Ineos Nova will close its 120 million-pound-capacity polystyrene plant in Montreal by the end of the year.
``Shutting down the Montreal site will remove high-cost capacity and enable us to consolidate production at our most efficient manufacturing sites,'' Ineos Nova Chief Executive Officer Kevin McQuade said in an Oct. 10 news release.
The shutdown represents about 6 percent of North American PS capacity for Ineos Nova, a Joliet, Ill.-based joint venture between Nova Chemicals Corp. of Pittsburgh and Ineos Group of Lyndhurst, England.
The plant employs 40. Nova acquired it from Huntsman Corp. in 1988, according to Ed Barnes, vice president of North American polymers for Ineos Nova. The size of the plant was the main factor in the decision, he said.
``If you look at our other assets, [the Montreal plant] was the smallest of the five,'' Barnes said in a phone interview. ``So the cost associated with each pound was much higher.''
No other plant closings are eminent, but ``everything is being examined,'' Barnes said. Some smaller pieces of machinery might be transferred to other Ineos Nova sites and the venture has not decided if it will sell the property, he added.
Officials described the closing as ``the first step'' in achieving $50 million in annual cost savings. Barnes said that the remainder would be achieved mainly through logistical advantages and better procurement practices.
The two firms already are saving $85 million in costs annually as the result of a number of moves between 2005 and 2007. Those included savings of $40 million from closing PS plants in Berre, France, and Carrington, England; $30 million from the expiration of long-term purchase contracts for styrene monomer; and $15 million from the closing of a PS plant in Chesapeake, Va.
Even after the Montreal plant closing, Ineos Nova will remain North America's largest PS maker, with almost 1.9 billion pounds of annual capacity at plants in Joliet; Decatur, Ala.; Springfield, Mass.; and Belpre, Ohio.
PS use in North America and Europe has declined in recent years, due in large part to higher prices for benzene, a chemical feedstock used to make styrene monomer. Passing on benzene costs has made PS more expensive than competing materials such as polypropylene and high density polyethylene.
In addition to Nova's Chesapeake closure, Dow Chemical Co. closed a 300 million-pound-capacity plant in Sarnia, Ontario, in 2006. Similar steps taken by other PS makers in Europe have reduced that region's annual PS capacity by more than 400 million pounds since mid-2005.
These challenging conditions have left North America with only three major PS suppliers : Ineos Nova, Total Petrochemicals USA Inc., and the merged styrenics units of Dow and Chevron Phillips Chemical Co. LLC, announced in April - less than a month after Ineos Nova expanded its existing European styrenics joint venture to include North America.
But in a recent conference call with stock analysts, Nova President and Chief Executive Officer Jeff Lipton said that better days might lie ahead for the PS world.
``I would tell you that most of the applications that can swing from styrenics into other applications have already shifted in that direction,'' Lipton said. ``There cannot be a wholesale shift, because styrenics do have some very unique properties.
``I don't think we are going to see much more, and polypropylene and polyethylene pricing have moved pretty smartly as well. So our expectation is that the reverse will come true, that we will see lower costs for benzene eventually. Nothing stays in the stratosphere forever.
``When that happens, we'll be able to price more aggressively and still make good margins, and the balance will be there,'' Lipton added.