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Critical Raw Materials Markets
Oil: Current spot prices are in the $58.00/ bbl range. Futures are trending higher.
Natural Gas: Current spot price reported at ~$4.00/MMBtu, with futures in the $4.20/MMBtu range.
Benzene: Early indicators are showing a settlement of approximately $1.90/ gallon up US$.21/ gal from April ($1.69/ gal.).
Propylene: April prices remained at $.275/ lb. for chemical grade and $.29/lb. for polymer grade.
Orthoxylene: May contracts remained at $0.365/lb.
Methanol: The Methanex Non-Discounted Reference Price for May will remain at US$.60/gallon a “roll” from April. Spot barge offers are in the upper $.40’s to low $.50’s per gallon and demand is flat. Methanex has begun shipping out of the Kinder Morgan Terminal, Perth Amboy, NJ replacing American Agip’s position there. The Methanex/ Terra Industries, Woodward, OK facility has been re-started and shipments from this production point are again available. At current gas pricing in the USA (approx $3.6/ MMBTU) cash costs per gallon of Methanol is approx $.48/ gallon. Demand is still horrible in North America, but China’s record demand over the last month is salvaging what could be a disastrous market for producers.
Urea: Urea prices are in the US$245- US$255/ ton range. Wet weather and some noise of lower forward Urea prices by a major producer have kept pricing down in what is usually the highest demand season. Low natural gas pricing makes current prices profitable for domestic producers.
Adipic Acid: Adipic Acid prices have moved up globally with the major raw materials ammonia and benzene advancing strongly in April and May. A price increase announcement of $.05- $.10/ lb. is expected as contracts allow. Availability is also starting to be an issue, rationalization continued with the latest announcement by Invista that they will mothball the Maitland, Canada operations. The closure of the Wilton, UK plant and now the mothballing of the Maitland, Canada plant has eliminated 14% of the global AA capacity and 40% of Invista’s overall capacity. Solutia has found a buyer in SK Capital Partners a US Private Equity Company. It is unclear how this company will be organized going forward.
Melamine: Melamine pricing is now considered stable. Demand remains weak. The massive Chinese export tariff on urea, that kept urea prices down most of the year, may be lifted stimulating exports and possibly price. China remains the low cost supplier worldwide but not all consumers can use what is considered lower quality product.
Molding Compounds: Prices have come down slightly but availability has become an issue. The extreme run up in raw material prices in 2007 and 2008 has left the remaining producers in a severe cash crunch and one of the remaining major producer is shut down.
Ammonium Nitrate: Low density AN prices are currently stable. Demand on both low and high density has softened considerably in most sectors and due to the extreme prices seen in 2008 some have successfully found alternate chemistries for their application.
Ammonia: Current U.S. Gulf NOLA barge pricing is US$285/ton (NOLA Barge). Demand is limited from fertilizer producers who are suffering with their own lack of demand. Buyers are seeking lower prices and with the end of the high demand season approaching fast they may get their wish.
Nitric Acid: Nitric Acid pricing is stable with demand seen as soft. Higher ammonia prices over the last couple months have given producers no reason to reduce pricing but with demand being soft and future ammonia pricing looking to move lower a price decrease could be a possibility for later in Q2.
Plasticizers and Plasticizer Alcohols:
Plasticizer demand is relatively flat in North America despite some supply redistribution after a U.S. and European importer files for Chapter 15. Price increase announcements of $.03 cts./ lb. for April were unsuccessful but the most recent $.03/ lb. increase for May 1st has a far better chance. Raw material pricing has escalated significantly and current pricing will keep producers in the red. Plasticizer demand in Asia has taken a recent downturn and the same can be said as of late on PZ alcohols.
TCC Plasticizers available:
“ChemFlexx 206” Linear Phthalate Plasticizer
“ChemFlexx 208” Low Temp Linear Phthalate Plasticizer
“NatureFlexx 509” Phthalate Free General Purpose Plasticizer
DINP (DiIsononyl Phthalate)
DOA (DiOctyl Adipate)
DOP (DiOctyl Phthalate)
DUP (DiUndecyl Phthalate)
Epoxidized Soybean Oil
TOTM (TriOtcyl Trimellitate)
DMP (DiMethyl Phthalate)
8 10 Trimellitate
9 11 Phthalate
Epoxidized Soybean Oil: Pricing is level with one major declaring Chapter 11. Overall demand is considered slow. Current pricing is higher than phthalates which is hurting demand.
Dicyandiamide: Prices have hit the bottom and some upward momentum is noted. Demand has improved and this is causing some delay in shipments from Asia.
