As part of a major restructuring of its portfolio, oil giant Royal Dutch/Shell Group will seek a buyer for half of Montell NV, the world's largest polypropylene maker, and sell off or split its PET resin business.
The move is part of Shell's effort to divest 40 percent of its chemical assets, which accounted for about 8 percent of its $172 billion in total sales last year.
Shell, like most other oil firms, has seen its profitability decline this year, as a global oil glut has sent prices plummeting. The firm — based in London and The Hague, the Netherlands — is one of the world's three largest oil producers.
Other plastics-related businesses to be shed are polystyrene, thermoplastic elastomers, aliphatic polyketones and polyurethane foams.
``We had to look at where we wanted to be and identify which sectors we didn't see as core sectors,'' Shell spokesman Eric Nixon said by telephone from London.
The Montell decision comes 15 months after Shell bought out Montedison Spa's 50 percent share of the company. Montell is by far the world's largest PP maker with almost 7 billion pounds of capacity, including about 3 billion pounds in North America. Its primary U.S. facility is in Bayport, Texas.
Montell's Spheripol PP production technology also is widely licensed. Its global headquarters is in Hoofddorp, the Netherlands; its North American base is in Wilmington, Del.
``[Buying out Montedison] was a good deal for Shell at the time, but the market has changed,'' Nixon said.
Industry sources listed Dow Chemical Co. of Midland, Mich., and Nova Chemicals of Calgary, Alberta, as potential partners in Montell. Dow launched its first PP plant in Schkopau, Germany, earlier this year, while Nova has repeatedly stressed its commitment to commodity plastics. Neither Dow nor Nova would comment.
``[Montell] has outstanding technologies for the development of new polymers, and it is believed that an alliance with a partner offering complementary market development capabilities offers the best long-term value,'' Shell officials said in a news release.
Montell North America spokesman Stan Howard said the firm had no information beyond Shell's earlier announcement.
Shell's Montell decision may be an attempt to weather the business cycle on the downside and reap the benefit on the upside, said Pat Duke, an industry analyst with Dewitt & Co. of Houston. Global PP prices suffered significant drops in 1998 because of overcapacity and reduced demand from Asia.
``This is a real opportunity for someone to take a major step up in acquiring high-quality facilities and technology,'' Duke said.
But he added the decision may be ``more of a knee-jerk reaction'' on Shell's part because of the unusual coinciding of lows in the petrochemical and crude oil markets because of several factors, including the Asian economic crisis.
The petrochemical and crude oil markets are usually countercyclical, allowing one to profit when prices are down in the other, Duke said.
In PET, Shell is looking to sell or partner a business that ranks among the top 10 in global PET production, including a No. 4 spot in the North American market. Its major North American facility is in Point Pleasant, W.Va.
Shell Chemical spokeswoman Sarah Colletti said it was too soon to tell what Shell would do with the PET business, which Shell acquired from Goodyear Tire & Rubber Co. in 1992.
DeWitt consultant Edgar Acosta was critical of the deal, since it comes at a low point in the PET business cycle.
``It's a mistake to sell not only PET but the other chemicals businesses,'' Acosta said. ``To sell at the lowest point in the market goes against all economics.''
PET prices have also been hammered by global oversupply and Asian turmoil. Acquisition rumors have even surrounded market leader Eastman Chemical Co. of Kingsport, Tenn.
Acosta said a Shell PET joint venture was more likely than a sale, since a joint venture would allow Shell to divert PET expenses to a separate business unit.
Dow, DuPont of Wilmington, Del., and Mitsubishi Corp. of Tokyo would be interested in Shell's PET business because of the chance to buy it at a bottom market price, Acosta said. Other parties could be smaller chemical industry players such as Huntsman Corp. of Salt Lake City or Fina Oil & Chemical Co. of Dallas.
Shell also will be exiting a world-leader position in epoxy. North American epoxy production sites include Deer Park, Texas, and Norco, La.
Shell either will divest its high-performance specialty resins such as Carilon-brand aliphatic polyketones and Kraton styrenic block copolymers, or find a partner for those businesses. Kraton holds a large share of the styrenic block copolymers market, which is the largest-volume sector of the TPE industry.
Shell's first North American Carilon facility, with 55 million pounds of capacity, is set to open in Geismar, La., early next year. Shell produces Kraton in Belpre, Ohio, where it has added 20 million pounds of capacity since 1996.
Kraton is used in adhesives, sealants and coatings, while Carilon has been marketed as a replacement for nylon and acetal.
In PS, Shell is a relatively minor player, with a single European plant producing about 200 million pounds of material a year.
Shell produces PU foams in Belgium. Recticel SA, a rival foam maker in Brussels, Belgium, is interested in buying the business, but Shell officials said no deal had been reached.