Lanxess Advances Construction Plans for 100,000-Ton Butyl Rubber Facility in Singapore

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Researched by Industrial Info Resources (Sugar Land, Texas)--Lanxess AG (ETR:LXS) (Leverkusen, Germany), a leading manufacturer of specialty chemicals, has advanced construction plans for a butyl rubber manufacturing facility in Jurong Island, Singapore, in view of increasing demand for tires, especially in China and India. Scheduled to begin production in the first quarter of 2013, the 400 million-euro (US$564.91 million) plant will have a manufacturing capacity of 100,000 tons per year. Lanxess will conduct a groundbreaking ceremony at the site in May.

In June 2007, Lanxess announced plans to expand the company's butyl rubber business by developing a new manufacturing facility in Asia. Three potential locations for the plant were Singapore; Map Ta Phut, in Thailand; and Kuantan, in Malaysia. In February 2008, Singapore was announced as the location for the facility.

The plant was to be constructed in the Tembusu Cluster of Jurong Island, where Lanxess was allotted land by JTC Corporation (Singapore), a statutory board under the Singaporean Ministry of Trade and Industry. The region was selected primarily due to availability of robust infrastructure and raw materials. Lanxess had entered into a long-term contract with Shell Eastern Petroleum Pte Limited (Singapore) to procure supplies of isobutylene from the latter's butadiene extraction unit, which is part of the Shell Eastern Petrochemicals Complex on the neighboring Bukom Island. Supply of raw material was scheduled to commence in 2010, and Lanxess' butyl rubber unit was to begin operations in 2011. At the time, Lanxess estimated that the global market for butyl rubber would exhibit sustainable growth at an annual rate of 3% over a period of 15 years. The markets in China, Hong Kong and Taiwan were expected to grow at 6% per year, while the Indian market for butyl rubber was estimated to grow at more than 8% per year.

However, in December 2008, due to the onset of the global economic crisis and reduced demand for butyl rubber, Lanxess announced that it would postpone the groundbreaking ceremony of the plant in Singapore from January 2009 to the fall of that year, and that the plant would begin operations in 2012. The firm reduced production levels at its plants in Belgium and Canada.

This was followed by another announcement in June 2009, whereby the firm postponed construction plans by another two years. Lanxess said that it would use this interim period to finish developing an innovative technology for production of butyl rubber at the new facility, which was then expected to be brought online in 2014.

The following month, Lanxess announced the launch of a multilateral collaboration with Bayer Technology Services GmbH (Leverkusen, Germany), University of Bonn (Bonn, Germany), Technical University of Dortmund (Dortmund, Germany), and Buss-SMS-Canzler GmbH (Butzbach, Germany) to develop an innovative technology for the production of various forms of synthetic rubber including butyl rubber. The project was to take three years for completion, entailing a total investment of 10 million euros (US$14.13 million). Lanxess also planned to make additional investments to ensure successful industrial-scale application of the technology.

During the global financial meltdown, Lanxess employed destocking measures in the face of volatile consumer demand. However, the firm says that demand for butyl rubber stabilized in the last six months, and the global market is now expected to grow at an average annual rate of more than 3% in the coming years. The firm's manufacturing facilities in Belgium and Canada are operating at high capacities.

Lanxess expects global tire sales to return to pre-crisis levels in 2011, as the automobile and tire replacement markets begin to recover. In June 2009, the firm signed a long-term supply contract with Hankook Tire Company Limited (SEO:000240) (Seoul, South Korea) to supply butyl rubber from 2010 to 2014. Lanxess also plans to shift the global headquarters of its butyl rubber business from Fribourg in Switzerland to Singapore this year to cater to the rising demand for tires in the Asian market.

Development of the new facility in Singapore is expected to create about 200 employment opportunities for highly skilled personnel. About 1,500 workers would be employed at the site during peak construction.

Due to its high impermeability to air and humidity, butyl rubber is largely used in the manufacturing of inner liners and tubes for tires. Halobutyl rubbers, formed by halogenation of butyl rubber, are used to manufacture tubeless tires. These products retain tire pressure at a constant value for long durations, and thereby ensure vehicle safety, lower consumption of fuel, and reduced emissions. Butyl rubber is also used in the manufacture of sports balls, closures for pharmaceutical bottles, protective clothing, and chewing gum.

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