Chemical makers scale back capacity
Weak demand from automotive, housing markets has chemicals suppliers closing plants
By Dave Hannon -- Purchasing, 11/21/2008 4:37:00 PM
Add chemicals and plastics to the list of industries that are ramping down production capacity in the U.S. and abroad as demand for raw materials continues to slide.
German chemicals giant BASF announced this week it will temporarily close 80 plants worldwide due to slumping demand and cutting production at 100 more, including facilities in Texas and Louisiana. In a statement, BASF said it was trying to stem any overcapacity at its operations "as a result of a massive decline" in demand, most notably from automotive customers.
And BASF’s news could be just the beginning. In a recent Bloomberg interview, Dow Chemical’s outspoken CEO Andrew Liveris said “Dow and others I think will be taking some radical actions to take out capacity. There could be acceleration of capacity rationalization because of acute pain." Liveris went on to say that “Holding price in the commodities is probably going to be near impossible in the next three to six months.”
Bob Plishka, a spokesman for Dow Chemical, told the Dow Jones News service this week that “Demand has decreased anywhere from 10% to 20%" (industry wide since the start of October), and generally our demand has been in line with the industry.” Plishka said Dow has shuttered 43 plants in the last two years.
Nova Chemicals today announced it plans to temporarily shut down its Beaver Valley plant in Monaca, Pennsylvania, which produces styrenic polymers for building and construction, durable goods and automotive markets. "Market conditions have been poor for the last year and recently have gotten dramatically worse," said Robert Snyder, vice president of performance styrenics in a statement issued today. "We expect to restart the plant, but only when we see significantly stronger demand and improving margins."
Solutia said recently it is restructuring its nylon business to reduce costs and as part of that restructuring it will shutdown an already idled bulk continuous filament carpet fiber assets at its plant in Greenwood, S.C. A company spokesman said “in the last several weeks, demand has declined significantly for nylon intermediate chemicals, fibers and resins. Therefore we are taking necessary actions to align our production and inventories with the current economic environment."
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