Major Chemical Industry Events in August: Giants Continue Restructuring and Layoffs of 20,000 Employees, Global Production Cuts May Happen Again

Summary of Major Chemical Industry Events Updated: Let's take a look at the significant developments in the chemical industry in August. We will review the major events of the month in the chemical industry from the perspectives of Corporate Developments, Policy Trends, Market Trends, and New Chemical Projects.

Corporate Developments

BASF to Close Another Plant in Germany; 75% of Future Production Capacity to Come from China

BASF announced that it will cease production related to adipic acid, cyclododecanone (CDon), and cyclopentanone (CPon) at its Ludwigshafen plant in Germany by the first half of 2025 to maintain competitiveness amid changing market conditions. The closure will affect approximately 180 workers. Meanwhile, BASF will continue producing adipic acid through its joint ventures in Onsan, South Korea, and Chalampe, France.

In the domestic market, on August 30, the Yangzi-Yangba Light Hydrocarbon Utilization Project officially started construction. The project will establish three new process units and supporting facilities: a 1 million ton/year ethylene steam cracker (including a waste alkali oxidation unit), a 500,000 ton/year gasoline hydrogenation unit, and a 620,000 ton/year aromatics extraction unit. The ethylene and propylene produced will be entirely used in the new downstream Yangzi Petrochemical polyolefin new materials project and the third phase of the Yangba Company project. BASF stated that in the next decade, 75% of its production capacity will come from China, affirming that investing in China is investing in the future. Below is an overview of BASF’s activities in China for 2024:

Henkel’s Largest Business Restructuring; Adhesive Business Revenue Reaches Nearly €5.5 Billion in the First Half

In 2022, Henkel Group’s business was mainly divided into three segments: Adhesive Technologies, Laundry & Home Care, and Beauty Care. To address sluggish growth and profitability, CEO Carsten Knobel merged the laundry and cleaning products (including well-known brands Persil and Pril) with the beauty care division to form Consumer Brands, aiming to reduce costs and strengthen the business. Over the past few months, Knobel has discontinued and sold brand businesses worth €650 million, which had thin margins and poor prospects.

Henkel’s restructuring plan, initiated in May 2022, has already shown some results. In the first half of 2024, Henkel achieved sales of €10.813 billion (approximately ¥85.69 billion), with adjusted EBIT growing by 28.4% to €1.61 billion, and profit margins rising to 14.9% (up from 11.5% last year). The Adhesive Technologies business saw sales reach €5.475 billion in the first half of 2024, a 2.0% year-on-year increase, primarily driven by a 0.2% price increase and a 1.8% volume growth. Compared to the first quarter of 2024, this business segment also saw continuous improvement in sales. Adjusted operating profit in this segment grew by 21.8% to €933 million in the first half of 2024, up from €766 million in the same period last year.

INEOS Faces Environmental Complaints; Two Factory Licenses Suspended While €4 Billion Low-Carbon Plant Gets Approved

On August 22, administrative authorities in Flanders, Belgium, announced the suspension of environmental licenses for two INEOS factories after two environmental organizations appealed, claiming that local authorities did not adequately investigate whether cobalt emissions from the INEOS plants were harmful to the Grote Nete River. Following an environmental impact report, local authorities concluded that the river’s water quality could deteriorate based on emission standards.

The suspended licenses include facilities with a production capacity of 675,000 tons/year of paraxylene, 875,000 tons/year of purified terephthalic acid, 90,000 tons/year of benzene, and 339,000 tons/year of polypropylene. It was explained that if the new licenses are revoked without replacement, the applicant can continue operations under the revalidated previous operating licenses until a new decision is made by the environment minister, so there is no immediate risk of business closure. A 525,000 ton/year purified terephthalic acid facility, which was shut down late last year due to energy costs and market competition, is also located in this area.

Meanwhile, 70 kilometers away from the factories in question, INEOS has just received environmental permits to continue the construction of its "Project One," a €4 billion investment. The steam cracker unit began construction in the first quarter of 2023 and is expected to start operations by mid-2026, with a designed annual ethylene production capacity of 1.45 million tons. It is estimated that the use of ethylene from this project will reduce the carbon footprint by over 2 million tons annually, equivalent to the emissions of 1.6 million cars. INEOS also announced plans to invest more than €6 billion in emission reduction efforts, including €1.2 billion in blue hydrogen and carbon capture technology at its main plant in Grangemouth, Scotland, and an additional €2 billion to build a series of green hydrogen plants across Europe.

Chinese Company Acquires Merck's Surface Solutions Business for ¥5.2 Billion

Global New Material International Holdings Limited announced that it has signed an agreement with Germany’s Merck Group to acquire Merck’s global Surface Solutions business for €665 million (approximately ¥5.187 billion) in cash. The transaction is expected to be completed by 2025, subject to regulatory approval and certain customary closing conditions.

