UPDATE: Sunoco Closes Polyproplene Plant In Chemicals Downturn
13 Gennaio 2009 - 5:12PM
Dow Jones News
Sunoco Inc. (SUN) plans to permanently close a polyproplene
manufacturing facility in Texas, the latest casualty in the
battered chemicals industry.
The Bayport, Texas, plant will be closed by April 30, the
company said in a release Tuesday.
The announced closure follows a weak year across the chemicals
industry.
Early in 2008, chemicals producers faced skyrocketing prices for
the commodities needed to run plants, and later in the year, demand
weakened for chemicals amid global economic turmoil. Major
chemicals producers like BASF S.E., Dow Chemical Co. (DOW), and
LyondellBasell Industries have announced plans to reduce staff and
temporarily shut-in plants. Two chemicals producers, LyondellBasell
and Oklahoma City-based Tronox Inc. have filed for bankruptcy.
Sunoco is slightly different from these chemical giants, because
it operates multiple units outside of chemicals. Sunoco is the
second-largest U.S. independent oil refiner by volume and has a
significant cokemaking business.
Industry watchers said Sunoco's decision reflected the current
troubles seen throughout the chemicals business.
"The closure does not come as a great surprise given very poor
economics throughout the petrochemical space over the past 12
months and Sunoco's inability to generate sufficient returns with
their chemicals segment," said Chi Chow, an analyst with
Denver-based Tristone Capital, in a report issued Tuesday.
Sunoco's chemical assets are currently on the block.
Philadelphia-based Sunoco sought a joint-venture partner for its
chemicals operations to help defray the cost of the unit for more
than a year, before a Dec. 15 announcement that the company plans
to sell the plants.
"The decision to close the facility was made after an extensive
review which demonstrated the plant is no longer financially
viable," said Vice President of Sunoco Chemicals Bruce D. Rubin in
a news release Monday.
The facility can produce about 400 million pounds of
polypropylene each year. The plant was built in 1976 and Sunoco
acquired it from Equistar in 2002. The plant uses technology that
makes it less competitive than Sunoco's other chemicals facilities.
Sunoco expects to report a non-cash charge of $35 million after
taxes for the fourth quarter as a result of the closure.
The company said it plans to continue to operate its other
chemicals facilities. "We have no current plans to close other
chemicals facilities. However, we're always assessing the long-term
competitiveness of our plants," said company spokesman Thomas
Golembeski. The company has previously said that it may shutter a
Tulsa, Okla., refinery if the plant is not sold in 2009.
The company said its three other polypropylene facilities in the
U.S. will assume a portion of the Texas facility's production.
Sunoco's shares are trading up 1.53% at $41.86.
-By Jessica Resnick-Ault, Dow Jones Newswires; 201-938-4435;
jessica.resnick-ault@dowjones.com
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