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June 26, 2003 02:00 AM

Basell opts to restart idle PP capacity

Frank Esposito
Senior Staff Reporter
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    Polypropylene leader Basell Polyolefins (Booth S2603) is casting a positive vote for the North American market by announcing plans to restart almost 900 million pounds of dormant PP capacity in 2004 and 2005.

    Basell North America President Chuck Platz made the announcement during a June 24 news conference at NPE 2003.

    Basell intends to bring 440 million pounds of idle capacity back in Bayport, Texas, next year, and to relaunch a similar amount of capacity in Lake Charles, La., the following year.

    And that's not counting 775 million pounds of capacity at a new Conoco Phillips plant in Linden, N.J., that Basell is marketing. That plant will be fully commercial by the end of 2003.

    Basell is staking its optimism on expectations for a strong second half in 2003, which would push PP's growth rate to double the gross domestic product.

    ``The economic recovery that will start in the second half will spark new growth for polypropylene,'' Platz said. ``As a result, the North American market will be close to sold out in 2004.''

    The Bayport plant can be restarted within four months to meet short-term demand, but the site will need an investment in new extrusion equipment to remain viable for the long term, Platz added.

    First-quarter PP sales numbers will have to improve quite a bit to match Platz's optimism. Through March, U.S. and Canadian PP sales were up only 1 percent vs. the same period a year ago, according to the American Plastics Council in Arlington, Va. But subtracting exports - which were down more than 21 percent - leaves the domestic market with a growth rate of 4.4 percent.

    A good deal of that growth has been in injection molded rigid packaging, which is up more than 10 percent. Sales into the fiber and filaments market - which makes up almost 25 percent of total U.S./Canadian PP demand - were down almost 2 percent, APC said. ``The biggest growth area has been rigid packaging,'' Platz said. ``We're converting a lot of competitive material into polypropylene. A few years ago, we were lucky to be doing 10 million pounds a year in rigid packaging. Now we're looking at 100, 200, even 300 million pounds.''

    But Platz admitted that profitability has remained challenging, as increased feedstock and energy costs have lessened the benefit of the series of price hikes that North American PP makers have won in 2002 and 2003.

    Even after a 2 cent-per-pound price drop in May, average selling prices for injection molding grades of homopolymer PP are up almost 57 percent since January 2002, according to Plastics News' resin pricing chart.

    ``If you look at the last few years, with rapidly rising and falling feedstocks, we haven't been able to raise prices fast enough to capture costs,'' Platz said. ``We've lagged the increases, so now we need to hold on to our [price increase] margins longer.''

    On the new product front, Basell arrived at NPE with a trio of new offerings aimed to keep the firm atop the PP summit.

    The threesome includes :

    * OxyPP, new polyolefins marketed toward masterbatch makers and compounders. The materials can improve dispersion and distribution mixing and improve color opacity, officials said. OxyPP will be commercialized this fall, said Seetha Coleman-Kammula, Basell North America's senior vice president of innovation and asset management.

    * New grades of metallocene-based Metocene PP that deliver clarity, impact performance and cost efficiency in packaging, consumer and medical products that have used crystal polystyrene. Coleman-Kammula said the new Metocene grades are being tested in labware and blow molded, hot-fill bottles and jars, where they offer clarity similar to PET.

    * Adstif PP, offering improvements in productivity and part performance for thermoforming and sheet packaging that had used PS, PVC and PET.

    Basell - based in Hoofddorp, Netherlands, and with North American offices in Elkton, Md. - is the world's largest PP maker with almost 15 billion pounds of active capacity, more than 3 billion pounds in North America.

    The firm has annual sales of more than $7 billion.

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