UPDATED: INEOS weighs sale of polyolefin production sites in Italy, France

INEOS Olefins & Polymers Europe (Rolle, Switzerland) is considering selling its Rosignano, Italy and Sarralbe, France high-density polyethylene (HDPE) plants as part of a broader strategic review. European resin manufacturers, which largely rely on petroleum-derived naphtha for key monomers like ethylene, have been at a huge cost disadvantage to North American firms that utilize natural gas for their petrochemical feedstocks at a time when shale gas exploitation has pushed gas prices to extremely low levels.

Anne-Gret Iturriaga Abarzua, INEOS communications manager, told PlasticsToday that despite that challenge, European petrochemical companies do have a path forward. "I believe that European producers can remain competitive but they need top quartile assets or a differentiated portfolio," Abarzua said. "Since we acquired both sites, we have significantly improved their performance such that today both sites are highly 'cycle-resistant' producing a sophisticated range of differentiated polymers with top quartile SHE, reliability and cost leadership. Today, both sites are top quartile, profitable and cash generative."

Howard Rappaport, senior director global plastics at IHS Chemical, told PlasticsToday the move by INEOS was in some ways, predictable. "These plans from INEOS are not surprising," Rappaport said. "Non-integrated margins are poor, and the outlook for polyolefins in Europe has deteriorated in the last year. They realize that in a low-margin environment, the low-cost producer prevails."

Rappaport noted that INEOS already jettisoned its non-profitable Italian PVC production facilities and had previously closed some PP capacity in Sarralbe. "There is no reason why they wouldn’t take further actions at Sarrable and Rosignano," Rappaport said. "Buying olefins at high prices from merchant sellers and selling polyolefins at lower prices in the market is not what INEOS, or any other producer, wants to do."

Originally acquired from BP's Innovene business, Rosignano and Sarralbe have been a part of INEOS since December 2005. INEOS said in a release that both sites are "profitable and cash generative", but going forward, INEOS' strategy is to focus on the growth of its assets that are "highly integrated upstream and downstream."

INEOS stressed that it is in a very early stage of the evaluation process, and will still discuss plans with employees, works councils, and any interested third parties. The outcome of those discussions, it said, are not a "foregone conclusion." INEOS operates integrated cracker complexes in Germany, Norway, France (Lavéra), and the U.K., with eight total sites in Europe. Abarzua said that Rosignano and Sarralbe are INEOS's only non-integrated sites, with all the others intregrated with feedstocks to some extent.

Sarralbe has 195,000 tonnes/yr and 90,000 tonnes/yr production capacity for HDPE and PP, respectively. The Rosignano plant has 200,000 tonnes/yr production capacity for HDPE. Abarzua said INEOS employs 230 at Sarralbe and 180 at Rosignano. Abarzua said INEOS's total production is around 60 million tonnes, so that in percentage terms, the loss of these sites would result in an overall reduction of around 0.6%. In terms of global HDPE capacity, the sites represent around 20% of the company's total capacity.

INEOS Olefins & Polymers Europe was formed in 2008 after INEOS acquired Borealis AS. The roots of the business go back to 2004, when BP acquired Solvay's PE business. That would become Innovene in 2005, which was the acquired by INEOS in the same year, creating INEOS Polyolefins in 2006.