Dicyclopentadiene: Prices are stable with underlying crude values. The Polyester Resin market continues to be extremely slow. Chevron Phillips plans to exit market after inventories are sold.
Fumaric Acid: Global values have eroded as inventories build. Offshore producers are eager to participate in North American markets as demand weakens.
Malic Acid: Global values have eroded with demand seen as slow. Offshore producers have shown keen interest in North American markets and may offer a lower priced alternative.
Isophthalic Acid: Prices have started come down in line with underlying raw material costs. Demand has also slowed in most major markets.
Maleic Anhydride: Demand remains slow but improving in April. Huntsman’s new MMA plant will be operational at the end of May adding to an already over supplied market. Butane is seen in the low to mid $.80’s per gallon.
Styrene monomer: Benzene values have moved up and so is SM pricing. Current spot pricing is approx. $.45/ lb. Domestic demand from all sectors is poor to extremely poor and pricing remains at levels not seen in almost 10 years.
Phthalic Anhydride: Orthoxylene settled up $.03/ lb. to US$.365/ lb. in April hence phthalic anhydride moved up $.03/ lb. in May. Demand is poor globally and the peak demand season affecting orthoxylene is waning- we expect price erosion in the coming months.
Mono Ethylene Glycol: A $.02/ lb. increase has been announced for May 1 setting the MeGlobal benchmark at US$.27/ lb. Spot is trading at US$.22- US$.23/ lb. US pricing is possibly the lowest in the world as Asian demand and pricing have picked up considerably and to the surprise of most.
Diethylene Glycol/ Triethylene Glycol: Demand is extremely weak on DEG, so poor in fact it is reported that several producers shipped material to Asia in order to control inventories. Spot is trading at US$.195/ lb. to US$.22/ lb. fob. All producers are operating at reduced levels. TEG benchmarks are at approx. US$.80/ lb. fob but imports continue to drive pricing lower.
Chemical Industry News
The Synthetic Organic Chemical Manufacturers Association (SOCMA) will change its name to the Society of Chemical Manufacturers and Affiliates in order to better represent its growing membership.
The EPA’s most recent data on the amount of toxic chemicals released into the US environment shows an overall decrease of 5% in releases from 2006 – 2007. However, the same report shows a 1% increase in releases of persistent, bioaccumulative, and toxic chemicals such as lead, dioxin, mercury, and PCB’s.
At the ChemSecure Conference sponsored by the American Chemistry Council (ACC) executives with leading chemical companies declared that a US mandate for inherently safer technology (IST) could damage the chemical industry. They were concerned that with additional authority the government could force companies to alter or reduce feedstock supplies, change production processes, or abandon products.
BASF SE has won US and EC antitrust clearance to complete its $5.1 billion takeover, including debt, of Swiss rival CIBA. BASF agreed to divest businesses that make dyes and related products in Europe and the US.
The US fertilizer industry, through The Fertilizer Institute, has urged Department of Homeland Security officials to have new antiterrorism security controls in place for the sale and distribution of ammonium nitrate (AN.) The Institute hopes to see regulation to ensure chain of custody requirements for AN. In 2008, US production of AN was ~2.5 million MT.
FMC has closed its Granger, WY soda ash plant for at least three months. Production from this plant represents more than 12% of FMC’s total capacity of ~4 million tpy. Workers at the plant will be relocated to other plants. US soda ash production for the industry as a whole is down approximately 12%.
Innua Petroleum spokesman stated that Innua Canada Ltd went into receivership in Canada on March 13, 2009 and that at the same time a receivership order was granted over the assets of the Normandy Group in Canada (although Normandy does not have any Canadian assets). The Canadian receiver filed for recognition of this receivership in the US under Chapter 15. This receivership is limited to Innua Canada and the Normandy Group assets in the US and Canada. Innua Petroleum Ltd. Is a totally separate company, and has not been part of the Normandy Group since October 2008. Innua Petroleum is not in receivership and it is not in Chapter 15.
S. C. Johnson has announced that it is removing phthalates from Windex, Shout, Pledge, and other popular cleaning products, and will begin disclosing all ingredients on its labels. The company plans to phase out phthalates within two years, although the CEO has said that the company believes they are safe, but is removing them due to consumer concerns.
Celanese has agreed to sell its polyvinyl alcohol (PVOH) business to Sekisui Chemical Company of Osaka, Japan. Sekisui will acquire facilities in Calvert City, KY, Pasadena, TX, and Tarragona, Spain. Celanese’s 2008 PVOH business had sales volume of ~$300 million last year.
SK Capital Partners II, LP, a private equity firm in New York City, is buying Solutia’s nylon business. Solutia will receive US$50 million in cash, $4 million in deferred cash payments as well as assumption of other liabilities by SK.
