Custom Search

ICI Rhodes in 1994  (the future Olympic 2000 Games venue will appear on the near horizon)
bullet

See also the panoramic photographs on Homebush Bay.

bullet

Other sites. University of Melbourne (very good).

CSR Chemicals and Timbrol were the only two petrochemical companies that could describe themselves as Australian owned.

CSR Chemicals went through three phases including its last under ICI's ownership. It finally, and predictably, closed in 1997. As an example of high cost operations underpinned by import tariffs and anti-dumping legislation, it should be of interest to strategists. There are valuable pointers to countries that use import tariffs to promote high cost activities.

 

Click on picture to see full panorama from shore of Homebush Bay

The key to the following four panoramic photographs taken some time between 1975 and 1980. They are on the eastern bank of Homebush Bay from the north to south centred on area from Gauthorpe and Mary streets, Rhodes New South Wales. 

timbrolkey1_3.jpg (10199 bytes)

timbrol_pan1.jpg (97096 bytes) timbrol_pan2.jpg (52411 bytes) timbrol_pan3.jpg (68704 bytes) timbrol_pan4.jpg (88266 bytes)
OXO and DA/VA plants

Berger Paints and CSR Building Materials (Gyprock)


bulletDetails of closure and interpretation.

 

horizontal rule

Historical commentary

In 1939, at a time of major new investments by ICI and Monsanto in Australia's chemical industry, CSR as a prosperous sugar refiner made a commitment to diversify. CSR entered the chemical industry by planning to add value to sugar and alcohol produced from molasses. Due to questionable strategic planning and an incognisance of evolving technology, CSR was soon compelled to revise its original strategy of using sugar-derived chemicals to produce petrochemicals. It was a change that reoriented it from a fast growing and open market, to a slower growing one dominated by ICI - a company that would also become its supplier of key feedstocks. ICI later purchased CSR's entry into the chemical business for a low price reflecting its very poor operating history. (In 2000, CSR is selling off all its sugar interests to focus on building products).

However, not even its cheap purchase by ICI, who held a significant share of the market for its chemicals, provided an economic basis for the complex to remain in operation. Since late 1992, the ICI plant has substantially closed confined to the manufacture of phthalic anhydride simply esterified with imported alcohols to plasticiser chemicals. All the ethanol-derived chemicals (including acetic acid and vinyl acetate monomer), the oxo alcohols, mannitol and sorbitol esters are no longer produced. (The oxo alcohol plant has been relocated to India.) In 1997 the rest of the plant closed leaving potentially valuable real estate at Homebush Bay.

Adding value and import replacement - common catch words today have perfunctory appeal, but as CSR showed that does not necessarily translate into a profitable business. CSR Chemicals like its previous neighbour Timbrol and only other major Australian organic chemical manufacturer) provide valuable lessons to policy makers and chemical strategists.

 

horizontal rule

CSR Chemicals Origins

In 1901, CSR began to manufacture ethanol (ethyl alcohol) at Pyrmont, New South Wales from molasses produced by its sugar refining business (using technology it had developed in 1869).

Ethanol was then a competitive raw material for Australia with no known indigenous oil or gas reserves; it could be manufactured from a grown product at a time of shortages in many chemicals. Although a high cost raw material, then with no indigenous petroleum feedstocks and substantial levels of government assistance, ethanol was a competitive raw material. CSRC's board of directors would have perceived an entry into the chemical industry as a reasonable diversification strategy for this profitable sugar-based company.

Comment
Today, with readily available hydrocarbons, most of the world's ethanol is manufactured from hydrocarbons (ie. using ethylene rather the reverse [dehydration] which is a higher cost route as then used by CSR, and for a few years by ICI at Botany). Then, without indigenous feedstocks and with concerns about Australia's strategic dependence on imported oil, it would have been perceived by government as an acceptable cost penalty for which tariffs should be available.
CSR began to produce a new group of chemicals in 1939 helped by purchasing a shareholding in Robert Corbett Pty Ltd a small manufacturer of sugar and alcohol-derived chemicals. The first chemicals were simple sugar by-products including ethanol (ethyl alcohol), vitamin C, acetone, small volume chemical derivatives and some pharmaceutical products.

