Issue Date: December 1, 2008
More Chemical Plants Are Closing
THE GLOBAL CREDIT CRUNCH is casting a growing shadow over the chemical industry. The latest bad news is a new round of plant shutdowns and earnings warnings.
Nova Chemicals and Solutia are closing plants because of slack demand from construction, automotive, and housing industry customers. Celanese warns that its 2008 earnings will be lower than previously expected, and Ashland says it will reduce its quarterly dividend by nearly 75% to preserve "financial flexibility."
And although Dow Chemical, the world's second largest chemical company, hasn't taken drastic steps yet, CEO Andrew N. Liveris warns that it will "take necessary, bold, and proactive measures to manage our transformation through these extremely challenging times." The firm is looking at "all options" to cut costs and defer or eliminate capital spending. Only two weeks ago, the largest chemical maker, BASF, said it would temporarily slash global production capacity by about 25% (C&EN, Nov. 24, page 7).
Until conditions improve, Nova is idling its 475 million-lb-per-year styrenic polymers plant in Monaca, Pa. The move affects 340 workers who make resins that end up in insulation and packaging. "We expect to restart the plant but only when we see significantly stronger demand and improving margins," says Robert Snyder, vice president for performance styrenics.
Slack demand has forced Solutia to temporarily decrease production of nylon intermediates, fibers, and resins. In addition, the firm is permanently shutting down nylon carpet fiber facilities in Greenwood, S.C., that it idled in early November. The moves affect 1,600 employees, 700 of whom will lose their jobs permanently, and are expected to save $40 million annually. Solutia says it still hopes to sell the nylon business, which it put up for sale at the end of June.
The global slowdown is hurting other firms, too. Celanese CEO David Weidman says lower consumer demand has reduced sales volumes in the fourth quarter, particularly in Asia. Ashland's CEO, James J. O'Brien, says he cut the company's dividend for "strategic and tactical considerations." It will allow the firm, which just completed a $3.3 billion purchase of Hercules, "to conserve cash through the trough of the economic cycle."
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