Will SABIC Invest in Production of Polyolefins in N.A.?

 

Quickly sweeping across the industry this week was the news that SABIC Innovative Plastics, Pittsfield, Mass., will no longer be in existence next year as the company sets up its new regional headquarters for all of its Americas-based business in the Greater Houston, Texas area.

 

This is part of a global restructuring, expected to be in place by January 1, 2016, that is aimed at creating a more agile, cost-efficient, and customer-focused organization whose needs are more effectively met, according to the company. SABIC’s Innovative Plastics Strategic Business Unit (SBU) will be split--with commodity products to be part of the Chemicals and Polymers SBUs, and the remaining Innovative Plastics products to be part of the newly created Specialties SBU.

 

Officials have not made it entirely clear what constitutes the commodity products, but I would venture it would include polyolefins and possibly Cycolac ABS and associated LNP-brand compounds, as well as Lexan PC, with the Specialties SBU containing the Ultem PEI and Noryl PPE. “This reorganization will focus resources more intensively on the needs of each line, enhancing customer intimacy with more focused solutions provision and helping move SABIC to the next level of portfolio product management,” said Yousef Abdullah Al-Benyan, Acting Vice Chairman and CEO of SABIC.

 

In one of two press releases, the company noted that a key driver of this change is the differing technology priorities of commodity and specialty businesses. The future of the commodity line will depend heavily on innovations around advancing feedstock technology. Specialty products face separate technology challenges, including the need to seek out technology acquisitions and partnerships or joint ventures that can enrich SABIC’s existing portfolio.

 

Based on that latter statement and the fact that SABIC officials within the near past have said there is an interest in exploring investment opportunities that would capitalize on new natural gas supplies, it would not be entirely surprising to hear that the company would start production of polyolefins and their feedstocks, whether through a joint venture or otherwise. My two cents at this early stage is that they might opt first for PP production—where supply is tight, and we have yet to hear firm new capacity announcements from any of the key domestic PP suppliers. Oh, and let us not forget—demand growth for PP of nearly 6% through third quarter of this year.

 

SABIC has said that in building this new regional headquarters, several American functional teams will be led from the Houston area, including a “number of roles”, out of the 300 employees, that are currently based in Pittsfield. The company has also not made a decision on the future of the Pittsfield Polymer Processing Development Center which has been known for over 25 years for the latest in plastics processing technology with SABIC’s engineering resins.