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Critical Raw Materials Markets

Oil: Current pricing of $66/bbl.
Natural Gas: May futures settled at $7.87/MMBtu
Benzene: Trading at or above $4.00/gallon
Propylene: US contracts for April were up $0.04/lb over March at $0.48/lb
Orthoxylene: April contracts settled at an increase of $0.025 to $0.485/lb.

Chemicals Markets

Methanol: Methanex Non- Discounted Reference Price remains unchanged for May at $1.01/ gallon. Several outages both planned and unplanned are working the supply and demand situation away from over supply. Spot pricing has escalated a bit from its low in the mid sixties.

Urea: Spot prices have leveled on the gulf thanks in part to limited buying interest due to wet weather in the corn belt. Granular barges are seen at $355- $358 per ton fob and prill at $320- $325. Demand is expected to increase once the wet weather ceases and this along with India jumping in and buying last week is expected to reinvigorate Urea’s upward price momentum. Feb. Urea imports were up 1 percent this year but the total is still well behind the imports of the same time period in 2006.

Adipic Acid: US price increase of $0.05/lb announced by at least one NA producer effective May 1. This based mainly on the historically high Benzene price as well as the high prices and huge demand from China. Prices in China are still over $1.00/ lb. One major US producer is seen exporting massive quantities of AA to China taking full advantage of the situation that exists.

Ammonium Nitrate/Ammonia/Nitric Acid: Ammonium Nitrate remains in balance for the time being. Expected demand surge should occur as weather improves and road projects/ mining projects increase.

Ammonia took a sharp price drop in Tampa last week from $363/ ton to $308/ st fob. Prices are expected to continue the slide in the near term future.

Nitric Acid is currently stable after small and regional increases effective January 1 and April 1 of this year.

Plasticizers: During April and May we have seen, and will continue to see, higher pricing due to increased costs of raw materials: alcohols (especially 2EH), adipic acid, and phthalic anhydride. 2-EH production issues are noted at one US producer. Plasticizer Alcohols are still demanding a premium over plasticizers in Asia.

Plasticizers remain in tight to balanced supply with the exception of DINP which is tight globally due to scheduled down time at plants in both Europe and Asia.

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

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

Dicyandiamide: Price/availability stable

Dicyclopentadiene: Stable market, good availability noted.

Fumaric Acid: Stable market; imports available.

Isophthalic Acid: This market can be noted as nothing short of extreme due to a lack of Metaxylene availability. I have heard reports of material sold in excess of $2.00/ lb. Material is extremely tight worldwide and the situation is not expected to improve until early summer at best.

Maleic Anhydride: Stable market with stable pricing. Imported Briquette prices expected to tighten on Benzene price surge.

Phthalic Anhydride: $.025/ lb. increase for May based on Orthoxylene.

Styrene: Prices expected to continue their climb based on historical Benzene pricing.

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

REACH – (Registration, Evaluation, and Authorization of Chemicals) costs of compliance are now becoming apparent in the EU. Estimates are that the program will cost the chemical industry $3 Billion over the 11 years it will take to implement it. This number seems understated as BASF alone anticipates spending 724million over 10-12 years. It has been reported that some members of Congress are looking into bringing TSCA more in line with Reach. As many as 150 state Reach-type legislative proposals are anticipated in 2007.

SAP has developed a new software system for helping chemical and other firms to attain Reach compliance.

Possible hurricane problems are being considered for the 2007 season, which is traditionally the period 6/1 – 11/30. While issues are being monitored, the official NOAA forecast is not due until May 22. It’s hoped that 2006 will be repeated, with no major storms.

The EU is becoming increasingly active in imposing additional protective controls on the transportation of chemicals and other hazardous materials. The chemical industry is concerned that such controls may duplicate rules already in place in individual member countries, efficient voluntary plans established by manufacturers, and may be unnecessarily restrictive.

It’s been reported that the mergers and acquisitions market is extremely active, due in part to strong cash flow and easy financing. The US chemical industry is a prime target for Asian and Middle Eastern companies wishing to enter the market or to expand an established position.

Univar has acquired CHEMCENTRAL for $650 million in competition with Brenntag.

NOVA Chemicals and INEOS plan to expand their European joint venture to North America. NOVA Innovene is expected to have annual sales of approximately $3.5 billion.

