Nexam – Full Scale Tests in a Double-Digit Growth Industry: The Global Plastic Pipes Market

Posted: 28 March, 2015 in Nexam, Published Investment Calls
Tags: , , , , , , , ,

Interestingly, Nexam seems to make progress within PE pipes business:

“During the current year, we will put more resources into delivering a strong “proof of concept” with our technology in the prioritized high-volume segment. A first step is commercialization of applications within PE-pipes, and a variety of film and foam, based on PET, PE and PE.” Furthermore, in the year-end report, this quote attracted the author´s interest: “Our cooperation with a major pipe manufacturer has taken decisive steps forward and in 2015, full scale tests will take place at the customer using products that include our crosslinking.” 

The author (CESI) felt curious and decided to learn more about the global plastic pipe market. CESI has previously analysed the Nexam Chemical technology in this blog post.

What is PE Pipe? High-Density Polyethylene Pipe (HDPE or PE Pipe) is made from ethylene, which can be derived from either crude oil or natural gas. PE pipe is extremely strong, durable, flexible, corrosion free and chemical resistant. These features make it perfect for a variety of underground conditions and help it last up to 100 years. The smooth walls allow for less friction, which increase flow through the same diameter as that of other pipes.

When installed, the pipe is joined by a heat fusion process, which prevents leakage. By using PE pipe, municipalities save a vast amount of water and reduce repair rates…

 leak new

This translates into a significant cost savings for the life of the pipe. PE pipe can carry potable water, wastewater, chemicals, hazardous wastes and compressed gases. PE is the preferred piping material for natural gas distribution because there is no tolerance for leaks and no worries about corrosion.

“Since its discovery in 1933, PE has grown to become one of the world’s most widely used and recognized thermoplastic materials. The versatility of this unique plastic material is demonstrated by the diversity of its use and applications. The original application for PE was as a substitute for rubber in electrical insulation during World War II. PE has since become one of the world’s most widely utilized thermoplastics. Today’s modern PE resins are highly engineered for much more rigorous applications such as pressure-rated gas and water pipe, landfill membranes, automotive fuel tanks and other demanding applications. PE’s use as a piping material first occurred in the mid 1950’s. In North America, its original use was in industrial applications, followed by rural water and then oil field production where a flexible, tough and lightweight piping product was needed to fulfill the needs of a rapidly developing oil and gas production industry. The success of PE’s pipe in these installations quickly led to its use in natural gas distribution where a coilable, corrosion-free piping material could be fused in the field to assure a “leak-free” method of transporting natural gas to homes and businesses. PE’s success in this critical application has not gone without notice and today it is the material of choice for the natural gas distribution industry. Sources now estimate that nearly 95% of all new gas distribution pipe installations in North America that are 12” in diameter or smaller are PE piping. (Source: The handbook of PE pipes)
“High-density polyethylene (HDPE) pipe category demonstrates high growth prospects among leading plastic pipe resin categories. These pipes include less installation costs when compared to other varieties of plastic pipes and can also be modified according to application area. Europe and the US comprise the largest markets. Asia-Pacific, Middle East, Eastern Europe and Latin America are expected to display higher growth than the global average growth rate following increasing demand for plastic pipes in construction, telecommunications and natural gas distribution systems. Advancements in drinking water transfer systems, and sewage and drainage systems are also expected to drive the market for plastic pipes. Additionally, laying of natural gas distribution pipelines, which is currently underway or being planned in many countries is also likely to bolster the drive for plastic pipes. (Source: Plastesmart)
  • China represents the leading producer of plastic pipes worldwide with about 2,000 production lines. Majority of the new and expansion projects in the country are extensively making use of plastic pipes.
  • The Middle East and African markets are also expected to witness rapid growth with increasing demand from local industrial enterprises and construction companies.
  • The US is poised to witness continued prevalence of plastic pipes over conventional piping materials. A combination of factors including likely rise in state spending towards municipal and state infrastructure projects and a rebound in construction activity are expected to spur robust expansion of pipes market. In addition, pressing need to repair and replace the worn-out water pipe networks and increased oil and gas exploration as well as transmission related operations are poised to support pipes market expansion in the US.
  • In Europe, the increasing thrust towards improving and expanding infrastructure networks across Eastern Europe is poised to expand the consumption of plastic pipes in the region.
Plastemart also highlights these Major players in the marketplace
  • A.G. Petzetakis
  • Advanced Drainage Systems Inc.
  • Amanco
  • C. I. Kasei Company
  • Chevron Phillips Chemical Company LLC
  • EgePlast A. S
  • Finolex Industries Ltd
  • Foshan Rifeng Enterprise Co
  • IPEX Inc.
  • JM Eagle Company Inc.
  • KWH Pipe Ltd.
  • Mitsubishi Plastics Inc.
  • National Pipe and Plastics Inc.
  • North American Pipe Corporation
  • Pipelife International GmbH
  • Plastika AS
  • Polypipe Plc
  • Royal Pipe Systems
  • Sekisui Chemical Company Ltd.
  • Shin-Etsu Polymer
  • Tessenderlo Group
  • Thai Pipe Industry Co. Ltd.
  • Tigre SA Tubos e Conexoes
  • Uponor Corp.
  • Wavin N.V.
The 2014 Research and Markets report about the Global PE Pipe Industry highlights these companies (no free access to full report):
  • ATOFINA
  • Anhui Guotong Pipe Co., Ltd.
  • Borealis
  • Canghou Mingzhu
  • HaiNiu
  • Hangzhou renhei Plastic Co., Ltd.
  • Hoechst
  • Lyondellbasell
  • Shandong Shengli Plastic Co., Ltd.
  • Shenzhen Baifukang Co., Ltd.
  • Shenzhen Dow Water Treatment Equipment Co., Ltd.
  • Wuxi Jiangtong plastic pipe Co., Ltd.
  • Wuxi Xindong plastic pipe Co., Ltd.
  • Zhejiang Fuhua Pipe Co., Ltd.
  • Zhejiang Huafeng Pipe Co., Ltd.
  • Zhejiang Xinde Pipe Co., Ltd.
Thus, solely within the PE pipes segment, there are more than a few large near future potential end customers for the cutting edge technology provided by Nexam. In this animated video, the pipe forming and installation process is very clearly demonstrated (3D animation, no sound):

