US chemical maker Chevron Phillips has reached an agreement with Sumika Polymers America Corporation for the permanent shutdown of their polypropylene joint venture, Phillips Sumika Polypropylene Company, and plant in Pasadena, Texas, CP Chem announced Tuesday.
Sumika Polymers America Corporation is a wholly-owned affiliate of Japan-based Sumitomo Chemical Company, Ltd.
The confirmation by CP Chem puts an end to month-long rumors in the polypropylene market regarding the future of Phillips Sumika.
Phillips Sumika intends to make the transition as smooth as possible and is working with customers during this period, CP Chem said in a statement.
All other operations at the Chevron Phillips Chemical Pasadena Plastics Complex are unaffected by the closing of the Phillips Sumika polypropylene plant at that facility, the company added.
"The company remains focused on running our operation safely for our employees and the community in which we operate. We are assessing the impact to employees affected by this closing and will work to redeploy as many as possible in other parts of our organization," CP Chem COO Tim Taylor said.
Chevron Phillips stressed it remains committed to the polypropylene business, and it will continue to distribute polypropylene produced by the Saudi Polymers Co (SPCo) scheduled to start up during the second half of 2011 in Al-Jubail, Saudi Arabia.
SPCo is jointly owned by Arabian Chevron Phillips Petrochemical Co and National Petrochemical Co (Petrochem).
Rumors of Phillips Sumika's permanent shutdown first surfaced last month before the producer announced it was seeking a 10-cent/lb hike on all Marlex homo- and random co-polymer grades for September 1. The increase would be in addition to any projected increases for September.
Both feedstock polymer-grade propylene and polypropylene ended up settling flat for September at 78 cents/lb and 87-88 cents/lb, respectively, according to Platts data.
One market source said then he believed the move was likely part of a strategy by Phillips Sumika to improve margins on products from one of its lower-yielding lines.
Another polypropylene source not affiliated with Phillips Sumika believed there might be more to the story.
"The whole thing is little weird," the source said. "We're going to have to wait and see what they plan to do."
CP Chem did not specify the reason for the PSPC shutdown, but market participants last month pointed to profitability issues as a likely reason for a possible shutdown.