To establish a foothold in the marketplace as a manufacturer of commodity chemicals, CSR planned to manufacture cellulose acetate resin. As a first step in 1946 anticipating the large scale manufacture of acetic acid (which began four years later in 1950), CSR began to manufacture cellulose acetate moulding powder from imported flake. The cellulose acetate plant operated for the next quarter century at their Lane Cove, New South Wales site until it closed in 1975.

Comment
Cellulose acetate is a plastic material principally used for moulding and fibres (rayon, for Australia's textile industry but which would soon be subject to competition from newer petroleum-sourced polymers). This resin is manufactured from acetic acid (made by oxidising ethanol) and cellulose (e.g. from its sugar cane bagasse).
In 1948, CSR separated its chemical business by forming CSR-Chemicals (CSRC) and four years later, the Distillers Company Ltd of the UK took a major shareholding in the company. The capital base provided CSRC the resources to begin its major thrust into the manufacture of commodity chemicals.

Commodity Chemicals

CSRC boldly began its strategy with the manufacture of polystyrene followed three years later with vinyl acetate monomer.

It was a venture that used two distinct technologies, with new feedstocks, to supply markets in which it had no experience and, for one of those two products, CSRC would compete with an experienced multinational chemical company. The common link was the required ethylene raw material that would be produced by dehydrating its ethanol.

Comment
The dehydration process, as also used for a time at ICI's Botany plant may be expressed as; C2H5OH ® C2H4 + H20. The reverse direction (ie. starting with ethylene) is now used to make ethanol.
Polystyrene
In 1955, CSRC began to manufacture polystyrene by polymerising imported styrene monomer.

It might have seemed a sound strategy as polystyrene was then a new plastic for which there was substantial and fast growing demand. On the other hand, CSRC would also be competing with Monsanto Australia for the small Australian market. Monsanto had not only begun to produce polystyrene two years earlier, it also had access to technology from its US blank with considerable experience and expertise.

Comment
The low value adding production of polystyrene from expensive to transport imported styrene monomer is only viable with tariff assistance. A manufacturer of polystyrene would have to plan to produce styrene from benzene and of course, establish a source of ethylene. (Styrene is made by reacting benzene with ethylene). Benzene is a by-product from steelworks but in Australia is only available in limited, and today in declining amounts. Therefore, CSRC would not only have to compete in the Australian market with the experienced Monsanto company, it would also have to plan to bid for the limited local supplies of benzene. Perhaps CSRC may have anticipated that it could form a relationship with another Australian company BHP. Here, patriotism was overridden by commercial issues as the only relationship formed by BHP was in 1977 with CSRC's USA-based competitor, Monsanto.
Vinyl acetate
In 1958, CSRC began to manufacture vinyl acetate monomer (VAM) to be polymerised to polyvinyl acetate (PVA) as its second key product. (A few years later acetic acid would no longer be required for cellulose acetate when CSRC closed its Lane Cove plant in 1975.)

Polyvinyl acetate is a polymer of vinyl acetate monomer that can be blended to produce what was then a comparatively new polymer-base for water-based paints, adhesives and textile finishes.

Like styrene, VAM also requires ethylene as a feedstock. This useful polymer was made from acetic anhydride (made from ethanol via acetic acid) and acetaldehyde (made from the thermal cracking of the reaction product, ethylidene diacetate). The process operated for thirteen years until its replacement in 1971 by the cheaper Bayer process that started with ethylene from petroleum instead of ethanol. (By then acetic acid was no longer produced commercially from ethanol but from oxidising ethylene.)

Although CSRC began to manufacture what was then like polystyrene a fast growing chemical, production of vinyl acetate, until its closure in 1992, was only a very modest 14 000 tonnes per year.

