The economy may be struggling, but Nova Chemicals Corp. is moving full speed ahead with plans to add 250 million pounds of polyethylene capacity at plants in Canada by the end of 2009.
Work already is under way on the effort, which will include 100 million pounds of new capacity for Advanced Sclairtech-brand high and linear low density PE in Joffre, Alberta. That addition will place Joffre's total PE capacity at 1 billion pounds annually.
The remaining 150 million pounds of new capacity will be split between three plants in the area of Mooretown, Ontario. The cost of the overall expansion is expected to be around $80 million.
``Part of the work is debottlenecking, but we're also learning how to run the Advanced Sclairtech plant better,'' Nova's Chris Bezaire said in an Oct. 24 interview at the company's headquarters in Pittsburgh. ``It's the only plant of its kind in the world, so every time we run resins, we improve.''
Bezaire, who is Nova's vice president for Advanced Sclairtech technology and licensing, added that Nova's feedstock advantage commonly known as its ``Alberta advantage'' ``is why Nova's adding [PE] capacity while other companies are removing it.''
The Alberta advantage refers to the financial benefit Nova enjoys by sourcing natural-gas feedstock from western Canada instead of the Gulf Coast, as most North American petrochemical firms do. Earlier this year, the Alberta advantage hit a record 28 cents per pound, including cash costs for feedstock, delivery and conversion.
The edge has averaged around 7 cents per pound in the past three years and is expected to be ``much better than average'' in 2009, according to Bezaire.
This year, Nova has used the Alberta advantage to increase its presence in the North American PE field, particularly in the area of packaging.
``A good chunk of our business is in food packaging,'' Bezaire said. ``Markets like meat and cheese packaging have been more resilient in 2008.''
Consumption of Nova's PE among its customer base has increased every quarter this year as customers learned to live with lower inventory levels, he added. Consumption in 2008 is expected to exceed both 2006 and 2007, according to data Nova collected by tracking railcars.
Through September, Nova's PE sales volume was up 9 percent vs. the year-ago period. By comparison, U.S./Canadian PE sales essentially were flat in the first seven months of the year, according to the American Chemistry Council in Arlington, Va.
Based on estimated 2008 sales, Nova ranks as North America's third-largest maker of LLDPE and comes in at No. 7 in both HDPE and LDPE sales. In the first nine months of 2008, sales at Nova's olefins/polyolefins business unit were up 39 percent to $4.5 billion, while pretax profit climbed 18 percent to $786 million.
Nova also has found success in 2008 by downgauging film made from its Surpass-brand specialty PE for use in cereal liners and similar products. The materials benefit from strong moisture and barrier properties, according to Bezaire, and can replace nylon in multilayer films, allowing the structure to be recycled.
``We're adding attributes, and as a result, customers will need our specialty product more, even if they're priced at a premium,'' Bezaire said.
Nova also expects increased packaging demand from China and India, where the need to get food to market is increasing, but where food spoilage rates also are above 50 percent. Efforts to keep food from spoiling will create more value in packaging resins, Bezaire said.
On the new product front, Nova has been able to place Surpass resins in Cosmo-brand storage containers, a collapsible moving and storage container system designed by Nova engineers. The containers made from recycled Surpass PE and molded by Plasticraft Corp. in Darien, Wis. include 250 cubic feet of storage space but are less than 3 feet high when collapsed after delivery.
Surpass PE resins also are used in the Twin Troller, an electric-powered two-passenger fishing boat made by Carolina Electric Boats of Benson, N.C. The boats are only 48 inches wide and weigh only 150 pounds when empty. They feature a foot-operated electric propulsion system that includes two electric motors. The boat recently won a new product award at an Association of Rotational Molders conference in Chicago.
Looking longer term, Bezaire like many Nova executives does not expect massive new PE capacities in the Middle East to have a major impact on North America.
Global PE makers ``are all boats in the same ocean,'' he said. ``But we don't believe all the [Middle Eastern] plants will start on their announced dates with 100 percent capacity. They'll come on line over time because of challenges to logistics and infrastructure and the impact will be more gradual.''
``If you look at polyethylene over time, it's averaged 5 percent annual growth, even in a downturn,'' Bezaire added. ``We recognize that every year is different, but in the long-term, polyethylene is a good place to be.''