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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