Chemical Project Cancellations this Year Remain Significantly Below Last Year's Levels

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Researched by Industrial Info Resources (Sugar Land, Texas)--The North American Chemical Processing Industry (CPI) began the year with a very strong momentum built by several years of increased demand, international growth and the overall upbeat outlook for industrial economies on a global scale. That momentum kept project cancellations this year well below 2007 levels at only 116 projects with a combined total investment value of $1.7 billion. This is a decrease of almost half the value of projects canceled in 2007 as identified by Industrial Info, which totaled $3.1 billion and more than 160 individual projects.

Some of the cancellations this year were for chemicals or commodities with a significant international competitiveness such as polyethylene terephthalate resins, polyester yarn and plastics. Reliance Industries Limited (BSE:500325) (Mumbai, India) had considered plans to construct a brownfield resins and specialty polymers plant in Kinston, North Carolina, at the site of a former chemical plant owned by Unifi Incorporated (NYSE:UFI) (Greensboro, North Carolina). Plans for this estimated $200 million project were canceled late this summer as world markets began to slow. BP (Naperville, Illinois) spent a couple of years studying the possible debottleneck of a purified terephthalic acid plant in Wando, South Carolina, called the Cooper River Chemicals site before pulling the plug on the nearly $70 million project earlier this year.

Despite the very large decline in project cancellations year over year, the industry stands to lose some of its momentum during the close of this year as fears of a prolonged global economic slowdown continue to grow. LyondellBasell North America Incorporated (Houston, Texas) recently announced the temporary closure of an ethylene unit in Texas until early next year. Moves like these indicate that CPI plant owners are prepared to watch the short-term market reactions to demand, the cost of feedstock and inventories.

Nova Chemicals Corporation (NYSE:NCX) (Calgary, Alberta) canceled plans earlier this year for a polyethylene unit addition at the Joffre, Alberta, olefins complex. Concerns over reliable feedstock and demand both played a role in this $500 million project cancellation. After recently finishing a multiphase expansion of a Decatur, Alabama, carbon fibers plant this year, Toray Carbon Fibers America Incorporated (New York, New York) has placed plans for a fifth expansion phase on hold. This estimated $160 million project was originally planned to begin construction early next year and include a building capable of holding future growth and additional expansions.

As the new year approaches, Industrial Info will continuously monitor and update the major projects identified with potential construction starts during 2009 to determine whether cancellations will follow suit and remain low next year or begin to trend upward with the market's decline.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.