🏭 The Column: Dec 15, 2023

Good morning. Super pumped to realize that I can put a table in this newsletter again. Maybe I should resurrect the old oil and gas price and chemicals index update at the top from way back in the day (it’s been a couple of years).

Worth Reading:

CCU Parity Act Gains Chemical Industry Support

If there’s one thing you should memorize from the Inflation Reduction Act (IRA), it’s the tax credit structure:

The tax credits are important, especially because of transferability, which basically means that DAC startups can print cash without selling a product (i.e. they can just sequester CO2 and sell the resulting tax credits to buyers who actually make a profit). Taken at face value, this is a good thing: free markets will never demand sequestered carbon, but free markets already demand financial products (for reasons outside the scope of this newsletter). That’s all well and good—the problem is that the structure discourages DAC startups from pursuing utilization, and utilization is the only way to build a DAC business with good long term economics. So a bunch of potential CO2 utilizers (including some chemical companies, like BASF and Methanex) signed a letter arguing for sequestration and utilization tax credit parity. [LINK]

What’s Going On:

Ineos acquired LyondellBasell’s EO

LyondellBasell’s entire ethylene oxide (EO) and derivatives business is based out of a single site in Pasadena, Texas that reacts ethylene with oxygen, and using the resulting EO to make glycols (MEG, DEG, and TEG), glycol ethers, and glycol ether acetates. The site is a remnant of LyondellBasell’s piecemeal history and has been a trusty provider of cash flow, but it has never been core to LyondellBasell’s business (as in, they do not have some sort of strategic advantage that makes it worth operating). This is fairly straightforward—EO is a heavily licensed process, and since LyondellBasell's ethylene isn't cheaper than the next guy's, the company couldn't secure a leading long-term position even if it wanted to (nobody can). So much of the strategic value for the EO business comes from the derivatives produced from it, or from being able to better serve your existing customers. This is Ineos’ bread and butter—they literally have EO in its name—they operate 4 sites globally (this will be their 5th) and they make more derivates from EO than LyondellBasell does or ever would. So Ineos is buying the business for $700m. [LINK]

Lanxess’ sulfur carrier expansion

Sulfur carriers are super niche: they are made by reacting solid sulfur with either an ester, triglyceride, or olefin. The product turns out to be an excellent additive for lubricating oils, because in high pressure applications, lubricating oils can be squeezed out of the metal-to-metal gaps that they're intended to fill, but these sulfurized esters, triglycerides, or olefins will chemically react with the metals, form a sulfide layer, and function as a solid lubricant—ultimately improving the performance of the lubricating oil. Lanxess just wrapped up an expansion project (nice work!), but their press release spins it towards sustainability just because triglycerides have vegetable origins (greenwashing!). Let’s not forget that the additive makes up a tiny fraction of a lubricating oil that is otherwise petrochemically derived, and let’s just focus on the fact that this is a good business (their product increases the value of their customer’s product). [LINK]

Trying to make EO more sustainable

Some might say that the Scientific Design Company (now owned by SABIC) gave birth to the modern chemical industry. The company invented process technologies to produce molecules like ethylene oxide (EO), propylene oxide, their resulting glycols, as well as terephthalic acid (PTA) and a few others. They became most well known for their EO production process, which produces CO2 as a by-product (as in, the emissions related to EO production aren’t just tied to energy use, it’s inherent to the reaction), so decarbonizing EO (so long as you make it from ethylene) means figuring out how to purify that CO2 stream and get it to market. That sort of thing is right up Linde’s alley, so SABIC is teaming up with Linde to develop a unified solution. It should be a pretty easy sell to the EO licensors once it’s proven out. [LINK]

Sumitomo’s CO2 to methanol

Typically, methanol is produced by reacting carbon monoxide and hydrogen (syngas) over a catalyst. But if you can manage to hydrogenate CO2 instead of carbon monoxide, then you've got yourself a great way to reduce site CO2 emissions. There a bunch of companies looking to do this right now (those tax credits we talked about certainly help), so Sumitomo is trying to figure it out. From what I understand, it’s mostly a selectivity problem—I talked about it with some detail at the bottom of this post one time. In any case, Sumitomo is getting a bit closer: they just completed the construction of their pilot plant. [LINK]

Cyclyx’s first plant

We talked about Cyclyx about a month ago: the company was spun out of Agilyx’s attempt to commercialize a polystyrene depolymerization process, and is now jointly owned by ExxonMobil, LyondellBasell, and Agilyx. The company is basically trying to tackle the collection and sorting part of the plastic waste problem. If we’re going to depolymerize plastic waste we’re going to need a consistent and predictable supply. Chemical reactors don’t like when the input composition varies widely. Now, after some 3 years of corporate development, they have reached a final investment decision: they will build a 150,000 ton per year site in Houston, Texas. [LINK]

Other Things Happen:

Solvay is looking to build a carbon neutral soda ash plant. Arkema bought a construction adhesive and sealants company. OMV and Synthos are trying to figure out sustainable butadiene. LyondellBasell’s upcoming demonstration-scale molecular recycling site just scored a $44m grant from the EU. Nouryon bought some renewable energy certificates instead of normal electricity for its three sites in Texas. Solvay’s spin off just started trading on the market on Monday. Draslovka is thinking about building a caustic soda plant in Memphis. A carbon capture company is partnering up with a few cement producers. BASF completed its specialty amine expansion.