SABIC to Commence Operations at 400,000-Ton LDPE Plant in England

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Researched by Industrial Info Resources (Sugar Land, Texas)--The much delayed low-density polyethylene (LDPE) plant in Wilton, near Middlesborough, England, will finally be brought online in September and is expected to reach full capacity next year. The plant, now owned by Sabic UK Petrochemicals, the U.K. arm of Saudi Basic Industries Corporation (SAU:2010) (SABIC) (Riyadh, Saudi Arabia), will produce up to 400,000 tons per year of LDPE, making it the largest LDPE plant in the world.

In April 2007, Sabic completed the acquisition of Huntsman Petrochemicals (UK) Limited, the European chemicals and polymers division of Huntsman Corporation (NYSE:HUN) (The Woodlands, Texas), for an estimated $700 million. The purchase included the partially completed LDPE plant, construction of which was first announced by Huntsman in September 2004. At the time of the takeover, the plant was scheduled for completion by the end of 2007.

Delays in construction resulted in the planned start-up date being postponed to February 2008 after construction started in 2006. Now, after a total investment of $407 million, the new plant finally will be commissioned next month.

LDPE is used mainly in film form as packaging material for both food and non-food products. In the food-packaging sector, it is used for meat and poultry wrapping, frozen-food packaging, and containers for dairy products. In addition to food packaging, LDPE is often used in shopping bags, garbage bags and industrial liners.

The second-largest application for LDPE is as an extrusion coating for cardboard products, where it provides a moisture-proof barrier for items such as fruit juice packages. LDPE also can be injection-molded to produce household goods, toys and medical equipment.

The global market for LDPE in 2008 was more than 18 million tons, equivalent to an increase of just 2% over the previous year. LDPE is facing competition from linear low-density polyethylene (LLDPE), which is stronger and can be produced in thinner films with the same properties as LDPE, saving on material costs.

The global economic downturn in the second half of 2008 resulted in lower feedstock prices and reduced demand, causing several companies to reduce production and temporarily shut down plants. In December 2008, BASF SE (OTC:BASFY) (Ludwigshafen, Germany) announced the closure of 80 plants worldwide, including the temporary shutdown of its LDPE plant in Nanjing, China. The company also announced that it was reducing production at more than 100 sites in an effort to address the declining LDPE demand.

This year, LyondelBasell Industries (Rotterdam, The Netherlands) and Dow Chemical Company Limited (NYSE:DOW) (Midland, Michigan) announced capacity closures in April and May, despite increased demand from Asia.

Sabic's new plant in Wilton will face strong competition from increased capacities scheduled to be brought online 2009-12, mainly in the Middle East, which has advantageous access to feedstock, and in Asia. Much of the growth in the demand for both LDPE and LLDPE comes from China, whereas markets in North America and Western Europe are expected to decline.

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