Indorama Ventures eyes expansion in Middle East, India and Indonesia

The company intends to plug gaps in its production network by investing in India and the Middle East

Indorama Ventures is expanding the former SK Chemicals site in Wloclawek, Poland

Thailand’s Indorama Ventures has been busy expanding its production network through a series of overseas ­acquisitions. The next steps, according to founder and chief executive Aloke Lohia, will involve building a production base in the Middle East and in Asia and further ­expansion in Indonesia.

The company is studying world-scale purified terephthalic acid (PTA) and polyethylene terephthalate (PET) projects in the Middle East and India. The proposed projects are part of the company’s plans to raise its global production capacity, for PTA, PET and fibers, to at least 10m tonnes/year by 2014, from approximately 5.5m tonnes/year today, says Lohia.

The goal will be achieved by building new capacity and through acquisitions, he says. Last year, Indorama Ventures acquired operations in Tangerang and Karawang, in West Java, Indonesia and in Wloclawek, Poland from South Korea’s SK Chemicals (see map of global production sites). It also completed the purchase of assets in the Spartanburg, North Carolina, US, and Queretaro, Mexico, from US-based PET producer INVISTA.

Indorama Ventures has announced additional expansions and acquisitions that will add about 1m tonnes/year of capacity, including the pending purchase of German specialty polyester firm Trevira. This means that to meet its 2014 target there is another 3.5m tonnes of capacity still to be announced “and that is in the pipeline,” Lohia says.

Adding 3.5m tonnes/year of capacity could require an investment of approximately $2bn, Lohia calculates. Investing in the polyester value chain – via capacity expansions or acquisitions – requires about $500-600/tonne of capacity, he says. Building production platforms in the Middle East and India would plug gaps in Indorama Ventures’ global production network. The company’s aim, Lohia says, is to be present in most of the countries where its products are consumed and where consumption is likely to grow.

“India is already a huge and growing market, and the Middle East offers both the market and has raw material advantages that we would like to tap into,” he says.

Indorama Ventures expects to start construction of the Middle East and India projects early next year, and to bring them on stream by 2014. There may be a time lag between the start-up of the PTA and PET units, Lohia says, but the objective is to have integrated production.

World-scale sizes for new PTA and PET plants are 1m-1.2m tonnes/year and 400,000-500,000 tonnes/year respectively, he notes.

INDONESIAN TARGETS
The company is also keen to take advantage of growing demand in Indonesia. “We have market leadership in North America, Europe and Thailand, and we would like to build a market leadership in Indonesia,” Lohia says. “For us, Indonesia is the next India or China.”

Following the acquisition of SK Chemicals’ Indonesian fibers and PET business earlier this year, Indorama Ventures has announced plans to build a new 300,000 tonne/year polyester plant in Purwakarta, Indonesia.

The project, which is being implemented by subsidiary company Indorama Ventures Indonesia, is scheduled to begin operations in the first quarter of 2013 and will supply growing demand for the polyester fiber, yarn and chips market in Indonesia and the Asian region. Indorama Ventures Indonesia will source PTA feedstock for the expansion from Indorama Ventures’ facilities in Thailand.

Indorama Ventures is considering additional investment opportunities in PTA/PET and fibers in Indonesia. This could take the form of an acquisition, which would be a faster model than a capacity expansion, Lohia says.

The company will also seek smaller-scale specialty fibers acquisitions, focusing on Western markets such as the US and Europe. “We are aiming to get their innovation skills,” Lohia explains. “Instead of building those skills from grass roots in Asia, we would like to leverage those assets in the West and bring those products into Asia, where the specialties market is growing.”

POLISH EXPANSION
Indorama Ventures is also expanding the former SK Chemicals site in Wloclawek, Poland. PET capacity will be raised by 220,000 tonnes/year to 360,000 tonnes/year in 2013, with PTA feedstock supplied by Polish oil and petrochemicals group PKN Orlen from its new plant, also at Wloclawek.

Polish prime minister Donald Tusk officially opened the 600,000 tonne/year PTA plant earlier this month.

Indorama Ventures’ other projects include PTA and PET expansions in Rotterdam, the Netherlands, and a 75,000 tonne/year PET project in Port Harcourt, Nigeria.

In Rotterdam, PET capacity will be raised by 190,000 tonnes/year to 390,000 tonnes/year and is expected to come on line in 2012. PTA capacity will be expanded by 250,000 tonnes/year in 2014.

The Nigeria project is expected to be completed at the end of this year and come on stream in the first quarter of next year. The size of the project reflects the relatively small size of Africa’s PET-related beverages market, Lohia says. “At the moment, Africa is a very small market for PET-related beverages. But we want to be an early entrant in those markets so we are starting with a small investment in Nigeria,” he explains.

Having a global, integrated production network for PET is key to Indorama Ventures’ strategy. “PET, which represents the largest chunk of our assets, is a regional business rather than a business that can be run from a single entity out of Asia,” Lohia says.

“It’s not the low level cost of Asia that drives that business.”

With a global production base for PET, the company is not dependent on anti-dumping duties, is not affected by exchange rate volatility and can give a better service to customers, he explains.

Where possible, Indorama Ventures negotiates PTA feedstock supply agreements with suppliers. For example UK-headquartered BP is a partner in the US, while Mexico’s Alfa is a partner in Mexico and PKN Orlen is a partner in Poland, Lohia says.

FULL UTILIZATION RATES

Global demand for PET and fibers is strong, and the company is running all its plants at full utilization rates, Lohia says. Indorama Ventures predicts that global consumption of PET and fibers and filaments will grow at approximately 6.5-7%/year. “The regional business model helps us tap into most customers and distribute our products widely, keeping our plants utilized,” he adds.