How did one of the world's most cost-competitive plants become unsustainable in only a couple of decades? Here's what happened to the ethylene cracker at Wilton - and one or two wider lessons
My father worked at ICI Wilton in 1970's. Back then every kid in my school's father worked either at ICI or Teesside Steelworks-75,000 employees all told. I recall ICI shareholders seeking to release value was one of the major causes of the company break-up but your analysis is spot on. Sadly, associated jobs now in the hundreds.
When ICI split off its pharmaceutical businesses (Zeneca) the remainder were comparatively low margin and a lot more cyclical (particularly the Chemicals and Polymers business of which the cracker, JVO6, was part). The City was less enamoured of it for those reasons and the share price suffered.
The board decided to reconfigure the business by moving to higher margin, intermediate chemicals and recruited a former Unilever Exec. as CEO. Charles Miller-Smith then did a deal with his former employer to buy their intermediates business paying considerably over the odds. A prolonged downturn and still struggling returns meant they were then forced into a firesale of the old ICI businesses for peanuts (initially it was entire divisions like paints and explosives but then individual plants were flogged off). That exercise in ‘releasing shareholder value’ however it was portrayed was more an attempt to clear debt.
Of course the beauty of ICI was that it leveraged synergies and efficiencies across diverse manufacturing units and the spread in turn offered protection from cyclical returns in individual sectors.
Nice text. There are some technical details missing. China makes ethylene from ethane (natural gas). So much that it have to lower down retaliatory tariffs on US ethane, otherwise the plastic industry collapsed. UK cannot do the same?. They can even buy natural gas from some technical ignorant (or capital/technology strapped) countries like my own: Argentina, which sell the raw natural gas, including ethane and propane. Use the methane or energy and the rest for more pricey olefins. With respect to energy prices, if you impose your industry high energy price because of climate change, you should apply a tariff on any product made with cheap non green (coal) energy. Last time I check, the CO2 emitted in China is the same than in the UK. Or you are just a fool
Fantastic writeup Ed, appreciated the photos to accompany it. Really wonder how much harm the imposition of stringent eco regs in the 90s-thru to the 2010s WITHOUT similar systems to the EU CBAM were a serious self-imposed harm.
Right at the point where economic power and political capital could have imposed better standards and uplifted global industry, the effect of policy was just to shift it elsewhere rather than transform it.
Thanks for your story. ICI impacted much of the world.
I worked at an ICI plant here in Australia in the early 90s. We were doing a big modernisation on an ethylene oxide plant. It was clear even to an ignorant engineer that ICI was dying. The plant we were upgrading was built in the 1950s. A futile exercise really when brand new plants were being built in Asia. Even though it used ethylene piped from our Moomba gas field. About a 1500km pipeline - somebody thought some effort was warranted.
I put the demise down to deprecating the value of the engineers and technologists. We had our offices shifted to a bunch of dongars (portable cabins) over a swamp. Still smarts. Technical skills were run down, and we narrowly avoided several accidents. This when ICI still held respect as leaders in safety and technology.
Amongst many other things they invented the HAZOP (Hazard and Operability Studies) which I used extensively during my career, and which probably resulted in many safety improvements for many clients in many fields.
I have been thinking of doing a few stories about some of my career episodes. This one might be a place to start.
Former DuPonter here. I’ve been to the Wilton site many times. DuPont acquired the ICI polyester assets in the late 90s. DuPont then sold all its fibers businesses (nylon, polyester, Lycra) to Koch Industries. Koch named this business Invista. I finished my career working in a fiber technology licensing business headquartered at Wilton Center in Redcar. Maybe it still exists; I retired in 2018.
I love it when Thatcherite’s bemoan the shrinking of manufacturing, but always seem to miss the point that it was her policies which led to it. There’s none so blind as those that will not see….
Absolutely. Until we accept that Thatcher and the economic theories she and her governments put into practice and have become the consensus have caused in so many ways the massive damage our country has inflicted on itself and remember one hell of a lot of British brilliance exists before 1979.
Kind of hilarious that the writer can write this and not mention that the UK privatised energy and the energy grid and businesses now pays huge electricity prices - highest in the world - because the grid was starved of investment and the prices have been frigged by the energy traders so that they are never lower than the price of gas. Also - Brexit. Why would any global chemical manufacturer set up in Britain? There are two costly certification processes now - one for EU one for UK and how easy will it be to comply with both as the countries diverge?
