Betting On Bromine In Arkansas

More than a mile under the ground in the southwestern corner of Arkansas lies a resource unique in the U.S.: salty brines rich in bromine.

Seaweed and plankton that decomposed during the Jurassic period 200 million years ago, when the region was under the sea, left behind bromine in concentrations of 5,000 to 6,000 parts per million, about 85 times greater than that of ocean water.

The brines came to light in the 1920s when oil companies encountered them while drilling in the area. Although they were considered a nuisance at first, their commercial potential gradually became apparent.

In 1957, production of elemental bromine commenced in Arkansas via a process in which bromine salts are reacted with chlorine. Although other sources of bromine have sprung up since then, Arkansas is still the source of about a quarter of the world’s supply. It’s produced by two chemical companies, Albemarle and Chemtura, in and around the town of Magnolia.

During the same week in April, Albe­marle and Chemtura each announced business sales that, by virtue of what they leave the companies with, boost the importance of bromine to their futures. Albemarle struck a deal to sell its antioxidants and ibuprofen businesses, and Chemtura said it will divest its agrochemicals unit.

Although bromine isn’t anyone’s idea of a growth industry these days, both firms, for better or for worse, are doubling down on it.

Enrico J. Termine, head of The Woodlands, Texas-based consulting firm Termine Group, argues that the bet is a solid one. And Termine has reason to know. He worked for both companies earlier in his career and has made a name for himself as a bromine chemistry expert.

The bromine business has a lot going for it, Termine says, largely for reasons of supply rather than demand. “Bromine is only found in a handful of places at sufficient concentration to have commercial value,” he says. “Unless you have leases to that brine and unless you have already sunk costs into infrastructure, it would be almost impossible for someone else to come in.”

Beyond Arkansas, the Dead Sea is the other major source of bromine, accounting for a little more than half of the world’s supply. There, bromine concentrations are more than 10,000 ppm.

The world’s third major bromine producer, Israel Chemical Ltd., or ICL, operates on the Dead Sea. Albemarle is active on the other side of the sea through a joint venture with a Jordanian firm called Jordan Bromine Co.

About 10% of the world’s bromine comes from China, where companies extract the molecule from wells in Shandong province, even though concentrates are only 150–200 ppm, according to Albemarle. And brines in Gujarat, India, provide a sliver of the world’s bromine. Chemtura is in the process of acquiring India’s largest bromine chemicals firm, Solaris ChemTech Industries.

The demand side of the bromine business is more challenging, Termine points out, but Albemarle and Chemtura have made a business out of managing those challenges.

Many of the problems are environmental. Bromine’s largest application was once as a component of ethylene dibromide, an additive used to stop lead deposits in engines running on leaded gasoline. That use has all but disappeared. Methyl bromide is being phased out as a fumigant because it depletes the ozone layer. And last year California, a state that sets the regulatory tone for the rest of the U.S., redefined fire safety standards for upholstered furniture such that brominated flame retardants will probably not be required for manufacturers to meet those standards.

Other challenges stem from changes in the marketplace. A cathode-ray monitor or television set required a lot more brominated flame retardant than an iPad or even a flat-screen television does, Termine observes. On top of that, TV sales are slow in the developed world, Albemarle says.

Demand challenges are reflected in financial results for the big three bromine companies. Sales for Albemarle’s bromine-related businesses declined 4% in 2013 to about $1.0 billion. Sales of bromine-related products at Chemtura fell by more than 12% last year to $639 million. And ICL posted an 8% decline in its bromine-focused industrial products division to $1.3 billion.

Anne P. Noonan, head of Chemtura’s industrial engineered products division, which includes the firm’s bromine-related operations, acknowledges that the bromine business faces challenges at the moment, but she contends that it has the potential to return to the enviable profit margins it enjoyed in years past.

Chemtura, Noonan says, is investing to make this happen. The company has put money into its fleet of bromine shipping containers to support double-digit growth in fine chemicals applications for bromine. It’s investing in new-generation flame retardants to replace older products in its portfolio. And it has developed a line of bromine-based products called GeoBrom for controlling mercury emissions from coal-fired power plants.

Albemarle has a similar view. In a conference call with stock analysts held after reporting first-quarter results last month, Luther C. Kissam, the firm’s chief executive officer, admitted to weakness in some bromine businesses, but he pointed to strength in bromine-based completion fluids for offshore oil wells and potential for the use of bromine to remove mercury from power plant flue gas.

One analyst asked Kissam where he plans to invest the proceeds from the sale of the antioxidants and ibuprofen businesses. Kissam was unequivocal: “We are looking for something that would either drive new uses of bromine or strengthen and grow our bromine franchise or strengthen and grow our catalyst franchise,” he responded.

Another analyst questioned whether Kissam would consider selling the bromine business to a private equity firm and purchasing a more technology-oriented business instead. Kissam insisted that Albemarle is the best owner for the business.

That makes sense to Termine, who sees both Albemarle and Chemtura sticking with bromine, even though many applications are mature or in their sunset years. “I would be surprised if either company would ever get rid of their bromine product line,” he says. “Even if it’s an end-of-life product, if you can manage it to the end of life, you can make a lot of money.”