The first visible sign of Huntsman Corp.'s review of its commodity chemicals businesses was seen Nov. 5, when the company revealed it is eliminating 150 million pounds of polystyrene capacity in Willow Springs, Ill., and Belpre, Ohio.
In a Nov. 5 telephone interview, Huntsman Vice Chairman Jon Huntsman Jr. said the move is necessary because of overcapacity in the PS market.
``This is the first time in the company's history that we've had to close down a major facility because of what we see as recklessness in the industry,'' Huntsman said.
``We've committed a large part of our profitability and financial future into polymers and we needed to take a responsible step in an industry marked by overcapacity.''
The Willow Springs location, a 70 million-pound-per-year site acquired from Amoco Polymers in December, will be closed, while three of Belpre's nine production lines will vanish, leaving that site with about 370 million pounds in annual capacity. Huntsman officials said the Belpre lines targeted for removal date to the 1960s and are less efficient than others at the site.
The reduction, of which 125 million pounds is in crystal PS, will leave Huntsman's North American PS capacity at 1.25 billion pounds.
PS prices have dropped an average of 4 cents since midsummer, largely because of new capacity. Price increase attempts of 3 and 4 cents each failed.
Speculation about Huntsman's future in commodity chemicals has flourished since Chief Executive Officer Jon Huntsman Sr. told the Wall Street Journal Aug. 27 that the firm could sell off as much $1.5 billion worth of its commodity chemicals operations. Huntsman is involved in PS, polypropylene, styrene, propylene, ethylene and butadiene in commodities markets.
Amid the speculation, Huntsman Jr. said the company ``intends to hang on to the [PS] business,'' which traditionally has been a focal point for the Salt Lake City-based firm.
``We've got a tremendous emotional attachment to this business and we want to see it get healthy again,'' Huntsman Jr. said. ``This move alone isn't enough to turn around the industry or our business, but we hope it's the first step in a return to health.''
About 30 jobs will be affected by the shutdowns, but workers at both sites will be offered transfers to other Huntsman plants.
Industry sources have said PS pricing and profitability have been affected this year by capacity additions by Chevron Corp. in Marietta, Ohio, and by BASF Corp. in Altam¡ra, Mexico. The only significant industry expansion set for 1998 is a 240 million- pound addition at BASF's Joliet, Ill., plant.
David Huntsman, the firm's vice president of PS and expanded PS, said PS tends to be affected more by such expansions because its market is more mature than other thermoplastic resins.
``Polystyrene has a harder time absorbing new capacity,'' he said. ``When those decisions to add capacity were made, profitability was better than it is today, but it's resulted in overcapacity.''