Union Carbide Corp., a longtime leader in polyethylene production and technology, is looking to grow its polypropylene business through a 50-50 joint venture with Tosco Corp., an independent oil refiner.
Tosco also announced it is building a massive, 775 million- pound-per-year PP plant in Linden, N.J.
The unnamed venture will market the 800 million pounds of PP Carbide produces each year at plants in Seadrift, Texas, and Norco, La., as well as output from the proposed Linden plant, which is set to come on-line in early 2001.
Including 1999 planned expansions, Carbide of Danbury, Conn., ranks eighth among North American PP makers, with a 4.2 percent market share. Stamford, Conn.-based Tosco's new capacity will vault the new joint venture into the top five, officials said.
The Carbide plants, acquired from Shell Chemical Co. in 1996, and the Tosco plant will be operated independently by each company, with the venture assuming responsibility for marketing, distribution and sales.
The new plant, which is expected to employ 200 and cost $200 million to build, will produce a full range of homopolymer and random and impact copolymer PP using Carbide's Unipol technology. Tosco becomes the 30th global licensee of the Unipol process.
``Projected growth rates for polypropylene over the long term are strong,'' William Joyce, Carbide chairman and chief executive officer, said in a news release. ``The joint venture with Tosco will put us in an excellent position to meet the growing demand.''
The Linden plant, to be built at Tosco's Bayway refinery, will be the firm's first venture into the plastics market. It will give Tosco a valuable downstream use for the 400 million pounds of propylene it produces at its Linden refinery. The new plant will give the venture access to PP processors in the Midwest and Northeast, said Carbide spokesman Greg Weingardt.
``Our two existing plants are on the Gulf Coast, so the Linden plant will give us immediate access to those other markets and lower our transportation costs,'' Weingardt said.
He defended Carbide's decision to market new capacity in 2001, when some observers believe PP still may be suffering from overcapacity and depressed pricing.
North American PP prices have dropped an average of 12 cents per pound since mid-1997.
Demand has remained strong, however, with North American sales up about 4.5 percent in 1998, according to the Society of the Plastics Industry Inc. in Washington.
``We believe that polypropylene growth will remain steady, at between 6.5 and 7.5 percent for at least the next five years,'' Weingardt said.
``By 2001, the [North American] market should be coming back and there should be recovery in the Asian and Latin American markets as well,'' he said
Dave Durand, a PP market consultant with Townsend Tarnell Inc. in Houston, agreed that the opening of the Linden plant will be well-timed.
``You've got to play the cycle like that,'' Durand said. ``The best position to be in is to have a plant coming on at the upturn. Unfortunately, you have to go to the board when things are in the sink and ask them to approve an expansion.
``There's been speculation for some time that Carbide was going to expand. They've always wanted to be a significant player in [North America], along with being a technology provider.''