Sterling Chemicals considers options for acrylonitrile operations

Texas based Sterling Chemicals had shut down its acrylonitrile and sodium cyanide facilities, and announced cancellation of supply contracts for an indefinite period due to unavailability of propylene. The company continues to be unable to secure adequate supplies of propylene to restart its acrylonitrile facilities and related derivate units. This showed in the business results with acrylonitrile and derivatives businesses sustaining gross losses of US$28 million during 2004 and US$36 million during 2003. As the losses rise and problems to secure adequate supplies of propylene continue, the company has been evaluating its options regarding continuity of business. Sterling seems to be finally weighing either of these two options: * Improvement in the cost competitiveness of the acrylonitrile business through major process changes to its facilities. This would lead to closure of its least efficient reactor, dropping overall production capacity from 350,000 tpa to 250,000 tpa. This drop in capacity from 750 million lbs to 520 million lbs will be incurred at a cost of US$2 million to US$3 million. * The second option is permanently shutting down its acrylonitrile and derivatives facilities at a one time estimated cost between US$20 M and US$30 M. These one-time costs include payment of contractual obligations, employee severance costs and decommissioning costs, among other costs. If this option is resorted to, the company would use the existing space and infrastructure for more productive purposes.
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