Comment
The slow growth of vinyl acetate production was largely due to the development of acrylic polymers increasingly competing with vinyl acetate in the paint market.
Typical world scale plants are some ten-times larger (capacities ranging from 100 000 to 150 000 tonnes) with considerable scale benefits. The CSR plant not only operated with a significant scale-related operating cost penalty, the polymerisation step was later undertaken by Hoechst one-thousand kilometres south in Victoria (now owned by National Starch and Chemical and importing the VAM since the closure at Rhodes).
Comment
Vinyl acetate provided CSRC with fast growing demand but it was a vulnerable strategy from the start. Vinyl acetate, like most other organic chemicals (including acetic acid), would soon be more cheaply manufactured from petrochemicals. The Rhodes site could never grow to sufficient size to competitively produce petrochemical feedstocks. Ethylene plants with capacities of at least 100 000 tonnes per year were then being built around the world an output some ten times its requirements. It was of course no basis to plan for a competitive plant especially as there were already three ethylene plants in use at Botany and Altona. The use of feedstocks made from ethanol would therefore become increasingly uncompetitive and it would eventually have to obtain its feedstock by pipeline from an ethylene supplier. It was perhaps fortunate for CSRC that ICI did not enter the vinyl acetate market but as events developed, it was cheaper for ICI to purchase CSRC than to establish its own plant.
Competitive Developments
In 1959, just four years after CSRC had commissioned its styrene polymerisation plant, Monsanto based in Victoria, began to build a styrene manufacturing plant at Silverwater just 5 kilometres from CSRC's plant. The new plant used ethylene produced at PACCAL's oil-sourced gas production plant.
Comment
The production of styrene monomer in Australia from 1961 meant that Monsanto was eligible for a 40 per cent tariff which would have increased the Australian price of styrene monomer to users like CSRC. However, a government concession (Ministerial Determination) to CSRC permitted it to continue to import styrene monomer on duty free terms.
Also during the 1950s, CSRC's competitive position was further weakened when technology became readily available to produce comparatively cheap ethylene from oil and gas (adopted at Botany in 1960). Ethylene so produced would be far cheaper than made from ethanol. Being too small to justify a competitive naphtha cracker, CSRC was locked into continuing to either use expensive ethanol or purchase its ethylene requirements.

Fortunately for CSRC, styrene was required to manufacture synthetic rubber by the Australian Synthetic Rubber Company at the new Altona petrochemical complex commissioned in 1961. Dow Chemical had the expertise to manufacture styrene and CSRC-Dow was formed as a joint venture initially operating at its Rhodes site. In 1964, the polymerisation unit was relocated to Altona and the styrene monomer would now, like by its larger competitor Monsanto, be manufactured using benzene produced by BHP and with ethylene supplied by Altona Petrochemical Company. CSRC's competitive position with its polystyrene strategy against Monsanto was at least stabilised (although it now had only a one-half interest in that strategy).

Also in 1961, CSRC formed a partnership with BFGoodrich, as BFGoodrich-CSR, to manufacture polyvinyl chloride synthetic resin. The new company used ethylene dichloride, a chlorohydrocarbon raw material manufactured by CSRC's newly formed joint venture company CSR-Dow.

Comment
By forming partnerships with multinational chemical companies, CSRC recognised the importance of access to technology and marketing support (that even ICI recognised when it formed a relationship with Phillips Petroleum Company to manufacture synthetic rubber at Kurnell, New South Wales). Going-it-alone was fraught with demonstrated pitfalls as CSR discovered at its cost.

CSR before 1966

CSRC was seemingly still technologically vulnerable. In the mid 1970s, another reasonably anticipated development began to be felt when a low-cost route was developed overseas to manufacture acetic acid from natural gas. This new technology was progressively adopted by the world's chemical industry (page 120) resulting in increased competition from cheaper acetic acid and esters (including polyvinyl acetate).

After just ten years, CSRC's strategy to establish a chemical complex based on sugar (ethanol) and benzene (as a by-product of steel manufacture) was clearly moribund especially with Monsanto's inevitable growth in Australia. CSRC however, unlike its neighbouring company Timbrol which ultimately closed, was prepared to continue in the business of producing petrochemicals (or perhaps a less kind interpretation, did not have the foresight to close).

By any reasonable assessment, CSRC's vinyl acetate business should at best have been described as weak, and it had sold half its polystyrene business to Dow Chemical at Altona. On the other hand, it could be argued that CSRC had a monopoly position in the Australian market for sugar (ethanol)-derived chemicals (acetic acid, acetic anhydride, vinyl acetate and cellulose acetate resins).

It should have been clear to CSRC's Board, that after just one decade in the commodity chemical business, it only had three options; CSRC could either revert to the pre-1955 position with it's sugar-derived chemicals (viable with tariffs) for a small local market), develop new petrochemicals that required ethylene, or cease to operate. CSRC chose the second option.