A recent meeting of the Gas Exporting Countries Forum (GECF) raised the potential issue of a “gas OPEC.” Leading producers agreed to look into gas pricing and pledged cooperation in technical matters. Observers have commented that a price cartel is not likely as there is no “swing producer,” and LNG is priced separately.

The Department of Energy has picked four companies and a university to receive $23 million to experiment with converting biomass to ethanol. They are Cargill, Celunol, DuPont, Mascoma, and Purdue University.

Brazil expects to increase ethanol output in 2007, resulting in a 10% production increase to 5.26 billion gallons. Domestic demand will account for about 4 billion gallons, leaving approximately 1 billion gallons for export. It’s predicted that Brazilian ethanol output will double in the next five years. The Brazilian government is hoping to negotiate reduction/removal of the US tariff on ethanol of $.54/gallon.

Degussa is considering building a 60,000 MT alkoxides, which are used as catalysts in biodiesel production, facility in Mobile, AL. Decision is expected by mid-year.

Coal prices are expected to increase during the second half of 2007 due to reduced inventories at utilities, increased mid-summer demand, and declining production.

Tate and Lyle ceased citric acid production at its Selby, UK plant, citing intense competition and oversupply in the world market.

Demand for wind power plants has surged across the globe with largest growth rates in Asia, followed by the Americas. Annual growth rate of 17% is predicted.

Dow Chemical and Libya’s National Oil Corporation have agreed jointly to expand and operate Libya’s Ras Lanuf petrochemical complex. Included are the site’s existing naphtha cracker and polyethylene production facilities. Plans are to build an ethane cracker, additional polyethylene and polypropylene facilities and other gas-based chemical plants.

The Senate recently voted to reject an amendment proposed by Senator Biden to require rerouting of hazardous rail cargo around population centers. The House Homeland Security Committee approved a similar amendment. The National Association of Chemical Distributors says that such rerouting will not make the national system safer and would cause shipments over longer distances, increasing chances of accidents.

Canadian Pacific Railway faces a potential strike by maintenance workers, which could increase freight delays caused by the Canadian National’s ongoing labor dispute. Government statistics show that chemical shipments have fallen by 2% to date.

Ongoing US pressure on China in the World Trade Organization regarding Chinese media piracy, limited US access to the country’s media sector and Chinese export subsidies have resulted in new import duties on Chinese paper products. US companies may now seek new import duties on many products such as chemicals, steel, construction materials and others. China is resisting these efforts.

The Economy


The Investor Environmental Health Network has issued a report regarding investment risks concerning litigation and publicity about toxic materials in cosmetics, toys and other industries.

An IMF spokesperson stated that the US housing slump and risky mortgage defaults will slow US economic growth this year below its 2.9% prediction. However, a recovery is predicted in early 2008. Sales of existing homes plunged 8.4% in March, the largest amount in 18 years.

New orders for durable goods increased to $215 billion, or an increase of 3.4%, in March, higher than forecast of 2.5%, and better than 2.4% in February. This was the fourth increase in the last five months. This has been fueled in part by competitive exports resulting from the weak dollar.

Gasoline prices are up an average 69 cents per gallon since January and eight cents in the past two weeks. The AAA and industry sources project $3/gallon price near term, but as refineries catch up, lower costs are predicted for the summer months, averaging less than 2006. An active hurricane season could make a drastic change in the predictions.

Core consumer prices, excluding food and energy, rose less than expected, at 0.1%, in March supporting the Fed’s prediction that inflation will subside as the economy slows. Prices overall rose 0.6% in March led by fuel costs.

Interest rates: Prime at 8.25%, rising to 8.5%.

Inflation: Currently 2.8%; average 3.0% in 2007.

Unemployment: Continued 4.5% in 2007.

Trade Deficit: Continued to decrease in February from $58.9B to $58.4B

Crude Oil: Price reduction forecast for mid-year.

Industrial production decreased by 0.2% in March, after 0.8% increase in February. Overall industrial production was 2.3% above a year earlier level.

Economists now predict 2.3% GDP growth in 2007, lower than earlier estimates.

The US dollar trading at 118.5 yen, $1.358 vs the euro. The British pound sterling hit the $2.00 mark for the first time in recent history.

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