Plastics will remain key focus at new Dow, Natural gas prices soar on winter weather concerns, Exxon/Sabic project progressing rapidly, M&A activity takes a breather during trade war

Our pick of the latest petrochemical news you need to know

Image: Dow's PDH unit in Freeport, Texas. Plastics will be important to the new Dow.

Plastics will be important focus for the new Dow Chemical

Plastics will be an important part of the new Dow Chemical, Chief Executive Jim Fitterling told investors at an investor day in New York on November 7.

Packaging & Specialty Plastics, including one of the world’s largest polyethylene resin businesses, equated to sales of around $16 billion in 2017. That amount is more than one-third of the $45 billion generated in 2017 by businesses that will make up the new Dow when it separates from DowDuPont Inc. on April 1.

The two plastics and chemicals firms had merged in 2017, but now will split into three separate companies: a new Dow, a new DuPont and Corteva, a firm that will include former agricultural businesses of Dow and DuPont.

In addition to PE and elastomers within Packaging & Specialty Plastics, other Dow units include polyurethanes and silicones.

Dow will continue to be based in ]Michigan. The new firm will have six businesses instead of 15-plus and will serve only three market sectors — packaging, infrastructure and consumer solutions — instead of more than 10.

Dow's expected headcount of 37,000 global employees also is 19,000 less than its prior total.

At the November earnings Day, the company said the new Dow investment plan will aim for projects with an internal rate of return (IRR) of over 13%, with a faster payback.

These types of projects tend to be incremental growth investments rather than mega projects which have had lower IRRs of 10-13% in the past.

Natural Gas prices soar 20% on winter supply concerns

Natural gas prices soared the most in nine years as forecasts for lingering U.S. cold weather spurred concern that supplies may not be adequate to meet demand over the winter.

Gas for December delivery rose as much as 20% to $4.929, the highest since February 2014, when a polar vortex brought an arctic chill to the Midwest and Eastern parts of the U.S.

End of day price quotes for natural gas (NYMEX)

The volume of trading on the New York Mercantile Exchange (NYMEX) was more than seven times the 100-day average. It was only on Tuesday, November 13, that gas exceeded the $4 mark for the first time in four years.

The rally also comes amid turmoil in international crude markets, with U.S. benchmark prices falling 7.1% on November 14.

Global M&A deals declining amid trade uncertainties

Only 46% of executives worldwide are planning merger and acquisition activity within the next 12 months, down 10% from a year prior, reports EY, attributing the decline to global trade concerns such as conflict between the US and China.

In its half-yearly assessment of corporate mergers and acquisitions, EY highlighted the dispute between the U.S. and China and uncertainty over Britain's looming exit from the European Union as key reasons behind the decline in executives' interest in deals. 

Higher tariffs have the potential to weigh on global growth, especially if countries retaliate against each other in a vicious cycle.

EY also found that many of the upcoming deals that are being considered are in places where trade uncertainties are highest, as the executives try to pre-empt a potential change in the legal landscape. Britain, for example, is now the number two destination for deals, up from fifth in April.

Though EY noted a decline in appetite for deals, it said the overall outlook remains positive, with 90 percent of executives expecting the global M&A market to improve in the next 12 months and a similar amount believing global economic growth prospects are improving, describing the current issues as a pause more than a stop.

EY's survey was based on responses from more than 2,600 executives across 45 countries.

Exxon/Sabic complex work moving along rapidly

Work on ExxonMobil's joint-venture petrochemical complex in Corpus Christi, Texas, is moving along at a rapid pace, a company executive said at a Greater Houston Port Bureau luncheon in November.

Most chemicals and resin to be produced at the complex will be bound for export, largely to Asia, as well as Latin America.

The project will include a 1.8 million tonne/year cracker, two linear low density polyethylene (LLDPE) plants and a monoethylene glycol (MEG) plant. It also will include a rail yard to offload polyethylene pellets for transport and a marine terminal to export liquids.

The companies expect to make a final investment decision to move ahead with the complex once permits are secured. Startup is expected in 2022.