A MARKET UPDATE for AUGUST / September, 2009

Events:

TCC will be attending the EPCA October 3-7, 2009 at the InterContinental Hotel Berlin, Germany. To Schedule time with a TCC Representative please contact Robb Roach at robb@thechemco.com

New Product:

TCC is proud to Introduce our New Non- Phthalate Plasticizers ChemFlexx NP 500 and ChemFlexx NP600. ChemFlexx NP 500 is our non-phthalate replacement for general purpose plasticizers like DOP and DINP where the NP 600 is our non-phthalate replacement for DIDP. Both products are available immediately in Bulk, Drums and Totes. Technical data and samples are also available upon request.

NatureFlexx 509 Phthalate Free General Purpose Plasticizer! This high molecular weight plasticizer is an excellent, phthalate free replacement for general purpose phthalate plasticizers like DINP, DOP, DEHP, DOTP, Etc.

New Product Lines:

TCC now offers Chlorinated Paraffin Oil, 85% Phosphoric Acid, Sulfonic Acids, Phenolic Resins and Specialty Chemicals to the Americas.

For more information please contact Robb Roach at robb@thechemco.com or Tel: (401) 423- 3100.

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 chemcobob@comcast.net

Critical Raw Materials Markets

Oil: Current spot prices are in the $66.00- $67.00/ bbl range.

Natural Gas: Current pricing in the $4.88/MMBtu range. September has seen nothing but upward momentum on price.

Benzene: Benzene contract pricing fell worldwide in September. The largest drop was in the U.S. where contracts settled at US$2.79/ gallon from $3.85/ gallon. Current spot pricing is in the $2.80- $2.85/ gallon range.

Propylene: September US contract prices were increased $.12/lb bringing chemical grade and polymer grade to $.555/lb and $.57/lb respectively.

Orthoxylene: September contracts settled at $0.40/lb. This was either a rollover or a $.01/lb reduction from August.

Chemicals Markets

Methanol:The Methanex Non-Discounted Reference Price for October increased by US$.11/ gallon to US$.95/gallon. Spot barge offers are currently in the $.82- $.92/ gallon range and demand is not nearly as strong as it has been. Inventories remain tight as producers and marketers cut back consumers in light of limited availability on the spot market and unexpected outages. We expect prices to continue to firm over the next few months.

Notes:
Atlas Methanol in Trinidad went down for about a week in what has been described as a “planned outage.” It is currently back up and running.

Outages at the Petrona’s plants (Malaysia) and the Ar Razi (Iran) plants continue to keep global Methanol availability limited.

Chinese methanol producers (coal based and natural gas based) continue to gain confidence as prices increase and dumping investigations continue.

Current Contract Methanol prices in USD$ per gallon globally are approximately US $.84/ gallon, Asia $.84/ gallon, and Europe $.705/ gallon. Europe is a quarterly price and will change on Oct. 1st.

Uncertainty still surrounds Hugo Chavez’s move to put Chemical producing entities under state control. Many consumers dependent on producers operating here are understandably nervous.

Chinese demand continues to be ravenous. Prices have reached the point where coal plants will and have started production. China’s Ministry of Commerce has announced an “anti- dumping” investigation into methanol produced in Saudi Arabia, Malaysia, Indonesia and New Zealand. The effects of this will be forthcoming.

China has also set a national standard for M85 Fuel (85% Methanol and 15% Gasoline) which will be implemented on December 1, 2009. This will obviously have a tremendous affect on demand and is an important development in what many consider the future of methanol, its use as a fuel.

Urea: Urea prices are in the US$265- $275/ ton range and quiet.

Notes:
Ammonia pricing is escalating which could prompt upward momentum in Urea.

Adipic Acid: Adipic Acid remains very tight especially in Europe and North America where prices continue to move up. Both geographies remain tight due to a combination of limited availability and a notable increase in demand. Prices have remained inflated despite lower benzene prices. Most North American and European consumers are not getting the volumes they need and therefore spot offers in excess of $1.20/ lb. are noted.

