Flint Hills Resources LLC will shutter its polyethylene and polypropylene resin facility in Odessa, Texas, during the first half of 2009.
Wichita, Kan.-based Flint Hills ``has done a complete review'' of the 51-year-old plant and determined that the amount of investment needed to make the plant more competitive ``was not prudent,'' company spokeswoman Katie Stavinoha said in a Nov. 6 telephone interview.
The plant employs 395 and has annual capacities of 440 million pounds of low density PE, 350 million pounds of linear LDPE and 120 million pounds of PP. Flint Hills also produces PP at plants in Longview, Texas, and Marysville, Mich., as well as expanded polystyrene at a plant in Peru, Ill.
``We believe that our best option for growing our polymers business is by optimizing our other production,'' said the firm's polymers managing director, Francis Murphy, in a Nov. 6 news release.
Flint Hills — a unit of chemicals maker Koch Industries Inc. of Wichita — bought the four resin plants from Huntsman Corp. in early 2007 in a deal valued at more than $750 million. Flint Hills also operates oil refineries and produces asphalt and other oil-based products.
The privately held firm does not disclose annual sales. Stavinoha added that no decisions have been made regarding a possible shift of machinery or equipment from Odessa to other Flint Hills sites.
Flint Hills and other resin makers have been hammered by high feedstock costs and slowing demand for much of 2007 and 2008. Although feedstock costs have declined recently, taking resin costs down as well, commodity plastics demand remains soft and could remain low during 2009, according to several market watchers.
``I suspect we'll have many individual plant shutdowns, especially within the larger companies that have more flexibility,'' said Earl Armstrong, president of DeWitt & Co. petrochemicals consulting firm in Houston. ``Most of the polymer industry in the U.S. is off about 30 percent.''
But Armstrong added that he's not as negative on 2009 as some others are.
``I'm on the other side of the curtain,'' he said. ``It's hard to look at the trillions of dollars that have been injected into the global economy and not expect a recovery. But it usually takes six to 12 months for these things to work their way through.''
The PP shutdown in Odessa brings the total amount of PP capacity removed from the North American market since early 2007 to about 1.7 billion pounds. Previous closings affected PP operations run by Dow Chemical Co. in Hahnville, La., and by LyondellBasell Industries AF SCA in Morris, Ill.; Varennes, Quebec; and Sarnia, Ontario. On the PE side, Petromont & Co. LP earlier this year removed 615 million pounds of high density PE capacity in Montreal East, Quebec.
There have been some capacity moves in the other direction as well. LyondellBasell last year re-opened a 500 million-pound-capacity PP plant in Pasadena, Texas. Nova Chemicals Corp. of Pittsburgh plans to add 250 million pounds of PE capacity at plants in Alberta and Ontario by the end of 2009.