) and Shanghai Chlor-Alkali Chemical Co. Ltd. (SCAC) have entered into a preliminary agreement for the reuse of waste water ...    More

Image

Milacron commits $30 million to investment in India

August 20, 2014 5:42 pm ET

MUMBAI (Updated) — Cincinnati-based Milacron LLC plans to invest $30 million over the next three years in India. The investments will double...    More

Image

Automakers look under the hood for the next lightweighting opportunities

August 20, 2014 1:06 pm ET

The automotive industry's current favorite target for lightweighting efforts is the powertrain, according to a recent survey.    More

Image

ISO publishes international standard for measuring phthalates in toys

August 19, 2014 10:40 am ET

The Geneva-based International Organization for Standardization (ISO) has published an international standard on phthalates used as plasticizers in to...    More

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report analyzes economic and market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as growth strategies being implemented by thermoformed packaging companies.

Learn more

Pipe, Profile & Tubing Extrusion in North America 2014

U.S. demand for extruded plastics is expected to grow by 3 percent in 2014, with PVC remaining the largest segment.

Plastic pipe will post the strongest gains through 2018, continuing to take market share from competing materials in a range of markets.

Our latest market report provides in-depth analysis of current trends and their financial impact on the pipe, profile and tubing extrusion industry in North America.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events