Melamine: Melamine pricing is considered stable. Demand remains weak. China remains the low cost supplier worldwide but not all consumers can use what is considered lower quality product.

Phenolic Resins: Prices have firmed with increased Phenol and Formaldehyde pricing. A limited number of players has resulted in few options for consumers and many have opted to seek toll manufacturing opportunities.

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 reported at US$325/ton (NOLA Barge). Higher numbers are seen in Tampa ($330- $350/ met ton).

Nitric Acid: Nitric Acid pricing is stable at the moment. Demand is relatively weak.

Plasticizers and Plasticizer Alcohols:

Plasticizer demand is improving in most geographies. Raw materials continue escalating (propylene/ orthoxylene) driving additional price increase announcements. There were two price increase announcements in September (the 1st and the 15th) for varying amounts and to make matters more confusing the success or failure of these increases varies depending on who you talk to. State level phthalate restrictions/ bans are having a more rapid and greater affect on phthalate plasticizers, especially DOP, in the USA.

TCC Plasticizers available:
Phthalate:
DINP (DiIsononyl Phthalate)
“ChemFlexx 206” Linear Phthalate Plasticizer
“ChemFlexx 208” Low Temp Linear Phthalate Plasticizer
DOP (DiOctyl Phthalate)
DUP (DiUndecyl Phthalate)
DMP (DiMethyl Phthalate)
Brominated DOP
9 11 Phthalate
Non- Phthalate:
“ChemFlexx NP 500” Non- Phthalate Replacement for General Purpose Plasticizers
“ChemFlexx NP 600” Non- Phthalate Replacement for DIDP
“NatureFlexx 509” Phthalate Free General Purpose
Epoxidized Soybean Oil
TOTM (TriOtcyl Trimellitate)
DOA (DiOctyl Adipate)
8 10 Trimellitate

Epoxidized Soybean Oil: Pricing is level and demand is considered good.

Dicyandiamide: Prices are moving up quickly on demand and increased raw material costs. Producers are reporting tight inventories and higher prices moving forward.

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: Fumaric Acid prices are moving up. Global values have increased as demand improved and raw material costs move up. China remains the low cost option for consumers.

Malic Acid: Global values have improved slightly with demand and increased raw material cost. China remains the low cost option for consumers.

Isophthalic Acid: Prices have increased in line with underlying raw material costs. Demand has also improved in most major markets.

Maleic Anhydride: Demand has improved slightly and prices are moving up again for October along with butane. September 1st saw a $.03/ lb. increase and it looks like another $.04/ lb. is on tap for October 1st. Underlying butane costs are the driver as supply isn’t an issue.

Styrene monomer: Benzene values have moved lower and so has SM pricing. Dow announced that they will close the styrene monomer and ethylbenzene unit in Freeport, TX by the end of this year.

Phthalic Anhydride: Orthoxylene rolled or decreased to US$.40/ lb. in September hence phthalic anhydride pricing will remain the same or move lower by a penny in October. Demand is weak and the peak demand season affecting orthoxylene has waned- we expect price erosion in the coming months. Imports are still available at a slight discount.

Mono Ethylene Glycol: It appears that prices will roll going into October as buying interest disappeared in China probably due to the national holiday. Based on a “no change” net contracts price will be around US$.34/ lb. fob gulf.

Diethylene Glycol/ Triethylene Glycol: Producers announced increases from US$.03- $.04/ lb. on DEG effective October 1st this after a $.06/ $.10/ lb. increase for September. Pricing is in the $.42- $.49/ lb. fob gulf range based on this increase. TEG prices improved in September on better demand. Spetember announcements ranged from $.05- $.09/ lb.. TEG Gulf pricing is in the $.70- $.74/ lb. range.