Merck's Surface Solutions has a significant presence in the global automotive and cosmetics markets. Post-integration, the Surface Solutions production facilities in Gernsheim, Germany; Onahama, Japan; and Savannah, Georgia, USA, will continue to operate and serve as hubs for their respective regions. Additionally, all 1,200 employees of Surface Solutions will be retained. Furthermore, comprehensive employment protection plans will be implemented in Gernsheim and Darmstadt, with the Gernsheim office set to remain operational at least until 2032. Until the transaction is completed, Merck Surface Solutions and Global New Material International will continue to operate independently.

Policy Trends

Global First Plastic Treaty to Be Finalized in November; Production Limits Likely to Be Imposed

On November 25 this year, countries from around the world will finalize the first global plastic treaty at a meeting in Busan, South Korea, aimed at addressing global plastic pollution. At the end of last year, countries including China, Saudi Arabia, Russia, Iran, Cuba, and Bahrain launched the "Global Plastic Sustainability Alliance," which will push for the treaty to focus on waste management rather than production limits.

In August this year, the Biden administration in the United States announced support for a global treaty aimed at restricting the production of new plastics. According to Reuters, the U.S. is establishing a potential global list of chemicals of environmental concern and drafting global standards to identify which plastics should be included on a list of "avoidable plastic products" to be gradually phased out. Previously, the "High Ambition Coalition," formed by 66 countries, also aimed to limit global plastic production. Whether the U.S. government's change in stance will encourage more countries to support restrictions on primary plastic production remains to be seen. However, this move has triggered strong opposition from the plastic industry, which views it as a "major policy shift."

The U.S. is one of the world's largest plastic manufacturers and also the largest producer of plastic waste, generating approximately 42 million tons of plastic waste annually, or about 130 kilograms per person per year. Since China banned the import of plastic waste from the U.S., the U.S. has been forced to handle this waste domestically. Although major companies like BASF, Eastman, Dow, and ExxonMobil are building new waste plastic recycling plants in the U.S. with government support, these efforts are still insufficient, and most waste is still managed through incineration or landfilling.

Market Trends

In August, prices for Asian chemical products continued their downward trend. According to a report by ICIS, the average prices of 26 out of 31 major petrochemical products fell in August. Among them, dioctyl phthalate (DOP), octanol, and caprolactam saw the most significant declines. Meanwhile, five petrochemical products saw price increases, with ethylene, ABS (acrylonitrile butadiene styrene), and styrene experiencing the largest rises.

The primary reasons for the price trends include the market still being in the off-season and global economic recovery falling short of expectations, leading to continued weak end-user demand. For a detailed reference of global market fluctuations in August, you can consult the statistics from the China Petroleum and Chemical Industry Federation.

New Chemical Projects

Wanhua Chemical Starts Production of Key Chemical Materials

At the end of August, Wanhua Chemical announced that its 48,000-ton/year citral plant has successfully completed trial runs and produced qualified products, marking the successful one-time startup of the world's largest single-capacity citral plant. Wanhua Chemical has successfully mastered the complete technology for producing L-menthol from citral and has established a 1,000-ton/year industrialized facility. This achievement marks a milestone in China’s synthetic menthol industry and makes Wanhua the fourth company globally to master the core technology for menthol production.

Additionally, at the beginning of September, Wanhua Chemical announced that its Hungarian subsidiary, BorsodChem, had begun phased shutdowns of its integrated MDI (400,000 tons/year) and TDI (250,000 tons/year) facilities, as well as related supporting units, for maintenance starting July 16, 2024. These maintenance activities have now been completed, and production has resumed.

Another Major Refining and Chemical Integration Project Launched with an Investment of ¥80.3 Billion

The Yanchang Petroleum Refining Company’s official website has announced the first public notice for the environmental impact assessment of the "Yanchang Petroleum Yan'an 10 Million Ton/Year Refining and Chemical Integration Upgrading Project." Yanchang Petroleum plans to build a new 10 million ton/year atmospheric distillation unit, a 1.2 million ton/year ethylene unit, and other related refining and chemical units. The project will also involve shutting down and upgrading existing facilities, with a total investment of approximately ¥80.29 billion.

Million-Ton DMC Project Launched in Guizhou

On August 29, the groundbreaking ceremony for the Guizhou Bijie Phosphor-Coal Chemical Integration Project was held in Zhijin County, marking the official start of construction. With a substantial investment of ¥73 billion, this project becomes the largest industrial investment in Guizhou's history. The project is a joint venture between Qingshan Group, Huayou Holdings, and Huafeng Group. It aims to invest in and build facilities for the annual production of 1.5 million tons of iron phosphate, 800,000 tons of lithium iron phosphate, 1 million tons of dimethyl carbonate (DMC), and 5 million tons of coking products, with construction planned in three phases. Upon completion, the project is expected to achieve an annual output value of over ¥120 billion. Phase one of the project will invest ¥24.3 billion to build 500,000 tons of iron phosphate, 250,000 tons of lithium iron phosphate, 2 million tons of coking products, 300,000 tons of synthetic ammonia, and 300,000 tons of hydrogen peroxide.