Consolidation in the Petrochemical Industry

By Mohi Narayan and Joyce Lee

NEW DELHI (Reuters) – Petrochemical producers in Europe and Asia are in survival mode as years of capacity build-up in top market China and high energy costs in Europe have depressed margins for three consecutive years, forcing firms to consolidate.

Here’s a look at consolidation moves by major producers worldwide.

EXXON MOBIL

ExxonMobil (NYSE:XOM) Chemical France announced in April it would shut down the steam cracker and close chemical production at Gravenchon this year, stating that the site has lost more than 500 million euros since 2018 and remains uncompetitive.

FORMOSA PETROCHEMICAL

The Taiwanese petrochemical giant has been operating only one out of its three naphtha crackers for a year. The company has kept the other two crackers offline due to poor demand and unhealthy margins, said spokesperson KY Lin. The company is not looking to make any new investments in the near term due to challenging market conditions, a company official noted.

INEOS

The UK-based company acquired TotalEnergies (EPA:TTEF)’ 50% share of the Naphtachimie, Appryl, Gexaro businesses in April, making INEOS the sole owner of the units at Lavera in southern France. The deal includes a 720,000 metric ton per year (tpy) steam cracker, 270,000 tpy of aromatics, and 300,000 tpy of polypropylene production capacity.

LYONDELLBASELL

The U.S.-based producer of plastic raw materials stated in May that it has launched a strategic review of the European assets of two of its business units. The company sold its Bayport, Texas ethylene oxide unit and associated business to chemical maker INEOS Oxide for $700 million in May.

MITSUI CHEMICALS

The Japanese firm announced in April its decision to close the phenol plant at its Ichihara Works by fiscal year 2026. Additionally, in October 2024, it will shut its polyethylene terephthalate (PET) plant at its Iwakuni-Ohtake Works. In Chiba, the company has reached an agreement with Idemitsu Kosan to consider aggregating ethylene equipment, as noted in its annual results released in May. It plans to downsize Omuta Work’s toluene diisocyanate (TDI) plant by fiscal year 2025 and is considering shutting the Anegasaki plant by 2027.

PENGERANG PETROCHEMICAL CO (PREFCHEM)

The 50-50 joint venture between Petronas and Saudi Aramco (TADAWUL:2222) has kept its 1.2 million tons per year naphtha cracker shut since it was closed for maintenance earlier this year. The office of the CEO has indicated that there’s no update on the restart of the cracker.

SAUDI BASIC INDUSTRIES CORP (SABIC)

SABIC, 70% owned by oil giant Aramco, announced plans in April to permanently shut the No. 3 naphtha-fed cracker at its plant in Geleen, the Netherlands, after routine maintenance at the site.

SHELL

The European energy major in May sold its refinery and petrochemical assets in Singapore, Asia’s main oil hub, to a joint venture between Indonesian chemicals firm Chandra Asri and Swiss miner and commodities trader Glencore (OTC:GLNCY). This sale is part of Shell (LON:SHEL) CEO Wael Sawan’s plan to reduce the company’s carbon footprint and focus on the most profitable businesses.

SUMITOMO CHEMICAL

Saudi Aramco has agreed to buy from Japan’s Sumitomo Chemical a 22.5% stake in their petrochemical joint venture Petro Rabigh for $702 million, according to a joint statement on Wednesday. This deal shrinks Sumitomo Chemical’s stake in the joint venture to 15% while increasing Aramco’s share to 60%.