As part of its plan to increase cost savings, LyondellBasell announced the elimination of 4,800 employees and contractors to be accomplished by the end of 2010. Targeted plant closures are in Texas, Maryland, and Illinois as well as Canada and France. The company plans to close 25 offices as well.
Abu Dhabi’s International Petroleum Investment Co. was recently given US antitrust clearance for its US$3.2 billion purchase of Nova Chemicals Corp. The total price includes debt assumption.
Russia’s leading polyethylene (PE) manufacturer, Kazanorgsintez, has requested economic aid from the federal government in an attempt to stave off bankruptcy proceedings. The company produces more than one third of Russia’s total PE output.
The American Chemistry Council has projected that US chemical output, exclusive of pharmaceuticals, will drop 8.7% from 2008. The ACC’s earlier forecast showed a decline of 3.1%
Dow Chemical will sell its Morton Salt business to K+S AG of Germany for ~$1.7 billion. This is reported to be part of Dow’s divestiture plan to pay off the debt acquired with the Rohm and Haas purchase. The company also said that it is in talks about the possible sale of its agriculture unit. Dow posted a small first quarter profit, counter to forecast.
A majority of first quarter chemical industry reports reflected significant downturns. DuPont reported a drop in earnings of 59%, BASF 68%, DSM 92% for the period. SABIC, which has a feedstock advantage, posted its first quarterly loss in seven years. Chemical companies that have high participation in the personal, home, and fabric care industries fared much better.
The workforce in the US chemical industry shrank by 11,300 in the first quarter, paralleling the broader economy. The March chemical employment figure was down 3.3% compared to a year ago.
A growing number of chemical producers have shown interest in applications for microreactors. They are being evaluated for the production of bulk chemicals such as ethylene, methanol, styrene, VAM, and formaldehyde as well as for specialties and cosmetic applications.
The Agrium offer to acquire CF Industries at a cost of $3.6 billion, rejected once by CF, has been submitted to CF shareholders.
China’s GDP growth slowed in the first quarter of 2009 to 6.1%, the lowest number since quarterly records began in 1992. The Chinese government has said that it is determined to achieve annual growth of 8%. A four trillion yen (US$580 billion) stimulus package put in place in November was felt in an industrial output increase of 3.8% in March. China’s export dependent economy still faces difficulties due to sharp reductions in demand, placing pressure on employment.
The World Bank has revised its China economic growth forecast to 6.5% in 2009, compared to a 9.8% rate in 2008 and an earlier forecast of 7.5%.
The six largest manufacturers of baby bottles will stop selling any bottles made with bisphenol A (BPA.) The manufacturers declared their intentions after several state Attorneys General wrote to the bottle makers and asked them voluntarily to stop using BPA. House and Senate leaders will now be introducing similar legislation in Washington. Sunoco has already refused to sell BPA to customers for use in food and water containers for children younger than three. US production of BPA in 2008 is estimated to be 950,000MT.
The International Conference on Chemicals Management will be held in Geneva, Switzerland on May 11 – 15. The agenda will focus on progress made in improving the safe management of chemicals as well as explain how the global chemical industry will demonstrate its economic, social, and environmental commitments.
The construction of a Baltic Sea pipeline that would end Poland’s near total dependence on Russian natural gas will be delayed indefinitely due to insufficient supply guarantees from Norway’s Statoil.
US Interior Secretary Ken Salazar has said that oil and gas will remain a central part of the nation’s energy supply and that the Obama administration isn’t going to abandon hydrocarbons amid its announced plans to achieve energy independence.
Petroleum refiner Valero recently outbid Archer Daniels Midland for the right to buy for $477 million, seven ethanol plants owned by bankrupt VeraSun, the second largest US ethanol producer. The acquisition would make Valero the first traditional refiner to move into ethanol production.
SynGest, a US firm, plans to build, at a cost of $80 million, a plant in Iowa that will produce anhydrous ammonia fertilizer from corn cobs. It’s projected that 150,000 tpy of corn cobs will produce 50,000 tpy of ammonia, enough to fertilize 500,000 acres of farmland. Construction is to start late 2010.
A recent study from the Renewable Fuels Association stated that expansion of US corn-based ethanol production to 15 billion gallons/year by 2015/16 should not require any further conversion of forest or grasslands use. It also stated that this increase could be met without any decline in corn, wheat, or soybean exports or stocks.
Year-to-year oil exploration in the US is down 38% while natural gas exploration is down 44%. Analysts suggest that the economic downturn has reduced activity and interest in offshore drilling rights. Crude oil pricing has sunk to ~$50/bbl from $147/bbl in July of 2008.