Yes, ethane can be stripped from an oil and gas petroleum well stream. Since it probably came from gas/oil wells in the UK, rather than from shale oil fields like the Permian and Eagle Ford, you may associate it more with "oil wells". Of course it can be found in both. As ethane is typically a product of rich natural gas wells, I do not associate it so much with oil. The Texas and other American shale oil fields have developed a different manner of handling shale oil fluids, which can have up to 70% condensates, pentane to heptane and even heavier fluids. The oil gravity can vary considerably, thus well streams are not segregated. Oil such as WTI and others with less than API 45 to 50 gravities are not mixed with condensates, which have yet higher APIs. These are now kept separate in tanks for batching in pipelines, or sent into completely separate pipeline systems. Separate pipelines, those for traditional WTI and now those for WTL, West Texas Light, and other Condensates, typically run into NGL, Natural Gas Liquid, pipelines. There you will find methane, ethane, propane, butanes, hexanes, heptanes and others up to C14, in some cases.
The NGL pipelines run into "Splitting Plants" where the lighter gases are stripped and separated. Ethane being one of those. The ethane is often sent either to a chemical plant, or liquified for overseas shipping in Ethane Carriers to the export market. The Norweigen plant you mention buys this ethane from US export streams. The chemical plant is where the ethane is cracked, producing as you mention, ethylene. It can be pipelined from there to other plants, but my preference is to use it on the spot in a polyethylene plant, as ethylene is pretty high on the hazardous gas list. The polyethylene plant polymerizes the ethylene and produces polyethylene. The ones I worked with produced polyethylene pellets that were bagged and sent worldwide.
ICI did NOT "fall to pieces", it had to demerge because the parts were worth more than the whole and the "greed is good" asset strippers were at the top of their power. They would have taken ICI over and sold off the Zeneca and Ciba-Geigy parts of the business.
You also had the EU/EEC demanding that "over production" was cut, I believe, to protect state-owned chemical industries on the continent. I don't know enough about that.
Was ICI better as one group? Maybe. There is no reason a large group cannot succeed imo, as long as the CEO allows the separate businesses to work together and realise the potential in new markets. The problem is modern CEOs aren't awarded for long term success, they want a share price increase over 5 years and that is it.
Great and important post as always. Can’t help but feel that had ICI still been with us there would have been a stronger voice telling government about the consequences of its actions for UK industry.
Minor typo: ICI was Imperial Chemical Industries rather than Imperial Chemicals Industry.
That’s a great analysis Ed and commendable for someone who doesn’t work in the complex chemical sector. I spent nearly 40 years in this industry mainly importing chemicals into the UK to fill a void often left by upstream UK plant closures.
Shipbuilding, Coal, Steel and now Chemicals is the final nail in our industrial heritage.
Thanks for ‘Material World’ - it should be compulsory reading for every 16-18 yr olds.
Ed - I couldn't agree with you more. I started my 40+ year industrial career, post-A level, pre-uni in the Wilton plant and then the following two summers in the Teesside British Steel plants. After 34 years overseas in the construction and energy industries I moved back to the North East and it breaks my heart every time I pass through Teesside or visit the Wilton site to see what little remains of the industrial complexes that brought real value to UK and started so many careers that have literally shaped the industrial world. Please please keep working to get your "Material World" messages out and just maybe it will start to reach some of our government decision makers.
Your page popped up on my LinkedIn feed and it just so happened that the top article at the time of writing was this one.
I grew up in the South Bank area of Teesside (now living in London) and found it fascinating what you said here. I've spoken to many times to people about the loss of jobs but never really understood why it was happening.
I have a band too and actually write a lot of songs about the subject, see Lost Town by Strawberry Fires if you were interested. Mention a lot of the points you've made!
This is a so-so analysis, it is nice to point out some of the better asspects of ICI's history but really it fails to recognise much more critical aspects.
To start with, the UK chemicals industry has been in decline since the early 1980s. ICI Petrochemicals (and its successor owners) survived better than some, but ultimately it has had to yield to global competitive forces. This btw will be no different in the Steel industry, and it will be mad for the UK government to prop up "British Steel" on the assumption that somehow you can reverse the tide.
The reality is that the plants on Teeside (as elsewhere, e.g. BP Chemicals at Baglan Bay a long time ago, and Ineos Grangemouth more recently, since its journalistically convenient to forget that Wilton was not the only Ethylene cracker in the UK...) are just not cost competitive.
And why is that?
Firstly it is is about feedstock (no cheap Ethane), secondly scale that is not big enough compared to newer more efficient plants built in the Middle East or Asia, thirdly operating costs are again too high (dominated by UK wages in turn being too high) vs China or India, fourthly because European chemicals demand is flat to shrinking... which provides no opportunity to invest to counteract some of the previously mentioned issues, and lastly because the technology in use is mature, and again there is no significant opportunity to shift to a more advanced technology that again might offer some competitive "protection".
These are the brutal "truths", and why the UK can and will never compete unless you can find solutions to those factors.