The 1966 decision was to purchase ethylene feedstock to replace the increasingly more costly ethanol process and develop new chemical products.

 

horizontal rule

Restart 1966

In 1966, eleven years after entering the commodity chemical business, CSRC recommenced anew with two initiatives that established it as a small petrochemical company.

CSRC would replace its ethanol feedstock with cheaper hydrocarbons (ethylene from ICI and natural gas from the Sydney grid) so that ethanol would now be only used to manufacture ethyl esters (ie. ethyl acetate). It would now manufacture a range of new chemicals - plasticiser esters primarily used in plastics and paints starting with oxo alcohols.

Feedstocks and Raw Materials

CSRC began to purchase ethylene brought by pipeline from ICI's Botany plant and ethanol would no longer be its principal feedstock. This pipeline would in effect establish a 20 kilometre umbilical cord to ICI to supply about 20 000 tonnes of ethylene per year.

Comment
Propylene would also be obtained from Botany but moved by road tanker. The propylene produced at the closer by Shell refinery at Clyde was later used for a period in ICI's polypropylene plant (established five years later in 1971).

Therefore, in this development, with no alternative commercially viable sources of feedstocks, CSRC irreversibly bound itself to ICI who also directly controlled about one-half of CSRC's market (for plasticisers and other esters in plastics and paints).
Comments
Reflecting the tariff system, Australia's chemical industry supplies its products to the local market at well above internationally traded prices therefore discounted to export. CSR Chemicals, with a long history of minimal operating profits and even losses, could not afford to lower its prices to compete in overseas markets. It was confined to the Australian market increasingly dominated by ICI.

It is axiomatic that in negotiating a contract, the bargaining position of the purchaser is enhanced by having a fall back position. For example, for many years Monsanto (later Chemplex now Huntsman Chemical) used ethylene supplied from an external source (APC now part of Kemcor) but it also had an on-site standby supply which could produce ethylene at its West Footscray plant. As CSRC only had a high cost alternative, it was in a weak bargaining position and ICI could be expected only to supply the feedstock at the full opportunity value, almost certainly not cheap.

It is not clear whether it could have negotiated with Shell given that its Clyde refinery once supplied ethylene to ICI Botany. Furthermore, CSRC could argue to ICI that the viability of its vinyl acetate plant depended on access to competitive feedstocks.

Acetic acid
Acetic acid, used in CSRC's vinyl acetate monomer (VAM) plant and to produce cellulose acetate, would now be made from ethylene (oxidised via acetaldehyde) using the acetal route. (A small amount of acetic anhydride would also be manufactured with a production capacity (until closing in 1992) of about 3 000 tonnes per year).

Acetic acid production capacity was (until closed in 1992) about 20 000 tonnes per year compared with world scale manufacturing plants typically producing about 100 000 tonnes per year. At one-fifth world scale, it would operate at a significant scale-related operating cost penalty offset by tariffs and anti-dumping legislation.

About eight years after CSR put into effect this new acetal plant, new technology was developed (by Monsanto USA) to produce acetic acid from natural gas (via methanol). This process is cheaper than the ethylene (acetal) route and, widely adopted, would lead to a progressive reduction in the world price of acetic acid and its derivatives (including polyvinyl acetate).

Comments
The technology used to manufacture many chemicals is subject to on-going technical enhancements and refinements reflected in improving performance and/or lower production costs. It is obviously difficult to foresee, or even then often impractical or economic to adapt all changes in technology by deferring investment. Business foresight is an important ingredient in the success of technology-based companies - a capacity that is clearly and repeatedly displayed by successful chemical companies like ICI.

In this bold initiative, CSRC remained in the chemical industry but it severed its links with its original sugar-sourced feedstocks strategy that vindicated CSRC's entry some ten years earlier into the commodity chemical industry. It would become another small petrochemical manufacturer joining its neighbour Timbrol, ICI, the Altona companies and Monsanto to service the small Australian petrochemical market.

Importantly, CSRC could not realistically expect to competitively produce its own feedstocks, control its markets and be competitive without market price-inflating import tariffs and anti-dumping legislation. As repeatedly demonstrated, it would inevitably become a frequent claimant for relief from dumping and with no realistic prospects for substantial exports. That is not to say producing chemicals without manufacturing the feedstock or without prospects for exports is necessarily unsound. CSRC was simply using expensive feedstocks and it was too small to be viable without tariffs and antidumping assistance. To CSRC, ICI represented a substantial and growing share of the proposed market for its proposed plasticiser chemicals but it would also result in a substantial loss of control, and ultimately, ownership.