 –

Some general global PE business metrics estimations (Plastic News)

World plastic pipes market is projected to reach 7.6 billion meters by 2017, as per Global Industry Analysts, Inc. Long term growth in the market clearly underlines a shift in balance towards the emerging markets, driven by heavy infrastructure investments and rise in construction activity (source, see previous link above).

“The plastic pipe industry will see double-digit growth over the next 10 years with global sales for manufacturers and the businesses supporting them estimated to reach $500 billion by 2024Four major factors are contributing to the favorable outlook: shale oil and gas developments, regional market expansion, innovation and increased awareness about the life-cycle assessment of plastic pipes. That’s all according to Stephen Boros, vice president of engineering for Pipeline Plastics LLC, who spoke at the Plastics Pipes XVII conference held last month in Chicago. Plastic pipe continues to supplant competing materials like copper, concrete and steel because of low-cost installation and long-term performance, according to Boros, who was chairman of the event, which was attended by 470 people from 34 countries. Regionally, the plastic pipe industry in China is experiencing the greatest growth and a spin-off conference focused on Asia is being organized for September 2015 in Shanghai. “Last year, China became the world’s largest producer and consumer of plastic pipes,” Boros said. “While we can expect the U.S. market to maintain double-digit growth as recovery of the construction market picks up, we can also predict similar gains in Asia and eventually Eastern Europe.” He also credited innovation with environmental implications, such as horticultural applications and water management solutions to relieve floods and droughts, for changing the way plastic pipe technology is viewed. “The versatility of plastics and the human minds that are inspired to share their useful contribution to the planet are ceaseless,” Boros said. “Unlike competitive pipe industries, the world’s leading plastic pipe makers regularly invest over 10 percent on research and development.” The scale and scope of the industry also is being shaped by increased security in the supply of raw materials from shale oil and gas developments as well as new studies pointing to the sustainability of plastic pipes over its life cycle, Boros said.” 

Regarding to Jim Rickards, in the next economic crisis, “water business” will be one of the most safe bets in respect to investments, so…
 –

“Water quantity and quality are the biggest environmental issues that we face in the 21st century.” That is according to former EPA Administrator Christie Whitman, who says that the US pipe infrastructure is in poor condition and is continuing to deteriorate each year.

In 2005, the American Society of Civil Engineers (ASCE) down graded America’s drinking water and wastewater systems to a “D -”. Looking forward it seems the trend getting worse if municipalities do not take proactive measures to improve their water facilities. In cities and towns throughout the U.S., our water infrastructure is usually 50 to 100 years old and well past its life expectancy. Our municipal water systems are aging fast, and it’s won’t get any better without serious intervention.

American’s aging wastewater management systems discharge billions of gallons of untreated sewage into U.S. surface waters each year. The EPA estimates that the nation must invest $390 billion over the next 20 years to replace existing systems and build new ones to meet increasing demands. If this are not addressed now, the correction could be costly for taxpayers.

According to the Colcom Foundation, 36 states are anticipating water shortages by the year 2013. If that’s the natural course of freshwater availability then leaking, dilapidated piping systems are not the solution. “More than half of humanity will be living with water shortages, depleted fisheries, and polluted coastlines within 50 years because of a worldwide water crisis” (UN report, 2003).

