Continued losses in its styrenics unit are leading Nova Chemicals Corp. to close its polystyrene resin and compounding plant in Chesapeake, Va., later this year.
The site operates 300 million pounds of annual capacity for solid PS and 170 million pounds for related compounds. A technical center in Chesapeake will close as well. The combined closings will result in annual cost savings of $15 million per year for Pittsburgh-based Nova.
Nova will take a charge of $56 million in late 2005 and early 2006 for the closings.
``We continue to drive cost improvements in our styrenics business as aggressively as possible,'' styrenics President Chris Pappas said in a news release.
The Chesapeake site - which represents about 20 percent of Nova's North American PS capacity and about 5 percent of the total regional market - will close by the end of the year, according to Rick Salvador, vice president of North American styrenics polymers.
Most of the 135 jobs will be eliminated, although some of the 20 technical positions will be transferred to Nova's lab in Monaca, Pa. Research and development equipment will move to Monaca as well.
Salvador added that there is capacity available at Nova's four other North American sites to make up for Chesapeake. Nova bought the site - which opened in 1973 - along with the rest of Huntsman Corp.'s PS business in 1998. Nova removed 100 million pounds of capacity and cut 14 jobs at the site in 2002, but ultimately Chesapeake could not overcome geography and operating rates.
``In essence, the [Chesapeake] site is surrounded by our other plants, and operating rates and efficiencies will improve at our other plants as a result of this action,'' Salvador said.
``The overall [styrenics] business isn't at the profitability we would like, and [closing Chesapeake] is a step to get us there. It makes us a stronger business overall.''
Nova also made compounds based on Zylar-brand styrenic copolymer and Zyntar-brand flame-retardant PS in Chesapeake, along with PS-based color concentrates. Salvador said Nova still wants to supply customers with those products, possibly through tolling arrangements with other firms.
In the first nine months of 2005, Nova's styrenics unit - including solid and expandable PS and styrene monomer - posted a loss of $156 million on sales of almost $1.7 billion. The sales number was roughly flat with the same period in 2004, but North American PS sales volumes - in pounds - dropped 15 percent to 842 million pounds.
Nova officials cited an 8 percent drop in external sales and higher prices for ethylene and benzene feedstocks as reasons for the poor nine-month performance in 2005. The styrenics unit also lost almost $200 million combined in 2003 and 2004.
``Polystyrene markets aren't growing, and at times they appear to decrease as processors draw down inventory,'' Salvador said. ``And the [PS] market still needs price increases to cover increases in raw material costs.''
Through September, U.S./Canadian PS sales were down 5 percent when compared with the same period in 2004, according to the American Plastics Council in Arlington, Va. Average per-pound selling prices for North American PS shot up an average of 10 cents per pound in the wake of Hurricanes Katrina and Rita last fall, but since that point have dropped at least 3 cents per pound. As a result, prices today are at roughly the same levels as in late 2004.
