June 21–LyondellBasell is betting millions of dollars that new technology will give it an edge in the burgeoning market for polyethylene, the ubiquitous plastic that has fueled a construction and export boom along the U.S. Gulf Coast.
The Houston petrochemicals manufacturer has built a substantial portion of its $725 million plant in La Porte, a cutting-edge facility with technology designed to produce high-density polyethylene that’s stronger and more durable than its standard commodity counterpart. The plant is expected to begin operations next year to meet growing demand in emerging overseas markets.
The technology, dubbed “Hyperzone,” involves two chemical reactors to process ethylene, a natural gas-derived base material for plastic resins designed for use in pipes, bottles, bags, packaging and a range of other applications. The company says the reactors are designed in a way to allow it to tailor chemical properties to meet customer specifications.
LyondellBasell recently installed the largest of the reactors, a 12-story behemoth custom-made in South Korea and shipped about 11,000 miles to Houston. The company built a new heavy-haul road just to transport the 503-ton reactor to the construction site.
Jim Sheehan, a petrochemicals analyst with SunTrust Robinson Humphrey, said the technology improves processing efficiency and the durability of the finished product. The higher quality of the plastic means LyondellBasell can charge premium prices, he added, giving it some degree of insulation from fluctuations in polyethylene prices.
“It’s differentiated in the market because of its strength,” he said.
LyondellBasell says the plastics made with Hyperzone technology are lighter weight and more resistant to cracks. The process is designed to produce stronger, safer pipes and to reduce the amount of material needed to manufacture household products and packaging.
The plant is the first major development in the company’s $4 billion plan to expand its production capacity along the Gulf Coast, where a ready supply of low-cost natural gas has given rise to some $60 billion in new petrochemicals projects. Producers have capitalized on the affordability of ethane and other gas-derived feedstocks used to make plastics and chemicals.
LyondellBasell is preparing to begin construction on the world’s largest propylene oxide and tertiary butyl alcohol plant at its Channelview complex to produce chemicals for furniture, automobiles, adhesives and other uses. The $2.4 billion project is the company’s largest investment to date.
The Hyperzone plant, once operational, will be one of the world’s largest producers of high-density polyethylene, capable of churning out 1.1 billion pounds each year. Much of that is destined for China, India and other markets where population growth has increased demand for consumer products and packaging.
“It’s going to empower us to compete with any other market and site out there in terms of production capability,” said Christopher Cain, the company’s site manager in La Porte.
Overseas markets already drive a substantial amount of global polyethylene production, which research firm IHS Markit expects to reach 223 billion pounds this year. High-density polyethylene accounts for much of that demand.
Joel Morales, IHS Markit’s plastics analyst, said more durable plastics offer particular benefits for the pipe sector, which is expected to grow quickly as developing economies build more gas and water lines. LyondellBasell and other companies that have invested in the production of higher-quality plastics have the potential to supply much of it.
“Long term, it should open up some doors and put them in a leading position in the market,” said Morales said.
The rollout of the Hyperzone technology will culminate more than a decade of research and development that began before Dutch chemical company Basell International acquired Houston’sLyondell Chemical Co. for $12.7 billion in 2007. Basell’s researchers in Europe began studying the idea years earlier, filing the first of many patents there in 2004.
“The key drivers for this technology were to develop superior products,” said Gabriele Mei, the company’s director of research and development in the Americas.
Basell pursued the technology through its merger with Lyondell. The merger, however, left the combined company burdened with a debt load that plunged it into bankruptcy during the depths of the last recession in 2009.
It emerged in 2010, just before the so-called shale boom ignited a resurgence in U.S. petrochemicals manufacturing. The company grew rapidly and continued to develop the Hyperzone technology with researchers in Italy, Germany, Ohio and Texas.
Now, with the shale boom showing no sign of slowing, the effort is poised to pay off, analysts said.
“You can’t just think about the market that you’re in today,” said Cain, the site manager. “You have to be looking at the long-term and what’s going to be needed.”
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