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

China's Shide Group, BASF unveil 'revolutionary' all-plastic window profile

April 23, 2014 9:10 pm ET

SHANGHAI — The PVC window profile market in Asia is expected to increase four-fold by 2025, and Chinese building products maker Dalian Shide...    More

Worker dies in fall at Formosa Texas plant

April 23, 2014 4:04 pm ET

A subcontractor died April 22 after falling 25 feet during routine cleaning operations at a Formosa Plastics Corp. USA facility in Point Comfort,...    More

Image

Milliken expanding SC plant for additional PP clarifying agent capacity

April 23, 2014 3:42 pm ET

American chemical company Milliken & Co. has announced plans for a major expansion in capacity for its Millad NX8000 clarifying agent for...    More

Image

CPM Extrusion, ECON launch new line of underwater pelletizers

April 23, 2014 11:25 am ET

CPM Extrusion Group and ECON GmbH unveiled their brand new EUPC line of underwater pelletizers today at ChinaPlas held in Shanghai, China.    More

Clariant says Asia holds the key to growth

April 23, 2014 3:52 pm ET

Clariant AG is based in Switzerland, but its eyes are firmly focused further east.    More

Market Reports

Market Data Book - Rankings & Lists

A one-stop download of Plastic News' exclusive annual lists and processor rankings containing essential data including sales, employees, end markets, materials and more.
EXCLUSIVE EXCEL FEATURE: full mailing address details for available plant locations.

Learn more

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Mold Making and Tooling Review and Outlook 2014 North America

This report provides in-depth analysis of the mold and toolmaking market for North America, including discussions of trends, opportunities, threats, the latest developments in production and labor and equipment trends impacting moldmakers.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

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

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events