A MARKET UPDATE for JULY / AUGUST, 2007

TCC periodically posts video “snapshots” regarding critical markets and economic updates on our web site. We welcome your viewing them and will appreciate your feedback.

We appreciate your taking the time to review this newsletter. We welcome your comments as well as contributions regarding our readers’ company/industry activities. Please send them to Bob Beavins at bob@thechemco.com

Critical Raw Materials Markets

Oil Price: ~$75.00/bbl.
Natural Gas Current spot prices average ~$/5.60MMBtu; August contracts settled at ~$6.00/MMBtu.
Benzene: Trading at $4.00/gallon for August.
Propylene: US contracts for July were up $0.0075/lb from June at $0.505/lb
Orthoxylene: July contracts reduced $0.04 to $0.50/lb.

Chemicals Markets

Methanol: Spot prices firmed in mid- July as gas curtailment issues in Trinidad and Tobago and Chile continues. MNDRP will remain unchanged into August at US$.93/ gallon. Demand is steady with some sectors remaining weak including formaldehyde. Methanex comments that all four Chilean Methanol Units will be operational by Q4 of 2007.

Urea: Prices weaken for several reasons including a wet summer in the Mid West, the closure of the Arkansas River, and a surge in supply to North America. World prices are considerably less then North America so the vessels are arriving to take full advantage. Granular spot barges seen at $308- $312/ ton.

Adipic Acid: Despite firming Benzene values prices in Asia decline as they have for the past several months. It is speculated that this may be the bottom and a firming trend is expected in the near future. US prices are level and on par with Asian pricing in the US$.87- $.95/ lb. range.

Ammonium Nitrate/Ammonia/Nitric Acid: Ammonia Prices are stable thanks to reasonable Natural Gas pricing and no major supply interruptions. Nitric Acid is tight due to a major turn around coming in Mid- August at Agrium and the unexpected outage at PCS Augusta. It is also noted that PCS is having some “issues” at their Lima, OH facility. Right now there is no price increase announcements but it is not out of the question to see one in the beg. of Q4 ’07. Ammonium Nitrate is strong on the agriculture side (high density) but continued rain in the mid west will hamper its strength. Low Density (explosive grade) is level right now as the interest in coal based power plants wains on pollution concerns.

Plasticizers: Plasticizers continue remain in tight supply. A snugness in 2EH supply is affecting many products, while the tightness of trimellitic anhydride is causing problems with trimellitates. DINP remains very short worldwide and the falling dollar against the euro is causing cost problems with material coming from Europe. Further price increases have been nominated for August 1 for all plasticizers.

TCC Plasticizers available:
TOTM
DOA
ChemFlexx 206 Linear Phthalate Plasticizer
DINP — Limited availability, with worldwide tight supply.
Brominated DOP
8 10 Trimellitate

Unavailable/Allocated Plasticizers:
DOP
DBP

PVC TCC now offers an extensive line of homopolymer emulsion PVC.

Dicyandiamide: Price’s firm slightly as the reduction of the Chinese VAT Rebates take affect.

Dicyclopentadiene: Prices firm slightly as derivative values increase.

Fumaric Acid: Stable market; imports available.

Isophthalic Acid: Import prices for late August at US$1.50- $2.00/ lb. FHR remains on sales control with only contract customers getting material. Eastman also serving up material only to those with papers or a purchase history.

Maleic Anhydride: Prices firm to those with Butane based contracts. Demand remains somewhat quiet with the housing slow down thus lackluster demand in UPR and other sectors.

Styrene monomer: Spot pricing at $.59/lb to $.60/ lb. down $.005/ lb. from July. Demand still rather quiet.

For more information on these or any of the products and services provided by TCC please contact Robb Roach directly at Robb@thechemco.com or go to our web site at thechemco.com

Chemical Industry News

As anticipated, on July 1, 2007 the Chinese government significantly reduced the VAT rebates on exports of a wide range of products. Rebates were cut on 2,831 products with the expressed goal of discouraging exports of energy-intensive products and lowering the country’s trade surplus. The rebate on exports of all plastic resins and processed products* has been reduced from 11 to 5% and over 500 items such as chlorine based chemicals, have had the rebate eliminated completely. It is unclear if this will have a large impact on US-China trade.
*Classified under Harmonized Tariff Schedule, Chapter 39.

On July 17, Lyondell signed an agreement with Basell whereby Basell acquired all its outstanding shares. Total transaction value is estimated at $19 billions. Basell is owned by NY based Access Industries. Between them, the two companies had 2006 combined revenues of $34 billions and employ 15,000 people.

