Gujarat Narmada Valley Fertilisers Company Ltd (GNFC) is finding it difficult to go ahead with its mega acetic acid capacity expansion with BP Chemicals unwilling to extend its licence.
The chemical arm of UK-based energy giant BP Plc, is one of the handful of companies in the world with the technology to manufacture acetic acid from methanol.
“GNFC is one of the leaders and the only big company in the country to have initiated manufacturing of acetic acid through the methanol route. But now BP is not agreeing to extend the licence for further capacity expansion,” said a reliable chemical industry source.
An email sent to BP did not elicit a response till the time of going to the press.
Currently, GNFC has one lakh metric tonnes of acetic acid manufacturing capacity via the methanol route through a technology transfer license from BP.
“Acetic acid was traditionally manufactured from ethanol but of late methanol is being looked at as a more viable option as the operating costs are also lower if the plant sizes are substantially big,” said the source.
He said another reason why companies want to go for the methanol route of acetic acid manufacture is because ethanol in the country is usually used in distilleries for the manufacture of alcohol and going ahead, it will have an increased demand from the oil companies because of the government norms of blending ethanol with automotive fuel.
Acetic acid is largely used in the textile industry for textile processing and printing and is also used as an important preservative in the food industry.
“We are looking at setting up a world class acetic acid facility with a capacity of 5-6 lakh tonnes. For this we need to have a license as not many companies in the world have this technology so we are negotiating with all global licensors for technology transfer,” said a GNFC official.
He said the company had been contemplating to expand the facility for almost two years now and had been negotiating for a licence with all players.
Although, the official did not say whether BP had declined to share the technology for further expansion, he said: “We are in dialogues with them.”
Other major players who have the methanol to acetic acid technology are Dallas-based Celanese, Tennessee-based Eastman Chemicals and Chiyoda of Japan.
GNFC produces close to 12 chemicals out of which the major ones are methanol, formic acid, nitric acid and acetic acid and has technology tie-ups for almost all its chemical products with leading global chemical players in the country. Some of its major technology partners are UK-based BP, Toyo of Japan, Germany’s BASF.
Despite being able to go ahead with the its acetic acid expansion, analysts are bullish on the company because of GNFC’s diversified portfolio of chemicals and the margins its draws from them.
“We expect GNFC to benefit from strong chemical prices in current scenario. Companies’ key products such as acetic acid has witnessed price increase by 21% qoq and 22% year on year during the fourth quarter of last fiscxal. Methanol, formic acid and aniline has also witnessed strong realisations on back of firm demand,” said analysts Rohan Gupta and Balwinder Singh from brokerage house Emkay Global Financial Services Ltd, in an April 11 report on GNFC.
They said though the prices of key raw materials like benzene and toluene have also gone up, but they expect spread has been favourable to the company hence resulting into margin expansion.
“We expect chemical segment margins to expand by 500 basis points yoy and 250 basis points sequentially in the fourth quarter,” the analysts wrote.
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