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Business

Ineos’s Scottish Drama

Petrochemicals: Firm’s losses, union dispute threaten Grangemouth complex

by Alex Scott
October 25, 2013 | APPEARED IN VOLUME 91, ISSUE 43

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Credit: Associated Press
Workers are at odds with Ineos over proposed wage and pension cuts.
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Credit: Associated Press
Workers are at odds with Ineos over proposed wage and pension cuts.

Following steep financial losses and a labor fight, Ineos says it will permanently close a petrochemical facility at its sprawling industrial complex in Grangemouth, Scotland. The firm has suspended operation of an oil refinery at the site as well.

Closure of the petrochemical facility will severely affect Ineos’s downstream chemical operations as well as the firm’s customers. Annually, those companies make some $8 billion worth of products based on Grangemouth’s output. Now, they will likely be forced to reduce manufacturing in the U.K. and import chemical products instead, says Paul Hodges, chairman of the London-based consulting firm International eChem.

In a joint venture with PetroChina, Ineos operates Scotland’s only refinery in Grangemouth. Ineos says it will reopen the refinery if threat of a labor union strike is lifted.

The petrochemical complex features a 1 million-metric-ton-per-year ethylene cracker. Ineos had hoped to turn around the financial performance of the complex by raising $500 million to build a new terminal that would enable it to import low-cost raw materials from the U.S.

The labor dispute includes rejection of an Ineos proposal to cap worker salaries and downgrade pensions, steps the firm argues are necessary to the site’s survival. But after Ineos announced closure of the petrochemical facility late last week, the union reversed course and said it would accept at least some aspects of the Ineos plan.

The company showed no sign of responding to the union offer as of C&EN press time.

Some 800 staffers and thousands of contractors will lose their jobs if Ineos doesn’t reopen the plant, which Ineos says has been losing some $16 million per month. Its closure could also have implications for the future of Ineos’s ethyl acetate facility in Hull, England, which relies on ethylene from Grangemouth, says William Bann, an analyst for Tecnon OrbiChem.

The U.K. government says it is talking with prospective purchasers of the complex. But “no one has come forward” to buy it, Gordon Grant, general manager of the Grangemouth site, told BBC radio.

Unite, the union that initially urged Grangemouth workers to reject the Ineos proposal, describes the closure as “tantamount to economic and industrial vandalism.”

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