Hexion Specialty Chemicals recently acquired Huntsman for an announced $10.6 billions after a second round of negotiations. Hexion is a producer of thermoset resins, and arose out of the 2005 merger of Borden, Bakelite AG, Resolution Performance Products and Resolution Specialty Materials. It is controlled by the private equity firm of Apollo Management LP. Flint Hills Resources, a subsidiary of Koch Industries, is buying Huntsman’s commodity resins business.

PolyOne Corp. has sold its share of Oxy Vinyls LP to its partner, Occidental Chemical Corp. for $261 millions. PolyOne will maintain existing PVC and VCM supply agreements with Oxy through 2024. Oxy Vinyls has approximately 4.2 billion pounds of PVC capacity.

CVC Capital Partners Ltd., Europe’s number two buyout firm, has agreed to acquire Univar, the largest US chemicals distributor for 1.52 billion euros ($2.07bn). Univar sales last year totaled $8 billions, including revenue from ChemCentral, which it purchased in the second quarter for $650 millions.

US Department of Defense, through its Defense Advanced Research Projects Agency, recently awarded funding for the development of a new bio-jet fuel technology for the military. The goal of the 18-month project is to produce an affordable alternative to petroleum-derived jet fuel, mainly JP8. Total global jet fuel consumption in 2005 was 3.6 million bbls per day, with the US accounting for 1.6 million.

Recent reports from UN sponsored agencies have cited increased demand for biofuels as a key factor in rising global crop and livestock prices. The growing use of cereals, sugar, oilseed and vegetable oils to produce fuels has increased both crop and livestock prices. This confirms earlier forecasts questioning the current corn to ethanol drive.

Associated British Foods plans to form a joint venture with BP and DuPont to build a large biofuel plant in the UK. The plant is expected to produce 330,00 tons of bioethanol per year from wheat. Operations are expected to begin in 2009.

The New Jersey state government is seeking hundreds of millions of dollars worth of compensation from producers and distributors of methyl tertiary butyl ether (MTBE) and others for pollution damage. Among defendants in the suit are Amerada Hess, Atlantic Richfield, BP America, Chevron, ExxonMobil, Getty, Shell, Texaco and Valero Energy. Other defendants among over 100 targeted companies are Crompton Colors, Essex Industrial Chemicals, and a variety of other businesses.

The California legislature is considering final approval to a ban on phthalates in infant toys, a move that could trigger similar legislation nationwide. The bill would bar certain phthalates in baby bottles, toys and other products intended for children three years old or younger. The bill would ban the manufacture of child care products containing DEHP, DBP, BBP, DINP, DIDP, DOP in concentrations exceeding 0.1%. Chemical industry officials have stated that the proposed legislation is not supported by science and would harm California’s economy.

French energy giant Total will partner with Russia’s Gasprom in tapping and utilizing the Tschtokman gas field, one of the largest gas reserves in the world.

In the latest effort to stem further criticism of its country’s tainted exports, the Chinese government has recently revoked the licenses of three plants that export mislabeled ingredients for drugs or pet food. One of the facilities had been exporting diethylene glycol and representing it as glycerin. Chinese regulators are reported to be in crisis mode after stories of tainted products and the threat represented to the export industry.

The intention to build a coal to natural gas plant to produce up to 70 billion cubic feet of pipeline quality natural gas produced from coal has been announced by coal producer Peabody Energy and ConocoPhillips. Primary design is to be completed early next year.

A federal court recently struck down rules regarding trucker working hours that were strongly criticized by safety advocates. In effect, drivers’ hours were reduced, and the decision could result in higher trucking costs.

The Economy

THE DOW JONES INDUSTRIAL AVERAGE CONTINUES ABOVE THE 1300 MARK AND BRIEFLY WENT OVER 1400.

The market for new homes has fallen to its lowest point in more than 16 years as builders struggle with high inventories of unsold houses. The National Association of Realtors projects that new home sales will rise slightly next year but remain below 2006 levels.

New orders for durable goods increased $3.0 billion, or 1.4%, to $217.1 billion in June. This was the fourth increase in the last five months and followed a 2.3% decrease in May. Excluding transportation, new orders decreased .5%. Excluding defense, new orders increased 1.9%.

Consumer Price Index increased 0.2% in June. The June level was 2.7% higher than June, 2006.

Interest rates: Prime at 8.25%.

Inflation: Currently 2.7%; average 3.0% in 2007.

Unemployment: Continued 4.5% in 2007.

Trade Deficit: Increased to $60.0 billions in May from $58.5 billions in April.

Crude Oil: Price reached $75.90/bbl on July 19, highest since August 9, 2006, when it traded at $76.28. It was $1.15 lower than all time high of $77.05 on August 6, 2006.

Industrial production for June rose 0.5%, and was 1.4% above its year-earlier level.

Economists predict average 2.7% GDP growth in 2007, possibly 3.2% into 2008.

The US dollar trading at 120.33 yen. $1.371 = euro. The British pound sterling = $2.05.

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