Plasticisers
CSRC's second limb of its 1966 initiative was to invest in a comparatively small plant to manufacture phthalate ester plasticisers. Plasticisers are specialty chemicals used in the rapidly growing plastics (PVC) and enamel (or oil based) surface coating (paint) industries.
Comments
Many plastic resins including PVC are unsuitable for many uses without additives to improve flexibility and resistance to cracking. These additives, called plasticisers, act as internal lubricants blended into the resin before their extrusion or moulding. Since the 1930s, phthalate esters have been used as cost-effective plasticisers for PVC resin and in paints and adhesives.

Phthalates are ester derivatives of phthalic acid (or phthalic anhydride). A range of phthalic acid esters are used of which bis (2-ethylhexyl) phthalate is the most common with similar characteristics as the other phthalates . Bis (2-ethylhexyl) phthalate is a light colored, oily, almost odourless liquid while some of the other phthalates have more waxy characteristics. Phthalate esters are primarily used in plastics such as PVC, and in paints. They are also used in the manufacture of PETN explosives.

These markets for CSRC's products were also those in which ICI was increasingly dominant. Furthermore, although the demand for paints was increasing, most of the growth was in water-based paints that was progressively taking market share from enamel-based paints.

Five years earlier, CSRC had taken a minority interest in BFGoodrich to manufacture PVC synthetic resin which assured a market for at least some of its plasticisers. ICI was becoming dominant in the paint industry that requires plasticiser chemicals (and VAM).

The plasticiser esters would be manufactured by reacting phthalic anhydride or other acids (largely imported) with alcohols. The phthalic anhydride would be manufactured from naphthalene (by-product of the coking process by Newcastle Chemicals at Newcastle, New South Wales, then jointly owned by BHP and ICI) and the alcohols would be manufactured by CSRC, using the oxo process.

The Oxo Process

The manufacture of esters for use as plasticisers, requires two components - acids (largely phthalic acid, page 126) and alcohols.

Although the required alcohols could, (and perhaps should) have been imported (as now done from 1992), CSRC decided to manufacture them using propylene and heptene feedstocks. .

Comment
The propylene would cost CSRC at least the value to ICI to manufacture EDC and other chlorohydrocarbon chemicals and would probably reflect its future higher value to ICI to manufacture polypropylene.
The objective was to manufacture phthalate esters that compete with the more commonly used di-2-ethyl hexyl phthalate (produced by the aldol reaction using propylene via butanol).

Due to the then high cost of propylene in Australia, (and/or its shortage given its alternate uses), CSRC elected to manufacture another and less common ester, di-iso octyl phthalate. This ester could serve the same purpose but did not require propylene. To do this, CSRC would instead purchase heptene from Australian oil refineries.

Oxo Alcohols

Technology

The oxo process was first commercially used in 1948 by the Exxon Company and may be used to produce a range of alcohols from a wide range of low value olefines. As applied by CSRC, the oxo process used only two roadfreighted olefines, propylene and heptene (a petroleum distillate produced at Australian oil refineries). The propylene and heptene were reacted with synthesis gas to produce aldehydes that when hydrogenated with hydrogen (produced on site) formed two (oxo) alcohols, butanol (n- and iso- isomers) and iso-octanol.

The OXO process takes the form of; RCH=CH2 + CO + H2 = RCH2CH2CHO. The resultant aldehyde can be hydrogenated with hydrogen to the corresponding alcohol or aldolised. The aldol reaction involves reacting the aldehydes with themselves to produce a secondary alcohol (di-2-ethyl hexyl phthalate), viz; 2RCH2CHO (2 steps via H2O loss and H2 hydrogenation) = RCH2CH2C-RHCH2OH.

Synthesis gas consists mainly of hydrogen and carbon monoxide. It is manufactured by burning hydrocarbons (at Rhodes, originally naphtha and later natural gas) under controlled conditions with oxygen.

