LONDON — Elenac SA, the European polyethylene joint venture set up by BASF AG and Shell Chemical Co., expects to become Europe's largest PE producer next year when it adds nearly 1.3 billion pounds of new capacity.
Now the firm is stepping beyond Europe to tap greater market potential abroad and benefit from cheap feedstock sources.
``We see regions with higher growth potential are outside Europe,'' Chief Executive Officer Rolf Richter said in a recent briefing in London.
The European and U.S. markets are growing, but in the future, regions such as Asia will grow faster, he said.
The year-old, Strasbourg, France-based company already has 4.2 billion pounds of annual capacity. It is No. 2 among European PE producers, just below Borealis A/S of Lyngby, Denmark.
Elenac claims a 15.2 percent share of the European market and ranks itself sixth among global PE producers. A key engine for its growth has been its global leadership in the market for PE resin for automotive gas tanks.
The company claims a 45 percent share of the global PE gas tank market, including a 40 percent share in the United States. Elenac opened a sales office in Southgate, Mich., in April, but it does not make PE in North America — Chevron Chemical Co.'s plant in Orange, Texas, makes the material for Elenac.
Elenac executives said the company has no plans to establish PE production in the United States. But they do see opportunities in the Far East, including Japan, where most automakers still use steel to make gas tanks.
If the plastic tank market develops in Asia, Elenac will look at a possible coproduction venture there, officials said.
``Also, we see that access to cheap feedstocks is more outside Western Europe than inside,'' Richter added.
Elenac's parent firms both are involved in petrochemical cracker projects around the world, which may offer some opportunities to Elenac, he said.
According to Elenac, the European PE market grew 5.1 percent in 1998. The firm forecasts annual growth of 3 percent through 2005.
Senior executives held the briefing to review the company's busy first year, which included the unveiling of plans to build a 705 million-pound-per-year low density PE plant at Aubette, France, and a 550 million-pound-per-year high density PE plant in Wesseling, Germany. Both facilities are to begin operating next year. Also in its first year, the company acquired Hoechst AG's 1.1 billion-pound-per-year HDPE business.
Richter was encouraged, but not enthusiastic, about prospects for metallocene PE production. The company is boosting production at a joint venture in Cipen, France, to make metallocene resins, but Richter said there is no need to build a third PE plant devoted to metallocenes.
``Our strategy is to concentrate this type of product at that plant, so it seems we don't need a third plant. The extra capacity is on stream already. Cipen has a lot of potential for more capacity and it will transfer fully to metallocenes.
``The market for metallocene products is not too big. It's growing, but with that capacity we see enough volume to supply that market,'' he said.
The Cipen plant has total capacity of 926 million pounds per year, half of it devoted to Elenac.
He estimated the total European market for metallocenes at no more than 220 million pounds annually, although it is seeing double-digit growth. Richter would not reveal what percentage of the Cipen plant is devoted to metallocene products.
Elenac, which operates 10 production plants across Europe and employs 2,500, had 1998 profit of 108 million Deutsche marks ($61.4 million) on sales of DM2.9 billion ($1.65 billion).