Australia's only ethylene manufacturer and a major polyethylene producer has gone into voluntary administration only days after its Chinese owner sold the company to property developers.
Qenos Pty. Ltd. had been owned by the Chinese government-owned China National Chemical Corp., known as ChemChina, since late 2005.
In early April, ChemChina sold Qenos to LAOP BidCo Pty. Ltd., a private company associated with the industrial and logistics property development company Logos Group. Days later, LAOP called in administrators. The administration process is similar the U.S. bankruptcy process.
Media reports said the purchaser was not interested in operating the plastics business but in gaining access to its two large industrial sites in Botany and Altona, which are suburbs of Sydney and Melbourne. The sites are located near water and rail transport infrastructure.
Innes Willox, the CEO of Australian Industry Group, a trade association that represents Australian employers, warned that Qenos' closure will cause major problems for the country's plastics industry.
"Full reliance on imported inputs will mean some businesses have no compelling reason to manufacture locally," Willox aid in a statement.
"Circular economy projects to more fully recycled plastics are just getting going and cannot yet fill the gap that Qenos will leave. Chaotic disruption of sovereign supply chains is a risk."
Willox said the causes of Qenos' closure include the closure of ExxonMobil's Altona refinery in 2021 and a long-term rise in natural gas prices in Australia.
"Qenos is surely not the only industrial gas user to be unviable at these prices; and more businesses may shrink or collapse without the local product supply and demand for goods and services that Qenos provided," Willox said.
McGrathNicol, a corporate restructuring firm, was appointed April 17 as the administrator for Qenos Pty. Ltd. and seven related companies. The first creditors meeting is scheduled for April 30.
The Botany site has been closed for more than a year after a cooling tower collapse in February 2023 but was being rebuilt until site work stopped in March this year.
Two of the four production lines in Altona have been mothballed since ExxonMobil closed its Altona refinery.
A statement from McGrathNicol said LAOP BidCo will fund the administration process, including paying employee wages and entitlements.
It said the new owner will fund "make safe and shut-down costs" for the Botany plant, which will not reopen. McGrathNicol will have discussions with "key partners to the Qenos business to determine the short-term future of the Altona plant."
The statement said Qenos' eXsource business is continuing to operate. Altona-based eXsource is a resin and chemicals distributor.
McGrathNicol chair Jason Preston said: "We have been appointed to stabilize operations and work closely with Qenos employees, suppliers, customers, financiers, government and other stakeholders to secure the best possible outcome for all parties."
Until 2005, Qenos was a joint venture owned by ExxonMobil Corp. and Melbourne-based Orica Ltd.
The 255-acre Altona site began production in the early 1960s and is "the largest production center for petrochemicals and plastics in Australia."
Qenos operates two plants at Altona. One processes ethane feedstock, sourced from offshore in Bass Strait, into ethylene. The other started production in 1967 as Hoechst Australia and now has capacity to produce about 230 million pounds of high density polyethylene annually.
The Botany complex has four plants on 91 acres, including two PE plants. One has annual capacity to make 150 million pounds of low density PE, and the other has annual capacity of 220 million pounds of linear LDPE.
Documents filed with ASIC show Qenos had a A$79.7 million (US$52 million) loss for the financial year ended June 30, 2022. Media reports suggest Qenos also has major environmental liabilities because of the age of its manufacturing facilities.