Use

About 95 per cent of the alcohols produced by CSRC were manufactured into esters principally used as plasticisers. The balance of these alcohols was sold (especially for use as frothing agents in mineral separation, the manufacture of other chemicals such as non-ionic surfactants and lubricants, and as support agents).

The manufacture of plasticiser esters required oxo alcohols and imported alcohols (e.g. octyldecyl alcohol and glycerol). These alcohols were batch reacted with phthalic anhydride (made by CSRC) and imported acids such as maleic and adipic acids to produce about ten ester chemicals.

Typical of most Australian plants, producing at 30 000 tonnes per year, CSRC was competing against plants three to five-times larger (ie. at 100 000 to 150 000 tonnes per year).

Applications

The alcohol component of the ester influences the application;
bulletButanols (n-butanol and iso-butanol) as phthalate esters were used as plasticisers especially for PVC and as insect repellents. As acetate esters, butanol esters are used as paint additives, mineral extraction aids and sold to other companies for the manufacture of specialty solvents and synthetic resins.
bulletOctanols, as phthalate esters, are used as plasticisers for PVC and paint formulations.
bulletOther alcohols. About 8 000 tonnes per year of other esters, such as glyceryl and ethyl acetates were produced for use as solvents for specialty applications, including flotation agents (in mining) and for paints, inks, textile coatings and pharmaceuticals.
As a legacy of its original strategy to manufacture chemicals made from sugar, CSRC manufactured sorbitol and mannitol that are sugar alcohols made from cane sugar (as invert sugar) by a catalytic hydrogenation process in a small scale plant.

Sorbitol is used to add body, texture and sweetness to many foods, and mannitol is used as a base for vitamins and pharmaceuticals. (Not surprisingly given the small scale of production, these have been subject to many anti-dumping appeals by the company until the company ceased their production in 1992).
CSRC in 1966

Back at the starting blocks, and perhaps even positioning itself for a partial sale that occurred two years later, CSRC was ready to take its place with the other petrochemical complexes in Australia. Its competitive position may be described by products and scale.

Products

CSRC became Australia's only manufacturer of long chain alcohols for a comparatively small market. Although it made many declared unsuccessful attempts to export, it was subject to extensive competition from cheaper imports resulting in frequent claims for relief from dumped goods.

Worldwide, the oxo process uses low value olefines to produce a broad range of useful alcohols. For example in the USA, the butanols and 2-ethyl hexanol (similar to CSRC's di-isooctanol made from heptene) are both derived from propylene. Longer chain C6 - C13 alcohols are also made from the appropriate olefines and used in the manufacture of plasticisers, lubricating oil additives, detergents and defoamers. The oxo process can therefore produce a broad range of useful alcohols from low value (surplus) olefine feedstocks. CSRC confined the oxo process to the production of just two alcohols - the butanols (n- and iso- isomers) and iso-octanol - as other potential feedstocks were used as fuel.

Scale

The CSRC plant had a production capacity of about 30 000 tonnes per year of oxo alcohols about one-fifth the scale of world-scale plants of about 150 000 tonnes per year. With its limited size, CSRC incurred a significant operating cost penalty.

Comment
It would have been more prudent for CSRC to import the oxo alcohols as it is doing from 1992. As with other low value operations and its original activity of using imported styrene, CSRC could have operated an esterification plant using Australian-sourced phthalic anhydride and imported alcohols. Even then, there is still little justification to manufacture these esters for Australia's small market without any comparative advantage. It was simply a process made viable by assistance.
Oxo alcohol production was a vulnerable activity as it was subject to intense competition from imports reflected in their frequent appeals for relief from dumped chemicals. Their production at Rhodes was by any rational measure, an activity that presumed the full maintenance of government assistance and it had no realistic expectations for exports other than small volumes at very marginal prices.

horizontal rule

ICI and CSRC

CSRC progressively began to manufacture chemicals made from sugar and imported styrene as it became a small petrochemical company. Without feedstock resources, no experience in the technology and inexorably locked into ICI, both as a supplier of its feedstocks and as a major customer for its products, it was inevitable that CSRC's strategy would be tested.

In 1968, ICI purchased a 49.7 per cent share of CSRC. The involvement of an experienced chemical company was reflected in significant changes in CSRC's operations, especially its feedstocks and relations with three Altona-based companies.

