A tough petrochemicals market is leading LyondellBasell Industries AF SCA to close a 480 million-pound-capacity plant making high density polyethylene in Alvin, Texas, by the end of July.
With declining demand for polyethylene in the United States and diminishing export opportunities we are taking steps to rationalize capacity, LyondellBasell's Vaughn Deasy said in a May 7 news release. Deasy serves as senior vice president of base chemicals and PE for the Rotterdam, Netherlands, firm.
We are experiencing trough margins and have excess capacity in our system, he added. These are difficult decisions, but steps must be taken to reduce costs and better balance supply in an environment of reduced demand.
U.S./Canadian HDPE sales fell 8 percent in 2008, removing about 1.5 billion pounds of demand from the region, according to the American Chemistry Council in Arlington, Va. Excluding exports, which grew 3 percent, the domestic HDPE market was down nearly 11 percent in 2008. That drop includes declines of 12 percent in blow molding demand and almost 14 percent in film.
The HDPE plant in Alvin employs 50. Earlier this year, LyondellBasell announced it was closing an olefins plant in Alvin as well. The HDPE plant is one of the firm's oldest, opened by USI Inc. in the 1970s, LyondellBasell spokesman David Harpole said by phone. Most production from the plant will be moved to a LyondellBasell plant in Clinton, Iowa, Harpole added.
Last month, officials said the firm needed to cut $700 million in fixed costs by the end of 2010. It will do so by closing at least 10 manufacturing plants and 20 offices and research sites, and by cutting 3,000 jobs.
Since early 2008, LyondellBasell has closed polypropylene plants in Sarnia, Ontario, and Varennes, Quebec, and LDPE plants in Bayport, Texas, and Fos-sur-Mer, France.
LyondellBasell's U.S. operations and one of its European holding companies filed for Chapter 11 bankruptcy protection in January, citing drastic drops in demand for plastics and chemicals. The firm also is struggling with a massive $23 billion debt load connected to Basell NV's $19 billion purchase of Lyondell Chemical Co. to form the new entity in late 2007.
LyondellBasell has annual sales of about $54 billion and is majority owned by investment firm of New York. It ranks as the world's largest maker of polyolefins, but it may relinquish that title after the closings are completed.
Industry analysts expect more consolidation to hit the North American polyolefins market in 2009 and 2010.