Corrects unit to be closed in paragraph 3. This story was originally published on 5 September
Petrochemical producer LyondellBasell today said it intends to permanently close one of its polypropylene (PP) lines at its site in Brindisi, Italy, citing challenging market conditions.
"After thorough analysis, we believe that closure of this unit is the most sustainable solution from a strategic and financial standpoint," said LyondellBasell's senior vice president for Olefins and Polyolefins, EAMEI, Jim Guilfoyle. "This unit is the oldest of its kind in the world and it has become uncompetitive. The market environment for our PP products of this Brindisi unit has become increasingly challenging, and the outlook provides little improvement."
LyondellBasell operates two PP units at Brindisi, with nameplate capacities of 235,000 t/yr and 260,000 t/yr. The closure will be at the former, which mainly produces specialty and high-end PP grades using the company's Spherizone technology, for manufacturing pipes, construction materials, automotives and household products. It was the first Spherizone unit, and opened in 2002. The other unit mainly produces commodity PP homopolymer grades using the company's Spheripol technology, primarily for packaging applications.
"The intention of our group is to strengthen the position of the company's other assets in higher value markets," Guilfoyle said.
LyondellBasell said it intends to close the PP line by the end of the year, and it has begun consultations with trade unions and stakeholders. PP supplies to its customers will continue in the meanwhile.
The development comes with a weak demand environment in the global polymer markets and in Europe particularly. Persistently high inflation and higher interest rates have dampened consumers' discretionary spending on finished products. Higher financing costs, owing to consecutive interest rate hikes by the central banks to combat inflation, have challenged the economics of many construction projects and have curbed demand for big-ticket purchases and consumer durables, with PP having a greater exposure to these segments compared with polyethylene and other polymer grades.
Global capacity additions will keep PP plants' operating rates reduced and add to the pressure on some units. Argus forecasts almost 20mn t of new PP capacity is being added in the three years from 2023 to 2025, around twice the amount needed to keep pace with demand growth in other regions.
LyondellBasell does not have any integrated upstream propylene production capacity at Brindisi. Up to 220,000 t/yr of feedstock propylene is sourced from Versalis' Brindisi cracker. The balance is shipped in by sea from other sites, mainly from Priolo in Italy, which adds a high freight cost component in its cost positioning.