  • A survey of 46 jurisdictions, including 43 states found an average of 16 percent “unaccounted for” water leakage with some leakage as high as 50 percent.
  • 2.5 billion gallons of drinking water (~22%) lost every day in the United States, most from leakage (AWWA? 2007).
  • Over 48 million gallons of drinking water lost every day in each state, most from leakage (Rich Gottwald, PPI, 2003).
  • 3.6 million illnesses reported every year caused by accidental release of sewage into drinking water systems from over-burdened or failed systems (Rich Gottwald, PPI, 2003).
  • Over $36 billion are spent every year on pipe maintenance due to corrosion of metal pipes (CorrosionCost.com)”

 

A miniature CESI selection of recent PE (HDPE) plastic waterpipe replacement programs…

  • The Leavenworth Water Department Excavates 100-Year-Old Water Mains, Undergoes a Major Replacement Program with Plastic Pipe and Makes Emergency Flood Repairs (uimonline source link) The City of Leavenworth has about 180 total miles of transmission lines, water mains and service lines. About half of that pipe will likely need to be replaced over the next 20 years, according to John Kaufman, general manager of the Leavenworth Water Department, which serves about 50,000 people. Since the 1990s, the water department has consistently evaluated and replaced water lines, but in 2005 it began a more proactive makeover of the system, replacing mainly cast iron pipe with high density polyethylene (HDPE) pipe. Kaufman says according to very accurate records kept by the city, much of the cast iron pipe that has been replaced was originally installed in 1882.

Screenshot from pipe 2015-03-27 21:34:26

 

  • Casselberry to replace water pipes, improve drinking water. The city is using a breakthrough technology to replace the outdated pipes in neighborhoods across the city: The new pipes are installed through/inside the old pipes (by the attachment of a metal head to the front of the new plastic pipe that breaks up the old cement pipes). When the new pipe is in place, a hydraulic system pulls the metal head out of the ground.”I like that. Less construction and destruction,” said resident Estelle Simandl.

.

casselberry

Click here for video link (2 min) 

 

  • Palo Alto Replacing Aging Water Mains A week ago today some Palo Alto residents awoke to dry taps and toilets that wouldn’t refill after the initial flush. A water main had ruptured during the night sending water gushing down Newell Street. Palo Alto City Utilities crews worked through the night and much of Saturday to replace the bad pipe and get water flowing again. Palo Alto is a mature city with quaint streets, graceful architecture—and an aging infrastructure. Snaking beneath streets are 230 miles of water mains. The pipelines are made of everything from cast iron to concrete. The majority, 138 miles, is asbestos cement pipe (ACP) installed from the 1940s – 1970s. Currently, the city uses High Density Polyethylene Pipe (HDPE) “which is by far the best kind,” according to Debra Katz, Utilities Communications Manager for the city. (Patch.com source link)

paul

 

  • HDPE outperforms all other materials in earthquakes: “Recent Earthquakes: Implications for U.S. Water Utilities” by John Eidinger G&E Engineering Systems Inc and Craig A. Davis Los Angeles Department of Water & Power, sponsored by the Water Research Foundation:  “The three case studies show that HDPE and chain-jointed ductile iron pipe have performed well in earthquakes, even where they are in located in infirm ground; non-seismically designed welded steel transmission pipes have failed in many places in the Japan and Chile earthquakes”

 

Some examples of PE, PP and polyolefin industrial pipes from around the world (borouge)

Screenshot from PO 1 2015-03-27 20:59:00

Screenshot from PO2 2015-03-27 20:59:29

 

Very Interestingly, the above depicted examples are extracted from a Borouge company presentation.

Borouge is a leading provider of innovative, value creating plastics solutions. A joint venture between the Abu Dhabi National Oil Company (ADNOC), one of the world’s major oil and gas companies, and Austria based Borealis, a leading provider of chemical and innovative plastics solutions, Borouge is a groundbreaking at the forefront of the next generation of plastics innovation.

With its base in the United Arab Emirates and its Marketing & Sales head office in Singapore, Borouge employs more than 3,000 people with over 40 nationalities, serving customers in 50 countries across the Middle East, Asia and Africa.

Borouge Production capacity: In 2010 Borouge tripled the annual production capacity of its plant in Abu Dhabi to 2 million tonnes.

With further expansion to 4.5 million tonnes scheduled in 2014, Borouge and Borealis will have a combined annual production capacity of approximately 8million tonnes of polyethylene and polypropylene.

Lars Öhrn held an Market Application Manager position at Borouge (Abu Dhabi) before accepting the new Nexam Chief Marketing Officer position.

The above stated facts (and grapics) should explain why CESI is so attracted to the Nexam pipe business (and the following statement from the last Nexam report should be the key to near future Nexam share value creation: “Our cooperation with a major pipe manufacturer has taken decisive steps forward and in 2015, full scale tests will take place at the customer using products that include our crosslinking.)