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

LyondellBasell Industries filed its plan for reorganization on September 11, a key move toward emerging from Chapter 11 bankruptcy by year-end. If a bankruptcy judge approves the plan, the company will remain in the same industries and have most of its key management in Houston. But it will be incorporated in the Netherlands rather than Luxembourg. As previously announced, the number of employees will be reduced to approximately 14,300 by the end of next year.

On September 11, Dow Chemical Company announced that it will close styrene monomer and ethylbenzene production units at its Freeport, TX site by the end of the year. The closures are said to be part of a broad restructuring plan announced earlier this year. Dow has secured a long term styrene supply in order to meet the demand of its derivative businesses.

Dow Kokam has been awarded a $161 million DOE grant for the development of a new generation of high-power battery technology for the automotive industry. Construction of the 800,000 square foot facility in Midland, MI is expected to start in early October.

Dow has sold its interest in Dutch refinery Total Raffinaderij to Paris-based Total for about $800 million. The deal is $75 million more than first announced due to adjustment in inventory values.

Specialty chemicals manufacturer Chemtura has said that it’s on track to exit bankruptcy by March 2010.

Air Products and Chemicals bought the Corpus Christi, TX hydrogen facility being built by MarkWest Energy Partners for an undisclosed amount.

Ashland recently sold Drew Marine to J. F. Lehman for $120 million. Drew provides chemicals, test equipment, water treatment and other products and services to the marine industry.

Terra Industries says its board of directors has rejected the latest takeover bid from CF Industries. The Terra board said that the offer substantially undervalues Terra.

The BPA battle still goes on. An attempt to ban the use of Bisphenol A in baby bottles, cups, and infant formula containers in California has failed. The bill will be reconsidered in 2010. The FDA ruled in August 2008 that BPA was safe for all use, but is currently reviewing and will decide by November 30 whether it needs to change its previous stance. Eleven safety agencies around the world have said that BPA is safe for use in food contact applications.

A petrochemical project being planned by Dow Chemical and Saudi Arabian Saudi Aramco would be one of the world’s largest chemical and plastics sites and would produce eight million tons of products per year. The project is known as Ras Tanura Integrated Refining and Petrochemicals and is valued at more than $20 billion. It will include 35 process units.

RusVinyl, a joint venture of Silbur, Solvay, and BASF has received approval to move forward with the construction of its new PVC plant in the Nizhny Novgorod region. Capacity is expected to be 330,000 MT per year. Investment is estimated at €800 million.

Russian energy company Roneft and China National Petroleum Corporation (CNPC) have completed a feasibility study on the construction of a petrochemical plant in China. It envisions a facility with annual capacity of 13 million MT.

The US Chamber of Commerce says it wants the EPA to hold a rare public hearing to put the science of climate change on trial. The Chamber says that it will take its request to federal court if the EPA turns it down. The agency called the hearing a waste of time and called the threatened lawsuit frivolous.

The EPA has said that it will reconsider controversial Bush-era environmental regulations that placed new pollution limits on smog. Environmentalists and a coalition of states have criticized the regulations as being too weak. Business groups say they are too stringent and that compliance could be costly. The agency said it would begin a new rulemaking process by December in order to reconsider the smog rules.

A group of 28 members of the House of Representatives demanded that President Obama support trade protections for US manufacturers in any “cap-and-trade” program for greenhouse gases.

The chief economist for the American Chemistry Council recently stated that the downstream impact of cap-and-trade would not only raise costs for energy and chemicals, but also encourage the move of chemicals manufacturing to lower cost regions, which might also have less strict emissions standards. This in turn could increase emissions globally.

Japan’s economy appears to be rapidly recovering with a reported quadrupling of the trade surplus from a year earlier. The surplus totaled $4.05 billion.

India’s economic expansion slowed to 6.1% for the fiscal first quarter as manufacturing activity remained sluggish despite low interest rates and stimulus spending. The country is also struggling with extended drought.

The Chinese government recently accused Washington of “rampant protectionism” for imposing heavy duties of 35% on imported Chinese tires and took steps toward retaliatory action by imposing tariffs on US exports of automotive products and chicken meat. US trade union pressure is seen as motivation for the move.

