Plastics, Profits, and Purpose

I wanted to start a blog with a theme and purpose and was inspired by content and discussions at three events I attended recently in Texas: Our own IHS Markit World Petrochemicals Conference in San Antonio, which came hard on the heels of IHS Markit flagship meeting in Houston, CERAWeek—now referred to as the Davos of the energy world—followed by the AFPM International Petrochemicals Forum in San Antonio. All were focused on similar topics of geopolitics, energy, sustainability, finance, markets, and trade.

Three weeks of events, with thousands of oil, gas, chemical, and related industry executives, politicians, environmentalists, and technology providers, often at the highest level, focused on driving global business, amid the great US shale-led manufacturing resurgence, while also amid increasing public attention and scrutiny.

Plastics were high profile, rising in importance as a value stream for oil and gas producers as energy demand wanes, but also suffering negative sentiment in society linked to marine litter and other waste issues.

Plastics as a material, and plastics waste as a resource, are undervalued by society. Captains of the Petrochemical industry, notably Jim Fitterling of Dow Chemical and Bob Patel of LyondellBasell, have taken proactive roles in the past year to solve the marine litter problem from within the industry and shown strong leadership—more specifics of that another time.

One event at AFPM was the award of the Science History Institute 2019 Petrochemical Heritage Award to brothers and industry figures James and Albert Chao, respectively Chairman and President/CEO of Westlake Chemical (Houston; TX). Their father received the Award 14 years ago and the brothers have continued with the same business values of TT Chao, who started making PVC in Asia in the mid-1950s with investment assistance from US AID.

In 1964, TT Chao started his own company in Taiwan—China Plastics Company Ltd—and later formed a multinational joint venture—one of many he created—with toy-maker Mattel, becoming the exclusive manufacturer of Barbie dolls over a period of 22 years. And by the way—Barbie turned 60 this year! (Diversity alert, but many readers will have fond childhood memories of the toy and perhaps ongoing experience ...)

James told an interesting anecdote of how his father was nearly deprived of US seed investment when a competitor lodged a complaint. When mainland China press reported this news by suggesting it was high-handed treatment from so called-friends of the young Taiwan industry, the US government swiftly confirmed the investment.

Westlake, is a great story of family business success, building some $9 billion in olefins and polymers revenue over three decades since its founding in 1986. Acquisitions include plants or business units from Air Products, CertainTeed, Eastman, Vinnolit (the PVC businesses of Wacker and Hoechst), and Axiall (Georgia Gulf, Vista and PPG).

Today, Westlake operates in 13 countries, with 50 sites in Asia, Europe, and North America and ranking number one in global capacity of specialty PVC, number three in chlor-alkali and PVC, and number two in LDPE in North America.

We know the Chao brothers to be benefactors and sponsors of knowledge and learning. They have extensive corporate and business insight, having grown up and been educated in the petrochemical, plastics, and downstream industries and served on many boards and international joint ventures set up by their father.

James referenced the only other family to have both father and sons presented with the Petrochemical Heritage Award—Jon and Peter Huntsman, whose significant philanthropy include building the Huntsman Cancer Institute in Salt Lake City, Utah.

Albert has been attending the AFPM (formerly NPRA's) International Petrochemical Conference since the early 1980s and describes it as like coming back to a family reunion.

This is one of the industry's great strengths—in unity, which is visible now in the fight against plastics marine waste.

A guiding philosophy for the Chao family in building Westlake has been to remain a family-oriented growth company that places employees and their safety first, focused on businesses they understand, with technological and/or feedstock advantages and disciplined financials, to be an investment-grade company in the $5.7 trillion chemical industry.

Faced with a backlash about single-use plastics, mounting land and ocean wastes, and global warming caused by increased greenhouse gases, Albert acknowledges that as an industry and as citizens of the world, executives must be proactive in solving global sustainability issues. At Westlake, this means achieving 30% reduction in CO2 emissions, reducing sulphur dioxide emissions to near zero, cutting energy and waste per ton of product, joining solid waste reduction efforts, and helping recyclers and municipalities with R&D to capture and recycle packaging waste

More recently, Westlake has joined the Alliance to End Plastic Waste, (led by Fitterling and Patel, mentioned above), along with 35 global chemical and plastic manufactures, plus packaging, and consumer retailing companies, to advance solutions to eliminate plastic waste in the global environment, especially in the oceans. Alliance members have committed to spend over $1 billion towards the $1.5 billion goal over the next five years to develop, accelerate, and deploy solutions; catalyze public and private investments; and engage communities globally to help end plastic waste in the environment.

Albert points out: "We are all in this together and I urge you and your companies to join hands together in solving these ominous global environmental problems and make the world a better place for all of us and our future generations."

It is worth noting here that PVC is one of the plastics most subject to attack for its environmental impact, yet is essential to the production of blood bags, trachea tubes, and other critical applications.

At the 2005 ceremony to accept the Petrochemical Heritage Award posthumously to his father, Albert cited more of the company's founding principles.

"We must acknowledge that we are an organization, not of machines, chemical processes and production output, but of people. While often a trite statement, people are ultimately the essence of our success."

"We must take pride in being good citizens of the communities in which we live and operate. A sense of community means we embrace a compassionate posture toward our neighbors, communities, and our environment."

These surely must be a mantra for all.

Posted 20 June 2019 by Lyn Tattum, Vice President, Business Information and Same Day Analysis/ Oil, Midstream, Downstream, Chemical Group, S&P Global Commodity Insights