Armacell. Regarding the Nexam PET foam business, CESI hopes Armacell will meet the minimal agreed order volumes later this year.

2014-12-22 Nexam Chemical and Armacell have jointly agreed to extend the exclusive supply agreement regarding Nexam’s products into PET-foam

Nexam Chemical and Armacell have jointly agreed to extend the exclusive supply agreement regarding Nexam’s products into PET-foam, which was signed between the parties in February 2014.

The extension is due to the fact that the implementation of the supply agreement has been delayed by approximately 1 year as a result of a strategic decision made by Armacell to switch from virgin PET to recycled PET as the main raw material base.

Armacell had accomplished good test results with Nexam’s products in virgin PET and is optimistic about the outcome in recycled PET. However Armacell needs to reformulate and thereafter reconfirm test results using Nexam’s products with recycled PET instead of virgin PET. The reformulation work using Nexam’s products in recycled PET has already begun at Armacell.

CESI edit and update  20170822.

According to the Nexam 2017 Q2 report, Armacell will apply the Nexam cross linking technology in the next generation PET foam!

 

“The delivery agreement that we signed with Armacell last quarter is about to, with some delay, find its practical form. Armacell will use NEXAMITE® in its ArmaFORM® PET-foam to achieve increased efficiency. “

 

Source link 

http://www.nexamchemical.com/Documents/Interim%20Reports/QDUE%20TWOTHOUSAND17%203NG%20F1N%5eL.pdf

 

Finally, a few more words on the competitive electron beam technology (also highlighted in the original CESI Nexam blog post)

The Nexam technology is unique. There is one technology – electron beam cross linking – that could be considered being classified as a competitive technology. Attached below is a crash course video covering this cross linking approach.

 –
However, CESI is convinced that the production cost should be substantially higher compared to conventional heating. Why? The electron beam is generated in the following way:
Screenshot from e beam 2015-03-26 22:20:38
Full video here (E-beam commercial movie).
 
Now, compare the electron beam technology with the Nexam technology where the cross linking process is initiated with standard heating in standard extruders already present in the end customers facilities!
Screenshot from extruder 2015-03-26 22:28:18

More info regarding standard extruder operation and control: Paulson Training, youtube video link

Thus, the e-beam cross linking technology is innovative, however unnecessarily complex compared to the Nexam Chemical technology. Therefore, CESI very much believes the old quote from Per Morin: “Electron Beam technology has been around for 50 years, it´s simply too expensive”

In summary, CESI has zero expectations regarding the number of sales in the next Nexam interim report. In addition, CESI does not expect any major positive surprises before the summer. However, in 6-18 months time, CESI expects that Nexam chemical will break the silence through frequent press releases announcing multi-ton orders of cross linkers from various end customers and within many different plastic product segments which quickly and initially (again) should lift the company´s market cap to the low multi-billion SEK region and eventually to the high multi-billion SEK region. Last time, hype from the former CEO Per Morin was the key share price appraisal driver. Next time, the sales numbers will be the key driver. Therefore, CESI welcomes the new business oriented CEO, Anders Spetz, and his ongoing build-up of the new sales team that will broaden the  customer base by moving forward in the value chain. If the Nexam shareholder is positively surprised by a very near future order announcement, CESI speculates that this order could come from IRPC. Why? Below is a quote from the Nexam Interim Financial Statements for Quarter 3, July–September 2014: “IRPC has informed us that they now have passed the development phase, with respect to a polyethylene quality for pipes, and will begin testing the quality for approval together with their end client in the autumn/winter.”

CESI has not yet highlighted the Nexam Chemical new high-temperature resin, NEXIMID® MHT-R. According to the same interim report, Nexam has already received several inquiries from around the world. In addition to the project with Rolls Royce and Swerea SiComp, Nexam is expecting several companies to initiate projects with the new resin in the coming years. CESI is also eager to review the near future market opportunities for Nexam´s new product PBO (phenylene bis-oxazoline). The list of Nexam products, product segments and partners are impressive. Nexam rests on multiple legs. The Nexam key issue has been (and still is) delays. CESI is convinced that the new CEO Anders Spetz (during a 8-18 months period) will succeed to accelerate and transform the Nexam cutting edge crosslinking technology to a hard core profitable business.

Best regards, C.E.S.I.

The author, Cutting Edge Science Invest, is a Nexam Chemical share holder. Cutting Edge Science Invest can not guarantee, or take into accountability, the content of truth and accuracy of the information in this article/post.Thus, Cutting Edge Science Invest requires that a possible reader gather complimentary information if any type of investment in the company described above is considered. Cutting Edge Science Invest provides personally biased information and at best also “general information and opinions”. The article/post does not contain professional investment advice. 

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