Venezuela plans to develop a nuclear energy program with Russia but it has been stated that there is no desire to build an atomic bomb. President Hugo Chavez said that the country’s oil and gas reserves won’t last forever and the government will seek alternative energy sources.

The US Department of Transportation’s Bureau of Transportation Statistics recently reported that its Freight Transportation Services Index rose 1.6% from June to July and was the first monthly increase since February.

Earlier this year, Mexico instituted tariffs against a variety of US exports after the US Congress cut the funding for its cross-border trucking pilot program, which allowed a certain number of Mexican truckers access to US highways. This has resulted in 25,000 lost American jobs,$2.6 billion in lost exports, and $2.2 billion in higher costs for US business and consumers according to a US Chamber of Commerce study released on September 15. In a differing opinion, the Teamsters Union placed responsibility for the job losses elsewhere, blamed the Mexican government for imposing excessive tariffs, and said that Mexican truckers continue to pose a safety and environmental threat.

The Economy

The Conference Board’s index of leading economic indicators was unchanged in August following increases in June and July. The Conference Board noted that the six month growth rate of the LEI continues to accelerate.

In August, retail sales increased 2.7% from July and were 5.3% below August 2008. Total sales for the June – August 2009 period were down 7.6% from a year earlier. Gasoline station sales were down 26.7% from August 2008.

Privately owned housing starts in August were 1.5% above the revised rate for July of 589,000 and 29.6% below the August 2008 rate of 849,000. Single family housing starts in August 2009 were at a rate of 479,000 or 3.0% below the revised July figure of 494,000.

New orders for manufactured durable goods in July increased $7.8 billion or 4.9% to $168.4 billion. This was the third increase in the last four months. July unfilled orders for manufactured durable goods decreased $0.4 billion or 0.1% to $740.2 billion. This has declined for ten consecutive months, following a 0.8% June decrease.

Consumer Price Index rose 0.4% in August. The index has decreased 1.5% over the last 12 months, not including seasonal adjustments. The increase was due largely to gasoline price increase of 9.1%. Despite the August increase, the gasoline index has fallen 30.0% over the last twelve months.

Interest rate: Prime at 3.25% as of 12/16/08 with possible 0.5% increase in the fourth quarter.

Inflation: Down 1.5% in August on an annual basis, with a modest increase expected in 2010 based on a recovering economy.

Unemployment: August 9.7%. A 10% rate or slightly higher is expected in early 2010.

Trade Deficit: For July 2009 the goods and services deficit increased to $32.0 billion from an adjusted $27.5 billion in June as imports increased more than exports. Exports and imports both increased to $127.6 billion and $159.6 billion respectively.

Crude Oil: Currently trading at ~$72/bbl, with forecasts approaching $80. OPEC target levels are $70 – 75/bbl.

BP has made a large (4 – 6 billion bbls) find at the Tiber exploratory well, which is in the Gulf of Mexico about 250 miles southeast of Houston. Further study is planned to assess the discovery, which lies at a depth of about 35,000 feet.

Natural Gas Spot prices and futures both increased in the first half of September amid some indications of improvements in the economy. Supplies continue to be seen as more than adequate for short-term demand and inventory is higher than the five year average.

Industrial production increased 0.8 % in August, following a revised increase of 1.0% in July. For the second quarter as a whole, output fell at an annual rate of 11.6%, compared to 19.1% in the first quarter. Industrial production in August was 10.7% below a year earlier. Capacity utilization rate for total industry in August was 69.6%, up from 68.5% in July, a level 11.3% below the 1972 – 2008 average.

Revised estimates issued by the Bureau of Economic Analysis on August 27 show Gross Domestic Product drop of 1.0% in the second quarter of 2009. In the first quarter, real GDP decreased 6.4%. A modest increase is expected at year-end.

The US dollar trading at 91.3 yen. $1.47 = euro. The British pound sterling = $1.63.

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