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June 09, 2004 12:00 AM

DuPont boosts capacity despite cutting 3500 jobs

ERJ Staff
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    By Frank Esposit Plastics News Staff

    Wilmington, Delaware-2004 is shaping up to be an odd year for DuPont Co. The Wilmington-based plastics and chemicals giant recently announced several capacity and technology advances, even as it works to cut 3500 jobs by the end of the year.

    Capacity increases are on tap for the firm's Kevlar-brand aramid fibers, as well as for its engineering resin compounding capacity in China and Argentina.

    The Kevlar move is the fourth capacity expansion for that product since 2000. Global Kevlar demand “has soared with the need for safety and security worldwide,” DuPont Advanced Fiber Systems vice president Bill Harvey said in a news release.

    US military operations in Iraq and Afghanistan have increased demand for the product, which is made at plants in Richmond, Virginia; Maydown, Northern Ireland; and Tokia, Japan. The latest expansion will cost more than $70 million and will increase global capacity by 10 percent between late 2005 and the first half of 2006.

    The first three expansions were made at the Kevlar plants in Richmond and Maydown. DuPont will announce later this year which plants will be included in the later expansion, spokesman Anthony Farina said.

    Kevlar is widely used in bullet-resistant vests and body armour. DuPont officials claim that Kevlar is five times stronger than steel on an equal weight basis. In addition to military applications, Kevlar is entering new markets such as tornado and blast-resistant structures.

    “You hear all the time about Kevlar saving lives in Iraq,” DuPont's Farina said. “But it's also being used more in products like tennis rackets, running shoes and bike tyres.”

    In China, DuPont will be able to do more compounding of nylon, thermoplastic polyesters (including PET and polybutylene terephthalate), thermoplastic elastomers and liquid crystal polymers through an agreement with Super-Engineering Plastics Shanghai Co. Ltd., a Shanghai-based compounder.

    The size or cost of the expansion, which will be operational by the end of 2004, was not revealed. Minoru Amoh, regional director for engineering polymers in the Asia Pacific region, said that local product supply “will allow [DuPont] to offer customers a broader product range in a more flexible manner.” DuPont already makes its acetal and glass-reinforced nylon resins at a plant in Shenzhen, China.

    The Argentine project calls for the addition of almost 10 million pounds of compounding capacity at a plant in Berazategui by the first quarter of 2005. A 5.5 million pound expansion was just completed at the site, which compounds nylon and thermoplastic polyesters.

    “Our [South American] business increased more than 20 percent in 2003, and we expect it to continue growing at a similar rate this year,” engineering polymers regional director Horacio Kantt said.

    On the technology front, DuPont has stepped up its efforts in the biodegradables market by forming a joint venture with Tate & Lyle PLC, an agricultural products firm based in London.

    The joint venture-DuPont Tate & Lyle BioProducts LLC-will build a manufacturing plant in Loudon, Tenn., which is set to open in 2006. The plant will make a grade of corn-based propanediol used to make DuPont's Sorona-brand polymer, which is being marketed into clothing, textile fibers and packaging. All of the new plant's output will be consumed internally by Sorona production, spokesman Farina said.

    The plant is expected to employ 50 and eventually will have annual capacity of 100 million pounds. DuPont veteran John Halberstadt will serve as president of the venture and will report to a joint management board.

    DuPont and Tate & Lyle have operated a pilot plant at a Tate & Lyle research and development center in Decatur, Illinois, since 2000. The product currently is made from oil, but a proprietary process will allow it to be made from corn, according to Farina.

    Farina said the process for making PDO from corn is a fermentation-based biological process - very similar to the way wine and beer are made - where yeast converts sugar into the end product.

    The North American biodegradables market is small, but growing. DuPont has produced Sorona, as well as its Biomax-brand biodegradable PET, since 2001. Cargill Dow LLC, a 50/50 joint venture between Dow Chemical Co. and Cargill Inc., opened a 300 million pound biodegradable polymer plant in Blair, Nebraska, in 2002. Eastman Chemical Co. and BASF Corp. also have biodegradable resins in their product mixes.

    All of DuPont's efforts come amid a backdrop of 3500 job cuts- 6 percent of DuPont's global workforce-that were announced in April. DuPont chairman and chief executive officer Chad Holliday described the cuts as “difficult but necessary decisions as we align our resources with market needs.”

    Almost 2500 of the job cuts will come from the US and Canada. The cuts will provide annual savings of $325 million and will help DuPont reach its goal of achieving $900 million in cost reductions by the end of 2005.

    Officials have not announced yet what portion of the cuts will come from its Performance Materials unit, which is a major producer of nylon, polyester, acetal and other specialty plastics. The unit ranked third among DuPont's business units in 2003, with sales of almost $5.4 billion. The company does not split out how many of the current 59,000 employees are in the Performance Materials unit, which also represents DuPont in the DuPont Dow Elastomers and DuPont Teijin Films joint ventures.

    Operating profit in DuPont's Performance Materials unit dropped 45 percent in 2003, and industry consultant Balaji Singh said he is not convinced that DuPont's recently announced efforts will improve that situation.

    “Biopolymers are a long-term project for DuPont - it's got nothing to do with their immediate problems,” said Singh, president of Chemical Market Resources Inc. in Houston. “Kevlar is a specialty material that only DuPont can make, and they're benefiting from a short-term increase in demand from military applications.”

    Singh added that although the compounding capacity increases will help, they were “only step increases” needed to keep up with demand.

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