My father worked at ICI Wilton in 1970's. Back then every kid in my school's father worked either at ICI or Teesside Steelworks-75,000 employees all told. I recall ICI shareholders seeking to release value was one of the major causes of the company break-up but your analysis is spot on. Sadly, associated jobs now in the hundreds.
Slightly modified take …
When ICI split off its pharmaceutical businesses (Zeneca) the remainder were comparatively low margin and a lot more cyclical (particularly the Chemicals and Polymers business of which the cracker, JVO6, was part). The City was less enamoured of it for those reasons and the share price suffered.
The board decided to reconfigure the business by moving to higher margin, intermediate chemicals and recruited a former Unilever Exec. as CEO. Charles Miller-Smith then did a deal with his former employer to buy their intermediates business paying considerably over the odds. A prolonged downturn and still struggling returns meant they were then forced into a firesale of the old ICI businesses for peanuts (initially it was entire divisions like paints and explosives but then individual plants were flogged off). That exercise in ‘releasing shareholder value’ however it was portrayed was more an attempt to clear debt.
Of course the beauty of ICI was that it leveraged synergies and efficiencies across diverse manufacturing units and the spread in turn offered protection from cyclical returns in individual sectors.
The sum was greater than the parts.
Nice text. There are some technical details missing. China makes ethylene from ethane (natural gas). So much that it have to lower down retaliatory tariffs on US ethane, otherwise the plastic industry collapsed. UK cannot do the same?. They can even buy natural gas from some technical ignorant (or capital/technology strapped) countries like my own: Argentina, which sell the raw natural gas, including ethane and propane. Use the methane or energy and the rest for more pricey olefins. With respect to energy prices, if you impose your industry high energy price because of climate change, you should apply a tariff on any product made with cheap non green (coal) energy. Last time I check, the CO2 emitted in China is the same than in the UK. Or you are just a fool
Fantastic writeup Ed, appreciated the photos to accompany it. Really wonder how much harm the imposition of stringent eco regs in the 90s-thru to the 2010s WITHOUT similar systems to the EU CBAM were a serious self-imposed harm.
Right at the point where economic power and political capital could have imposed better standards and uplifted global industry, the effect of policy was just to shift it elsewhere rather than transform it.
Thanks for your story. ICI impacted much of the world.
I worked at an ICI plant here in Australia in the early 90s. We were doing a big modernisation on an ethylene oxide plant. It was clear even to an ignorant engineer that ICI was dying. The plant we were upgrading was built in the 1950s. A futile exercise really when brand new plants were being built in Asia. Even though it used ethylene piped from our Moomba gas field. About a 1500km pipeline - somebody thought some effort was warranted.
I put the demise down to deprecating the value of the engineers and technologists. We had our offices shifted to a bunch of dongars (portable cabins) over a swamp. Still smarts. Technical skills were run down, and we narrowly avoided several accidents. This when ICI still held respect as leaders in safety and technology.
Amongst many other things they invented the HAZOP (Hazard and Operability Studies) which I used extensively during my career, and which probably resulted in many safety improvements for many clients in many fields.
I have been thinking of doing a few stories about some of my career episodes. This one might be a place to start.
Cheers
Will there be a Material World 2 please?!
Former DuPonter here. I’ve been to the Wilton site many times. DuPont acquired the ICI polyester assets in the late 90s. DuPont then sold all its fibers businesses (nylon, polyester, Lycra) to Koch Industries. Koch named this business Invista. I finished my career working in a fiber technology licensing business headquartered at Wilton Center in Redcar. Maybe it still exists; I retired in 2018.
I love it when Thatcherite’s bemoan the shrinking of manufacturing, but always seem to miss the point that it was her policies which led to it. There’s none so blind as those that will not see….
Absolutely. Until we accept that Thatcher and the economic theories she and her governments put into practice and have become the consensus have caused in so many ways the massive damage our country has inflicted on itself and remember one hell of a lot of British brilliance exists before 1979.
Kind of hilarious that the writer can write this and not mention that the UK privatised energy and the energy grid and businesses now pays huge electricity prices - highest in the world - because the grid was starved of investment and the prices have been frigged by the energy traders so that they are never lower than the price of gas. Also - Brexit. Why would any global chemical manufacturer set up in Britain? There are two costly certification processes now - one for EU one for UK and how easy will it be to comply with both as the countries diverge?
