The products described
Acrylates are esters of acrylic acid which are produced in large-scale plants from propylene and other hydrocarbon feedstocks. The limited scale of Australia's market has been given as a reason for it not being manufactured. Acrylates are used to prepare emulsions (sometimes unstable requiring local manufacture) by companies such as Rohm & Haas and BASF for use in paints, adhesives and specialist application emulsions. The process is helped by a price-inflating 5 per cent import tariff that reinforces the margin of advantage from freight savings using locally sourced solvents.
The importatation of acrylic acid and esters can be expected to continue.
Benzene is the raw material used for the manufacture of styrene and phenol. Declining local supplies from BHP's steelworks is forcing Huntsman to increasingly rely on imports. Environmental pressures is likely to see supplies from Australia reduce to zero. Benzene is unlikely to be produced in Australia in the near future with only a small domestic market.
The benzene is reacted with ethylene in a worldscale plant (100 000 tpa) established in 1976 to produce styrene.
Some benzene is also used to produce phenol and acetone as by-product. The phenol plant is tiny and therefore high cost. The co-produced acetone appears no longer to be exported according to the current reports (contrasting with the Coode Island Review Panel report). Phenol is also a freely traded chemical.
The processes are helped by an import tariff (and anti-dumping protection) and the plant would not be established in today's economic environment without competitive advantage over overseas plants close to raw materials (especially benzene).
It would not be unreasonable to suggest that Huntsman could continue a large part of its operation relying instead on imported styrene (on analogy to propylene oxide by Dow) as Monsanto Australia (and CSR Chemicals) has done in earlier times in Australia with higher levels of tariff protection. Its competitivenes is marginal and its intermediate term outlook is unclear.
Butadiene is required for the elastomer (synthetic rubber) plant established in 1961 and operated by Kemcor at Altona. It is of very small scale (around 35 000 tonnes for SBR and BR rubbers) and established at a time when competing imports were taxed at 50 per cent. Butadiene has many of the characteristics of LPG as a hydrocarbon.
It is imported as Kemcor does not manufacture enough (about one-half) from its SCAL 1 cracker using gas oil - a situation unlikely to change even with any expansions based on Bass Strait gas. The outlook for the manufacture of synthetic rubber at Altona is unclear given the small scale and dependence on imports.
Polyols are safe chemicals that are proposed to be imported through the HCF. Their manufacture is outlined under propylene oxide above. They could be imported in place of propylene oxide raw material.
Propylene oxide is made from propylene hydrocarbon. The propylene oxide is converted by Dow Chemical to polyols in a simple operation established in 1972 adding little value with little employment (perhaps 30). The process is made competitive by the freight savings in using locally available water and alcohols and other basic chemicals. Nevertheless, the company has claimed (to the IAC inquiries) that competition was "substantial" with limited prospects for growth at a time when import tariffs were four-times higher than at present.
Styrene is proposed to be exported through the HCF. It is produced by Huntsman by alkylating benzene increasingly supplied from imports and now represents about 80 per cent of supplies. Its predecessor, Monsanto, once operated a plant at Silverwater NSW (PACCAL) which closed when gas supplies ceased.
Unlike the other activities involving HCF products, styrene is produced at world-scale but some of that advantage is eroded by the increased incidence of international freight on its principal raw material benzene. The plant is a legacy of Australia's protectionist era.
Styrene is a low value added derivative of benzene and exports are to utilise anused capacity. Not surprisingly, exports of styrene are declining sharply from 40 per cent of production in 1992 to around 15 per cent today. Exports could be anticipated to cease over five years with growth in Australia's market for styrene products. The need for the HCF for that purpose will therefore decline.
Styrene is used to produce polystyrene resins, polyester resins and the copolymers ABS and SAN using hazardous acrylonitrile. The manufacture is at relatively small scale made competitive by an import tariff and anti-dumping protection (and small premium for convenience for local supply to users in Australia. Limited competitiveness will mean that it will remain a domestic-market oriented operation with growth determined by the home market.
The activities of Huntsman are assisted with tariff and anti-dumping legislation that inflate the price of its products adding to costs to user industries. It has been estimated by the Industries Assistance Commission (IAC, in analysing the impact of reduced tariffs on styrene), the generally reduced tariff would reduce the value added for the users by only one-fifteenth compared with the styrene resin manufacturers (then two before Dow ceased operation). Overall, by the IAC analysis, there would therefore be a net gain to the economy with lower prices for plastic goods without a local styrene resin manufacturer. The status of Huntsman in importing styrene would be like Dow importing propylene oxide rather than producing it in Australia. (We acknowledge different complexities and economies).
Toluene di-isocyanate (TDI) is a specialist chemical used to react with the polyols as produced by Dow to form polyurethane foam. Given the very large freight advantage in producing the foam near the principal markets, (with consequent price inflating advantage far greater than the import tariff), TDI can be expected to continue to be imported regardless of Dow's decision to manufacture the polyol made from propylene oxide.
Vinyl chloride monomer (VCM)
Vinyl chloride monomer is a chlorinated hydrocarbon which is polymerised to PVC resin - a process which adds little real value having previously been assisted by an import tariff of 30 per cent.
During 1996, ICI is closing down its VCM manufacturing plant at Botany in favour of imports for its underutilised Laverton polymerisation plant that has been importing VCM since its establishment in 1979. Around 160 000 tonnes of VCM will be imported through Victoria by ICI and Auseon.
Australia is a major importer of caustic soda which is a co-product of chlorine required to produce VCM. ICI and others have expressed interest in establishing a chloralkali plant which would avoid the need for imports of VCM. With little recent interest, this prospect appears less clear and imports could be anticipated to continue.
Though a known carcinogen, it is assigned a high (ie. safe) ERPG value.
Other HCF chemicals
The ethanol and methanol are relatively innocuous chemicals, being flammable that could therefore be processed like petrol. The trade in methanol, (used to produce formaldehyde by ICI and Borden) can be anticipated to continue with its use in the manufacture of urea and melamine formaldehyde resins. A methanol pilot plant established by BHP at Laverton could replace imports proposed for the HCF.
Neither alcohol warrants the degree of separation to underpin or support the HCF.
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