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BASF Offers A “remedy” For The Acquisition Of Solvay Polyamides
Oct 24, 2018

BASF offers a “remedy” for the acquisition of Solvay Polyamides

The German chemical giant BASF has provided the European Commission with a series of remedial plans to obtain approval for its €1.6 billion acquisition of the Solvay Group polyamide business.

Juergen Becky, BASF's senior vice president of high performance materials in Europe, said in an interview that BASF will retain some of its assets and certain technologies as part of the acquisition plan, which are operated by Solvay alone.

"We are in the second phase of this process. This is a typical M&A customs clearance process, and a survey of the activity's attention shows that people are worried that BASF may be too strong in the market," Becky said.

At this point, the European Commission needs to conduct another market test to measure customer opinions. BASF is expected to respond in early 2019.

Juergen Becky, Senior Vice President, High Performance Materials, BASF, Germany

Becky did not specify which assets would not be acquired, but he said it would include Solvay's innovative capacity and manufacturing assets in the intermediates and engineering plastics business in Europe.

Some transactions involving Asian and South American businesses are not affected by remedial measures.

At the time of the announcement, the supply of polyamide 6.6 was severely strained, mainly due to insufficient supply of precursor adiponitrile.

“The entire chemical process of PA6.6 begins with ADN, which is the most decisive molecule in the entire value chain.

The next step is to produce hexamethylenediamine (HMD), which we did at the Hillsides plant in the UK. Becky explained.

Then, an AH salt was produced by adding adipic acid and a diamine, followed by production of a PA6.6-based polymer.

“With the exception of ADN, all of BASF’s processes are done internally.” Becky said he served as senior vice president a year and a half ago.

In the short term, BASF expects ADN's supply to be short due to insufficient capacity.

In Europe, Butachemie, a joint venture between Solvay and INVISTA, produces 520,000 tons of this basic material each year.

INVISTA also operates two other plants in the United States with a capacity of 420,000 tons/year and 320,000 tons/year, while Aoshengde's US production capacity is 360,000 tons/year.

Although the demand for PA6.6 has grown at a rate of 4-5% per year over the past 10 years, the global demand for ADN has barely changed.

However, in recent months, there have been some announcements about AND capacity.

Indavi is building a 300,000 tonne/year plant in China that will be operational in 2023. Aoshengde plans to build a 2 million tons/year plant in 2023.

Butachemie is also improving an expansion project to increase its capacity by 80-90 million tons by 2020. According to Becky, new capacity will soon be absorbed by the market.

BASF, as a company with a strong reputation in the field of vertical integration, has important strategic importance in acquiring the Solvay polyamide business, as it provides BASF with the opportunity to enter ADN Europe's only production base.

“We hope to complement our portfolio of engineering plastics, increase access to key growth markets in Asia and South America, and strengthen the value chain by retro-integrating into key raw materials such as ADN.

In this way, we can still achieve our main strategic goals. Becky said.

The European Commission’s concerns about BASF’s exclusive rights to produce ADN products in Europe have not disturbed the company.

The reason is that, to date, Solvay's patents for the production of basic precursors in Europe will only be transferred between the two companies.

“We will continue to work closely with the European Commission and hope that we can solve all the problems,” Becky added.

In addition to the lack of ADN supply on the market, BASF's nylon 6/6 business was hit by two force majeure events at its HMD production site in Hill Sanders in 2018.

In addition to the HMD unit, BASF sold its Hill Sanders production site to INEOS in 2008.

“Ince is operating the HMD plant in Hill Sanders. The entire facility experienced two different accidental failures, resulting in the closure of the HMD plant in January and May,” Baker said.

He said: "At present, we are stabilizing the situation and have sent our staff to the site to supervise the operation of the factory."

The 100,000 t/y unit is BASF's only HMD production unit in Europe.

“A strategic factory, we will do our best to ensure its reliability.” Becky said.

Polyamide 6.6 is widely used in the automotive industry, especially due to its high heat resistance.

Due to tight market supply, the base polymer price has now reached a maximum of 3,800 euros per ton, compared to 2,800 euros per ton last year.

In the industry's call for alternatives, BASF released a new set of polyphthalamide (PPA) compounds at the German Plastics Processing Fair this year.

Ultramid Advanced T1000 based PA 6T / 6I, it has the highest strength and stiffness in Ultramid family, having constant mechanical properties at a temperature of 120 degrees Celsius.

Due to its semi-aromatic chemical structure, it has high moisture resistance and high corrosion resistance, and its performance is superior to traditional nylon and many other PPA.

Although these compounds can provide a replacement for PA6.6, they still share the same precursors, for example, ADN is a component of them.

Despite this, the ability of new materials to play a key role in the development of next-generation lightweight, high-performance components is highly anticipated.