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Business deals

Malaysia's Petronas and LG Chem to build glove material plant

State energy firm moves into nitrile as COVID-19 spurs demand for protective gear

Malaysia's state energy company Petronas is hoping to tap growing demand for nitrile gloves used in the health care industry.   © Reuters

KUALA LUMPUR -- State energy company Petroliam Nasional, better known as Petronas, and South Korean chemical giant LG Chem have inked an agreement to build a manufacturing plant in Malaysia to produce nitrile butadiene latex -- a core raw material for making synthetic rubber gloves.

The manufacturing plant is slated to begin production in 2023 to tap the growing market for rubber gloves, in which Malaysia is already a global leader. Major manufacturers in the country include Top Glove, Hartalega and Supermax.

Construction of the plant will begin in 2021 at Petronas' petrochemical complex in the southern state of Johor, and it will have an initial production capacity of 200,000 tons of nitrile butadiene latex a year, the company's chemicals arm, Petronas Chemicals, said in a statement on Monday. No investment values were disclosed.

Nitrile butadiene latex is a synthetic rubber that uses butadiene as the main feedstock and is a core raw material for making nitrile gloves, which are widely used in health care and the food industry. Nitrile gloves are gaining traction against their natural rubber counterparts thanks their improved durability and chemical-resistance features.

Recently, the use of nitrile gloves has surged amid efforts to prevent the spread of Covid-19 and other infections. Demand is growing at more than 10% a year on average and nitrile gloves are expected to account for 70% of the entire latex glove market in 2024.

Petronas Chemicals says the partnership with LG Chem is timely given the steady growth in demand for nitrile gloves globally, and will help create new revenue streams and open up new markets by the two companies' resources. The plant is will offer various grades and new applications of butadiene latex, as well as develop high-value-added products through research and development and investment, the company added.

"It provides a compelling entry point into the growing nitrile butadiene latex-based products and enables Petronas Chemicals to enhance its presence in attractive end-markets, especially for personal care and healthcare, mainly in the Asia-Pacific region," Petronas Chemicals Managing Director Sazali Hamzah said.

For Petronas Chemicals specifically, Sazali said the partnership with LG Chem will further strengthen the pursuit of its growth agenda following the acquisition of a silicone player last year. "With more specialty chemicals in our portfolio, we are moving into segments with higher growth potential," he said.

In 2017, Petronas inked an agreement with Saudi Arabian Oil Company, also known as Saudi Aramco, with the latter investing $7 billion for a 50% stake in refinery and cracker plants in a $27 billion refineries and petrochemical integrated complex in Johor.

Petronas Chemicals, which released its second-quarter financial results last week, saw its net profit for the three-month period fall 83% to 186 million ringgit from 1.11 billion ringgit registered in the second quarter of 2019. The company blamed the weak performance on lower plant utilization rates and decreased production volume and sales volumes, all related to the aftermath of the coronavirus pandemic, which forced Malaysia to impose a three-month lockdown.

Revenue for the three-month also fell 26% to 3.17 billion ringgit from 4.33 billion ringgit a year ago.

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