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Sellers Eye Upturn In Used Equipment Sales

Cheap U.S. energy may mean demand for process equipment idled by bankruptcy and consolidation

by Marc S. Reisch
December 16, 2013 | A version of this story appeared in Volume 91, Issue 50

Credit: Newscom
Hoku Materials’ polysilicon plant under construction in 2010.
Photo of Hoku Materials polysilicon plant under construction in 2010 showing vent gas recovery equipment.
Credit: Newscom
Hoku Materials’ polysilicon plant under construction in 2010.

A nearly complete polysilicon plant that cost $700 million sits idle in Pocatello, Idaho. Tomorrow that plant, built for now-bankrupt Hoku Materials, goes on the auction block.

Court trustees supervising the sale expect to recover somewhere between $6 million and $35 million from assets that in headier times were slated to produce materials used to make solar panels.

In June, the biotechnology firm Affymax auctioned off pharmaceutical equipment at its Palo Alto, Calif., facility, raising $1.4 million. Earlier in the year, Affymax recalled its only product, a drug to treat anemia. The company announced it would restructure itself and might declare bankruptcy.

Idle equipment from firms such as Hoku and Affymax was once likely destined for the scrapyard or a ship bound for China, but these days it may end up back on U.S. production lines. Used equipment dealers are anticipating a resurgence in U.S.-based manufacturing brought on by cheap energy and raw materials derived from shale gas.

Right now, dealers have huge inventories of unused plants and equipment. Although some of that inventory comes from recent bankruptcies or business reversals, even more idle equipment is sitting around because of mergers and industry consolidations, some of those going back to the Great Recession of 2008.

International Process Plants, which buys petrochemical, pharmaceutical, fertilizer, and oil-refining plants, owns 100 complete process plants for sale, according to IPP President Ronald H. Gale.

IPP’s inventory includes methanol, hydrogen, polyester, and polyethylene facilities. Until recently, a lot of used plants and equipment went from the U.S. and Europe to buyers in the developing world, Gale says. But low-cost U.S. natural gas is beginning to change the flow of asset purchases.

In what he hopes may be a harbinger of things to come, Gale says some used plants and equipment are being shipped to the U.S. from overseas. His firm recently sold a pharmaceutical-grade glycerin purification plant in the U.K. to a customer who relocated it to the U.S.

But the cost of moving large equipment over long distances can be high. Gale is counting on the planned buildup of shale-gas-fueled petrochemical facilities by firms such as Dow Chemical, Shell Chemicals, and Braskem to drive up U.S. demand for some of the downstream plants that IPP owns.

Most chemical plants are built new, Gale acknowledges. “But entrepreneurial companies and those looking to save money and shorten the lead time required to engineer and fabricate new plants and equipment are considering buying used,” he says.

Jesse Spector, vice president of used process equipment seller Phoenix Equipment, says his firm has also seen an uptick in inquiries from U.S. equipment buyers. But “we haven’t seen sales actually materialize yet,” he admits.

Phoenix could use those sales. “A lot of machinery used to go to India and China,” Spector tells C&EN. But as those countries develop their own fabrication and engineering capabilities, demand is drying up. Asian chemical and pharmaceutical makers can often purchase new equipment locally for less than the cost of shipping and setting up used equipment, he says.

DuPont, which has done its share of consolidation in recent years, runs an asset management group to handle plants and equipment it no longer needs. Other large firms such as Dow Chemical and Abbott Laboratories have similar business units.

“We first advertise used equipment internally to see if we can redeploy it,” says Barbara Flynn, sourcing and logistics supervisor for the DuPont group. After a while, the equipment is offered to outside customers on a third-party website and is scrapped if the equipment can’t be sold, Flynn says. Sometimes DuPont will work with a broker or auctioneer to sell valuable equipment. The time from listing to disposal is as much as two to five years.

The cost difference between new and used equipment is a real motivator for purchasers. If it fits their needs, used equipment generally ends up costing half of what it does new, including shipping and installation costs, says John Cote, chemical division managing director for EquipNet, which offers asset management and auction services.

The firm, which counts pharmaceutical and fine chemicals makers among its clients, says consolidation and more efficient business practices among pharmaceutical makers have led to a noticeable uptick in equipment available for sale in that industry.

Used equipment at one time flowed from large firms to smaller ones, says Ben Potenza, vice president of marketing for EquipNet. But over the past five years, his firm has brokered used equipment sales between large multinational companies.

“Before 2008, big multinationals would never have bought used equipment,” Potenza observes. “But they are ready now.” As he sees it, “companies are realizing there is real value in idle equipment.”



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