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INEOS NOVA to shut US styrene plant production

https://www.chemnet.com   Sep 20,2007 ICIS news
HOUSTON (ICIS news)--A joint venture formed by NOVA Chemicals and INEOS plans to shut down styrene production at Sterling Chemicals' plant in Texas City, US, part of a larger plan to improve margins, a company executive said on Wednesday.

"The entire industry has had a very tough time," said Jeffrey Lipton, NOVA chief executive.

Earlier this week, NOVA signed a $60m (Euro43m) supply agreement with Sterling to purchase the plant's 1.7bn lb/year styrene production - 11% of North American capacity, the company said.

NOVA will transfer the production to the INEOS NOVA joint venture once it becomes operational on 1 October, the company said.

The joint venture will then shut down styrene production, perhaps as soon as this year, Lipton said. The intent is to improve margins for styrenics.

The joint venture will shift part of Sterling's production to more efficient plants, contributing to the joint venture $30m/year in earnings before interest, taxes, depreciation and amortisation (EBITDA), he said.

The NOVA-INEOS and Dow-Chevron Phillips joint ventures should significantly improve market stability in the US polystyrene (PS) industry, according to market sources.

PS suppliers were anticipating the announced joint ventures would lead to a steadier environment conducive to improving eroded margins, counteracting the negative impact from volatility in feedstocks costs.

Although plagued by unpredictability in the past several years, PS activity in 2006-2007 became more rational. Participants said the market, prodded by the closing of Dow’s two PS production units in Sarnia, Canada and the Nova STYRENIX restructuring, became more disciplined and avoided earlier opportunistic buy-sell cycles.

However, buyers cautioned that a reduction in the number of PS suppliers could prompt further price increases, reducing demand for a product that is already considered too expensive when compared with alternatives such as paper and polypropylene (PP).

Consumers said the PS market is not booming, and that the threat of imports of PS either as raw material or as finished goods should be of concern to the US industry.

(Additional reporting by Ron Coifman)

($1.00 = Euro0.72)
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