Ineos Oxide buys LyondellBasell Texas EO business for $700 mil to help mitigate high European costs

Ineos Oxide's decision to buy LyondellBasell's Bayport, Texas, ethylene oxide and derivatives business for $700 million will provide the UK-based company an opportunity mitigate negative margins seen by European ethylene glycol producers and stiff competition from cheaper feedstock producers in the US and Middle East.

The Bayport site houses a 420,000 mt/year ethylene oxide plant, a 375,000 mt/year ethylene glycols plant and a 165,000 mt/year glycol ethers plant on the site.

The company said the acquisition of the integrated site would give it access to cost advantaged US energy, feedstocks and logistics.

According to S&P Global Commodity Insights, the cash costs of running a typical 40- to 50-year-old European plant are twice as much as a US ethane-based ethylene glycol plant. This transaction would thus open up the opportunity for Ineos Oxide to mitigate itself against the higher-cost and negative-margin issues that have hit European ethylene glycol producers.

"Ineos are the leading producer of ethylene oxide and derivatives in Europe and this major step will expand our business into the US, which is the world's largest market," Ineos CEO Tobias Hannemann said.

Rationalization seen for 2024 amid weak demand

European ethylene glycol prices are expected to see the impact of mothballing and rationalization take shape in 2024, amid poor demand, and consumers will likely seek cheaper spot volumes. Consumers are expected to agree to reduced contractual intake, with 30% reductions and contract-spot ratios of 50-50 expected in some cases despite anti-dumping duties on US product.

Due to the high cost in 2023 of European monoethylene glycol versus cheaper imported spot, buyers in Europe are likely to want greater spot exposure in 2024, and some traders anticipate higher demand for imported spot volumes would likely drive an increase in price.

Sources pointed to the high volumes that producers had on their hands and the low price development. There was a worry over the market development for next year. With DEG and TEG there were no such issues, with both markets being more minor volume supplies compared to MEG, a contractual buyer said Dec 8.

Platts assessed FCA monoethylene glycol spot prices at Eur520/mt Dec. 1, down Eur30/mt on the week, whilst bulk spot prices were assessed down Eur20/mt on the week at Eur475/mt ($512.15/mt) CIF ARA. In the US, Platts assessed US spot MEG at 18 cents/lb FOB USG ($396.72/mt) on Dec. 1, flat from the previous week.

Ineos pivots towards cheaper ethane feedstocks

Rather than depend on naphtha-based and thus more expensive oil-based European production, Ineos has in recent years been pivoting its European production sites towards more of the ethane gas feedstock produced in the US and transitioning some of their existing sites to feed US LPGs. The company has also invested in logistics systems to ship in shale-based LPG feedstocks such as ethane from the US into its European production sites.

Ineos has also invested in the construction of the first new ethane-fed European cracker. The company still assumes that its planned ethane cracker at Antwerp will be commissioned in 2026 despite a delay caused by a Belgian court's decision to cancel the Eur4 billion project's environmental permit, Ineos Group Director Tom Crotty said in October.

Ethylene oxide is the key raw material in the production of monoethylene glycol, die-ethylene glycol and tri-ethylene glycols which go into the production pharmaceuticals, cosmetics, semiconductors, polyester, food packaging, soaps and detergents, coolants, dehydrating agents in gas pipelines and in the manufacture of specialty chemicals.