Feedstocks
bullet Ethylene (estimated at 20 000 tonnes at time of closure in 1992) would be brought by pipeline from ICI Botany (from their new LPG/naphtha cracker).
bullet Propylene (estimated at 7 000 tonnes at time of closure) would be supplied by road from ICI. Propylene was then also used by ICI to produce carbon tetrachloride and other chlorohydrocarbons but it would also have been targeted for the eventual production of polypropylene. Given its alternate applications, propylene would not be a cheap feedstock for CSRC. Therefore, for its longer chain (C8) alcohol, CSRC used heptene instead of propylene as used overseas (see oxo alcohols, page 122).
bullet Phthalic anhydride. A plant was established at Rhodes using naphthalene road freighted from Newcastle. The phthalic anhydride plant currently has a capacity of about 20 000 tonnes per year (believed to be operating near full capacity). Typical world scale plants range to 100 000 tonnes per year and use ortho-xylene instead of naphthalene. Some phthalic anhydride is also sold to manufacture alkyd resins (eg. to AC Hatrick) and polyester resins (to Monsanto).
Other changes

Other changes instigated from 1968 were;
bulletVinyl acetate monomer would be freighted some one thousand kilometres south to Hoechst's plant at Altona, Victoria for polymerisation and blending to produce adhesives and water-based paints;
bulletIn 1971, CSR established a new vinyl acetate plant (using Bayer technology) to replace the process established in 1958. The raw materials were ethylene, acetic acid (made from ethylene) and oxygen (from CIG). The operation closed in 1992.
bulletIn 1991, the vinyl acetate plant was sold to the National Starch and Chemical Pty Ltd who now imports vinyl acetate monomer with closure of the Rhodes plant.
bulletCSRC's shareholding in CSRC-Dow and BFGoodrich-CSRC was sold to the principals (ie. Dow and BFGoodrich respectively). Both these Altona companies produced chemicals that were in competition with its part owner ICI (ie. EDC and PVC [from EDC via VCM]).
By these steps, supported by ICI's dominant market position in plastics and paints, CSRC began to focus on its principal activities and assuring the Rhodes plant a market in Australia.

horizontal rule

ICI Ownership of CSRC

For the next two decades, profits remained very low and operating losses were recorded, (eg. in constant value terms a better year was in 1981 when it reported a modest profit of just $1.9 million - say about 5 per cent on capital). Annual reports advised shareholders about endeavours to export, problems of imports and the need for government assistance including from dumped competing chemicals.

With most of its feedstocks supplied by one company, CSRC had what may be described as an umbilical cord to ICI. This reliance on one company reduced its flexibility especially since its key products were used in PVC plastics and paints - markets dominated by ICI. ICI was in a strong negotiating position to purchase the balance of CSRC's issued capital.

Comment
In 1979, ICI commissioned a PVC manufacturing plant at Laverton Victoria increasing its share of the PVC market to about two-thirds. The purchase of British Paints and Berger Paints and ownership of Dulux, meant that ICI supplied more than half Australia's paint market. ICI also purchased the Selleys company (from Hoechst who was polymerising the vinyl acetate produced by CSRC). There was therefore very little of CSRC's markets not dominated by ICI.
In 1987, nine years after purchasing a minority interest in CSRC but still obtaining poor returns, ICI purchased the balance (50.3 per cent) of CSR's Ltd interest in CSR Chemicals for just $14.3 million (ie. valuing the plant, real estate on the bank of the Parramatta River, stock and raw materials at only $29 million).

Status before 1992

In contrast to the adjoining Timbrol/UCAL plant that closed, CSRC with the extensive financial resources of its blank, had been responding to its changing competitive position by boldly adopting new feedstocks and new products for new markets. Serving a small Australian market and competing against much larger overseas petrochemical plants, CSR-Chemicals remained in business. Nevertheless import tariffs (30 per cent), antidumping measures and substantial international freight costs to be met by competing suppliers, were not enough to compensate for its fundamental weakness. It was perhaps fortunate for its employees that ICI progressively purchased the company, deferring its inevitable closure.