Yes, ethane can be stripped from an oil and gas petroleum well stream. Since it probably came from gas/oil wells in the UK, rather than from shale oil fields like the Permian and Eagle Ford, you may associate it more with "oil wells". Of course it can be found in both. As ethane is typically a product of rich natural gas wells, I do not associate it so much with oil. The Texas and other American shale oil fields have developed a different manner of handling shale oil fluids, which can have up to 70% condensates, pentane to heptane and even heavier fluids. The oil gravity can vary considerably, thus well streams are not segregated. Oil such as WTI and others with less than API 45 to 50 gravities are not mixed with condensates, which have yet higher APIs. These are now kept separate in tanks for batching in pipelines, or sent into completely separate pipeline systems. Separate pipelines, those for traditional WTI and now those for WTL, West Texas Light, and other Condensates, typically run into NGL, Natural Gas Liquid, pipelines. There you will find methane, ethane, propane, butanes, hexanes, heptanes and others up to C14, in some cases.
The NGL pipelines run into "Splitting Plants" where the lighter gases are stripped and separated. Ethane being one of those. The ethane is often sent either to a chemical plant, or liquified for overseas shipping in Ethane Carriers to the export market. The Norweigen plant you mention buys this ethane from US export streams. The chemical plant is where the ethane is cracked, producing as you mention, ethylene. It can be pipelined from there to other plants, but my preference is to use it on the spot in a polyethylene plant, as ethylene is pretty high on the hazardous gas list. The polyethylene plant polymerizes the ethylene and produces polyethylene. The ones I worked with produced polyethylene pellets that were bagged and sent worldwide.
ICI did NOT "fall to pieces", it had to demerge because the parts were worth more than the whole and the "greed is good" asset strippers were at the top of their power. They would have taken ICI over and sold off the Zeneca and Ciba-Geigy parts of the business.
You also had the EU/EEC demanding that "over production" was cut, I believe, to protect state-owned chemical industries on the continent. I don't know enough about that.
Was ICI better as one group? Maybe. There is no reason a large group cannot succeed imo, as long as the CEO allows the separate businesses to work together and realise the potential in new markets. The problem is modern CEOs aren't awarded for long term success, they want a share price increase over 5 years and that is it.
Great and important post as always. Can’t help but feel that had ICI still been with us there would have been a stronger voice telling government about the consequences of its actions for UK industry.
Minor typo: ICI was Imperial Chemical Industries rather than Imperial Chemicals Industry.
That’s a great analysis Ed and commendable for someone who doesn’t work in the complex chemical sector. I spent nearly 40 years in this industry mainly importing chemicals into the UK to fill a void often left by upstream UK plant closures.
Shipbuilding, Coal, Steel and now Chemicals is the final nail in our industrial heritage.
Thanks for ‘Material World’ - it should be compulsory reading for every 16-18 yr olds.
Ed - I couldn't agree with you more. I started my 40+ year industrial career, post-A level, pre-uni in the Wilton plant and then the following two summers in the Teesside British Steel plants. After 34 years overseas in the construction and energy industries I moved back to the North East and it breaks my heart every time I pass through Teesside or visit the Wilton site to see what little remains of the industrial complexes that brought real value to UK and started so many careers that have literally shaped the industrial world. Please please keep working to get your "Material World" messages out and just maybe it will start to reach some of our government decision makers.
Brexit and REACH?
Your page popped up on my LinkedIn feed and it just so happened that the top article at the time of writing was this one.
I grew up in the South Bank area of Teesside (now living in London) and found it fascinating what you said here. I've spoken to many times to people about the loss of jobs but never really understood why it was happening.
I have a band too and actually write a lot of songs about the subject, see Lost Town by Strawberry Fires if you were interested. Mention a lot of the points you've made!
https://open.spotify.com/track/7Bd8RB0qHJb5OS6OuSuHFG?si=9e5deaebf12b4f4c
This is a so-so analysis, it is nice to point out some of the better asspects of ICI's history but really it fails to recognise much more critical aspects.
To start with, the UK chemicals industry has been in decline since the early 1980s. ICI Petrochemicals (and its successor owners) survived better than some, but ultimately it has had to yield to global competitive forces. This btw will be no different in the Steel industry, and it will be mad for the UK government to prop up "British Steel" on the assumption that somehow you can reverse the tide.
The reality is that the plants on Teeside (as elsewhere, e.g. BP Chemicals at Baglan Bay a long time ago, and Ineos Grangemouth more recently, since its journalistically convenient to forget that Wilton was not the only Ethylene cracker in the UK...) are just not cost competitive.
And why is that?
Firstly it is is about feedstock (no cheap Ethane), secondly scale that is not big enough compared to newer more efficient plants built in the Middle East or Asia, thirdly operating costs are again too high (dominated by UK wages in turn being too high) vs China or India, fourthly because European chemicals demand is flat to shrinking... which provides no opportunity to invest to counteract some of the previously mentioned issues, and lastly because the technology in use is mature, and again there is no significant opportunity to shift to a more advanced technology that again might offer some competitive "protection".
These are the brutal "truths", and why the UK can and will never compete unless you can find solutions to those factors.