Tough market conditions and older, smaller-scale equipment are forcing Equistar Chemicals LP to close its polyethylene plant in Port Arthur, Texas.
The site employs 125 and produces 240 million pounds of high density PE and 160 million pounds of low density PE annually, representing about 5 percent of Houston-based Equistar's total PE output.
"The current [PE] situation, with its poor profitability, really has been brutal," W. Norman Phillips, Equistar's senior vice president of polymers, said by phone Jan. 23.
Equistar already had shut down a 300 million-pound-per-year line in Port Arthur in early 1999. The rest of the PE unit will be completely closed by the end of February.
Equistar's polymers business, which includes PE and polypropylene, lost $100 million in the first nine months of 2000, as polymer sales price increases failed to keep up with increases in the cost of raw materials. The firm's petrochemicals segment, including PE feedstock ethylene, posted a net gain of $643 million in the same period.
Sales of HDPE previously handled at Port Arthur now will go through Equistar's HDPE plant in Alvin, Texas, while LDPE sales will be handled by the firm's Morris, Ill., and La Porte, Texas sites.
Equistar had looked into selling the plant or expanding the site but decided closing it made the most economic sense, Phillips said.
Age and size also played a role. The HDPE unit is 27 years old and the LDPE works are 23 years old. Port Arthur's product mix also was a factor, because most of its output was sold into highly competitive, commodity-type markets such as HDPE bottles for household and industrial chemicals and LDPE film for trash can liners.
"This is basically the other shoe dropping at that facility," said Howard Rappaport, industry analyst with CMAI Inc. in Houston. "[Equistar] is looking at a combination of older, higher-cost assets in the face of terrible market conditions. [Closing Port Arthur] makes sense in this environment."
Business conditions also have led Equistar to delay the addition of 70 million pounds of LDPE capacity in Morris, Ill., from the second quarter of 2001 to the first half of 2002.
A 240 million-pound LDPE expansion in La Porte that was expected for late 2001 or early 2002 has been pushed back to sometime in 2003.