Ingevity announced last week that it will close by mid-2024 its Deridder, Louisiana, processing plant, which produces crude tall oil fatty acid products for metalworking fluids and other applications.
The closing is part of a strategy to accelerate a shift by the company’s Performance Chemicals business to use of non-crude tall oil-based fatty acids.
Part of the motivation for that transition is for the company to reduce its exposure to structurally more expensive crude tall oil raw material, which is being impacted by the biofuels market. The company said it plans to sell excess crude tall oil and that it will operate a dual crude tall oil and alternative fatty acid refinery network to maximize profitability and reduce raw material cost volatility.
The North Charleston, South Carolina-based company acquired Georgia-Pacific’s pine chemicals business – including tall oil fatty acids – in 2017. In 2020, the lubricants market accounted for 7% of Ingevity’s $392 million sales revenues.
Charleston, South Carolina-based Ingevity supplies the lubricant and metalworking fluid markets with tall oil fatty acid and distilled tall oil, along with a variety of raw materials and performance additives. The company said its biobased tall oil fatty acid, distilled tall oil and specialty additive products are used to tighten unstable emulsions. Emulsions are used for extending the life of a metalworking fluid.
The announcement included the permanent closure of the company’s DeRidder, Louisiana, production facility that manufactures a range of crude tall oil-based products that are primarily for the Industrial Specialties business, which is reported within Ingevity’s Performance Chemicals segment. Ingevity expects to close the DeRidder facility by the end of the first half of 2024.
“Today’s actions increase our focus on growing our most profitable Performance Chemicals businesses such as Pavement Technologies and accelerate our transition to non-crude tall oil-based fatty acids,” Ingevity President and CEO John Fortson said in a news release. “Our decision is the result of a careful evaluation of various strategic options to address the cyclicality of our rosin-based end markets, as well as the significant structural changes and elevated pricing of CTO due to the biofuels market.
“Going forward, we will continue to strengthen and diversify the Performance Chemicals business through the introduction and expansion of complementary and new product offerings based on alternative chemistries, such as soy and canola-based fatty acids.”
The company also announced additional corporate and business cost reductions, which combined with those previously announced, are expected to result in total $65 million to $75 million starting in 2024.