Union Carbide Corp., Lyondell Petrochemical Co. and Quantum Chemical Co. announced Aug. 23 they may build a plant at Lyondell's petrochemical complex in Channelview, Texas, to make 1.5 billion pounds of ethylene a year. The companies said they have launched an engineering study for a plant that could be operating by 1998.
Initial plans call for the plant to be a jointly owned manufacturing facility operated by Lyondell, according to Lou Agnello, Union Carbide spokesman.
The plant represents a 13 percent increase in the three company's total ethylene production capacity. Lyondell of Houston now can produce 3.6 billion pounds of ethylene a year; Quantum of Cincinnati, 3.7 billion pounds; and Union Carbide of Danbury, Conn., 3.8 billion pounds.
This project, plus 10 additional ethylene expansion projects under way or announced, would raise production to 54.5 billion pounds by 1998, a 17 percent increase from 1994.
Industry analyst Paul Raman of S.G. Warburg and Co. Inc. of New York, said he believes the plant will provide long-term benefits for Union Carbide, but he questioned its timing.
``We expect the ethylene market to be strong in the rest of 1995 and 1996. However, in 1997-98, we expect ethylene prices to be weak and the company [Union Carbide] would be better off being a net buyer of ethylene,'' Raman said in a report analyzing the announcement.
Union Carbide now buys 2 billion pounds of ethylene a year.
Both Quantum and Union Carbide are expected to continue to be net buyers of ethylene, but both will supply a larger percentage of their own needs internally with this expansion, spokesmen for the companies said.
Lyondell sells ethylene to a number of companies, including Union Carbide and Quantum.
Raman said he expects capacity utilization rates to be near 100 percent this year, then to drop to 98 percent in 1996, and to 97 percent in 1997.
Raman also said he believes the combination of Union Carbide, Quantum and Lyondell raises anti-competitive issues because, combined, they already control one-quarter of the U.S. market for ethylene and one-third of the U.S. market for polyethylene.
However, Raman noted it is unlikely that the Justice Department will investigate the proposed venture because the partners will use all of the ethylene produced by the venture internally.