Diesel fuel prices, which averaged $3.79/gallon in 2008, are projected by the Energy Information Administration to average $2.28 in 2009 and $2.55 in 2010. This forecast is based on crude oil average price of $52/bbl.
The current recession is driving down gasoline demand and price; US consumption dropped nearly 7% in 2008 and an additional 2.2% drop is seen for this year. The ethanol industry has been affected adversely, with temporary closures and some bankruptcies. Major ethanol producer Archer Daniels Midland has estimated that 21% of US ethanol capacity has been idled. US drivers are unlikely to use enough gas next year to absorb the 13 billion gallons of ethanol that Congress has mandated at the present 10% ethanol gasoline addition rate. The ethanol industry has asked that the addition rate be raised to 15 or 20% per gallon of gasoline, but few engines can run at this higher rate without damaging engines, corroding systems, etc.
Truck and diesel engine makers’ work on selective catalytic reduction technology has convinced the EPA to abandon its hesitancy on that approach to emissions control. The system requires cooperation by the driver and widespread availability of “diesel exhaust fluid,” or liquid urea.
Union Pacific Railroad and Dow Chemical say that they are making progress in improving safety and security of chemicals shipped by rail. The program includes education of emergency responders nationwide, design and test of a safer hazmat tank car, and other actions.
The global economic slowdown is having an impact on ocean container shipping. It’s been estimated that global container traffic may drop 3% this year. For example, the port of Long Beach, CA container movements dropped 40% in February to a level not seen since 2004.
Tariffs on 89 US agricultural and manufactured products that this country exports to Mexico went into effect on March 19, as part of Mexico’s response to US Congressional action that cut the funding for a cross-border trucking pilot program. The tariffs impact $2.4 billion in trade and could cost US manufacturers and growers millions of dollars while straining relations with the country’s second largest trading partner. The suspended program which allowed 26 Mexican trucking companies to operate on US highways, was renewed for two more years in August before being canceled by a provision in the $410 billion spending bill passed by Congress. President Obama wants Congress to come up with a plan that would restore the program in some form. Some critics of the Congressional action have stated that it’s in violation of NAFTA.
On May 11, the cost of a first class postage stamp will increase $.02 to $.44. A postcard stamp is now 28¢up one cent. The first ounce of a large envelope is up a nickel to 88¢ and the first ounce of parcel post is $1.22, up five cents. The first ounce of first class mail to Canada is 75¢. The first ounce of first class mail to Mexico is 79¢. The first ounce of all other international first class mail is up 4¢ to 98¢.
It’s been estimated that the massive economic rescue plan will result in a federal deficit equal to 12.2% of the country’s GDP this year, and a post WW II high.
Major purchasing indices continued to rise from low points in March, indicating that the drop in materials demand may have bottomed out. The Institute of Supply Management’s monthly Purchasing Manager’s Index has stopped declining and has trended up for the past two months. The latest reading is 35.8 after an all-time low in December of 32.9. Some buyers are indicating that they have worked through their inventories and are getting closer to increasing buying plans.
In March, retail sales were down 1.1% from February and 9.4% below March 2008. Total sales for the January – March 2009 period were down 8.8% from a year earlier. Privately owned housing starts in March were 10.8% below the revised rate for February, and 48.43% below the revised March 2008 rate. Single family housing starts were the same as February at 358,000 which was a 2.1% increase over January.
New orders for manufactured durable goods in March, down for seven of the last eight months, decreased $1.3 billion, or .8% to $160.5 billion. This followed a 1.6% February increase.
Consumer Price Index decreased 0.1% in March after a 0.4% increase in February.
Interest rate: Prime at 3.25% as of 12/16/08.
Inflation: Down 0.4% in March on an annual basis, and the first decline since August 1955.
Unemployment: March 8.5%, with 9.5% forecast by year end, compared to peaks of 10.8% in 1982 and 25.2% in 1932.
Trade Deficit: For February 2009 the goods and services deficit decreased to $26.0 billion from an adjusted $36.2 billion in January. Imports decreased and exports increased during the period.
Crude Oil: Currently trading at ~$53/bbl with futures reported close to the same. US crude inventories are currently 13% above the five year average.
Industrial production decreased 1.5 % in March. For the first quarter, output fell at an annual rate of 20%. At 97.4% of its 2002 average, output in March fell to its lowest level since December 1998. Capacity utilization rate for total industry in March was 69.3%, a historical low.
GDP fell by 6.1% in the first quarter.
The US dollar trading at 99.0 yen. $1.34 = euro. The British pound sterling = $1.50.