At the beginning, CSR's board would have seen evidence of fast growing markets so that a venture into chemical manufacturing would seem a sound strategic investment. CSR had the resources and a strong financial background and any lack of competitiveness would be compensated by assistance measures. When CSRC entered the chemical industry, it used sugar-derived feedstocks, benefited from high import tariffs and faced little competition. However, the inevitable introduction of cheaper petrochemical-based technology meant that CSRC's competitive position began to erode affecting its cellulose acetate, vinyl acetate and related ethanol-derived chemicals. Equally, it's thrust into polystyrene manufacturing had also been extraordinarily brave given Monsanto's ownership and background.

 

Comment
Monsanto confirmed its strength with two strategic alliances - the first in 1959 with PACCAL as a gas producer, and in 1977 with BHP as Australia's sole supplier of the benzene feedstock required to make styrene. CSRC was oversighted as a potential partner in the first alliance with a company only a few kilometres from its plant.
Failing with its original strategy, CSRC then chose to manufacture plasticiser chemicals for a small though rapidly growing market. Although annual reports variously referred to endeavours to export, it was unrealistic to expect significant volumes from a small high cost plant. Like polystyrene, its plasticiser chemicals required petrochemical feedstocks that it could not economically produce given the small scale of its operation (and that could never grow to competitive scale with its inherent high operating costs).

Technology was a particularly weak aspect of CSRC as it repeatedly suffered from the impact of changing technologies and apblank inability to recognise influences on its competitiveness. It operated in direct competition with experienced chemical companies with strong marketing skills, with extensive technological resources and the ability to anticipate and adapt technical developments.

Substantial Closure of Rhodes

In 1992, ICI announced the substantial closure of the Rhodes site. The oxo alcohols, the ethylene-derived chemicals (acetaldehyde, acetic acid, solvent acetates and vinyl acetate monomer) and mannitol and sorbitol would no longer be manufactured in Australia.

The plant is now confined to the manufacture of phthalic anhydride (by the oxidation of naphthalene from BHP Newcastle by Koppers) that is simply esterified with imported fatty (oxo) alcohols to produce phthalate esters (about 30 000 tonnes per year).

During 1995, 6 200 tonnes of phthalate esters were imported valued at $11.7m implying ICI supplied about 70 per cent of the Australian market. Principal sources of imports were USA, Belgium-Luxembourg and Japan. Exports were valued at less than $0.2m.

ICI Rhodes until 1992.

The Rhodes site 1996

Closed 1997

Competition for raw materials

In February 1997, ICI Australia announced it was closing its phthalate ester operation with $50 million p.a. of its production to be replaced by imports (principally from BASF in Malaysia) for an Australian market valued at $70m. The site at Homebush Bay is considered to be valued at more than A$50m for residential purposes.
ICI identified Austalia's import tariff policy as the reason for its closure (The Australian, 26 Feb 1997 "ICI cites tariff policy for plant closure"). Also in February, a new naphthalene sulfonate formaldehyde condensate surfactant plant was being commissioned by Albright and Wilson at Wetherill Park in New South Wales. The plant will use around 6 000 tpa of naphthalene, representing about one-third of Australia's production. ICI had until then been Australia's only buyer of the naphthalene produced by Koppers at Newcastle, NSW in a bulky, low value liquid form.

ICI enjoyed a vital raw material advantage that would be eroded by a new alternative market presented by Albright and Wilson. Koppers too was already installing a new drying facility to enable the export of naphthalene flake so that. ICI's plant now also using largely imported alcohols, would have its comparative advantage severely eroded. Even though capable of using o-xylene to produce the phthalic anhydride, being imported and operated at small scale, they would become very uncompetitive against imports from large scale operations. Any consequent rise in the price of naphthalene, would prejudice its ability to maintain this vestige of CSR Chemicals' operation.

ICI was now also incurring the penalty of the tariff system from which it had previously benefited.

Australia's two original chemical manufacturers at Rhodes New South Wales, provide salutary lessons for newcomers to the chemical industry and important insights for Government policy makers.

 

horizontal rule

From Guide to Chemicals in Australia. Editor Remco Van Santen Published by Chemlink Pty Ltd PO Box 673 West Perth Western Australia 6872 .

Chemlink Pty Ltd ACN 007 034 022. Publications 1997. All contents Copyright © 1997. All rights reserved. Information in this document is subject to change without notice. Products and companies referred to are trademarks or registered trademarks of their respective companies or mark holders. URL: www.chemlink.com.au/