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Critical Raw Materials Markets
Oil Price: ~$92.00/bbl.
Natural Gas: Current spot prices average ~$/6.10/MMBtu; November contracts settled at ~$6.972/MMBtu.
Benzene: US Contract price up $.41/ gallon to $3.90/ gallon. Only one producer has announced as of press time.
Propylene: US contracts for October were up $0.03/lb from September at $0.5275/lb
Orthoxylene: October contracts reduced $0.01 to $0.445/lb.
Methanol: Inventories remain critically low as producers announce another round of increases for November. Thinly traded spot is reported around $2.20- $2.30/ gallon with forward spot numbers hitting a record of $2.45- $2.50/ gallon. Methanex announced MNDRP will increase $.30/ gallon in November to US$2.00/ gallon while Southern Chemical’s pricing has increased $.40/ gallon to US$2.05/ gallon. Truck and rail prices are seen well in excess of this price as spot buyers shop to find un available and expensive molecules. No new information from Methanex on their Chilean gas situation, we expect new information on the situation in the coming weeks.
Urea: The advancing prices of late summer seem to have quieted for October but held firm. Spot pricing is seen in the mid $350’s per ton fob Gulf. Producers reporting robust earnings.
Adipic Acid: US prices remain flat as Asian prices decline sharply due to a lack of demand and tremendous imports. For the first time in 2+ years pricing is Asia is about par with U.S. US Pricing seen at $.88- $.92/ lb. for large consumers.
Ammonium Nitrate/Ammonia/Nitric Acid:
Ammonium Nitrate prices are stable as the House passes Ammonium Nitrate Bill:
The House of Representatives passed a bill today restricting the sale of ammonium nitrate. H.R. 1680, the “Secure Handling of Ammonium Nitrate Act of 2007”. The bill, sponsored by Congressman Thompson, creates a nationwide standard for regulating the sale of ammonium nitrate based fertilizers nationwide that could be used in terrorist acts, without unduly burdening the agricultural sector’s access to ammonium nitrate fertilizer for farming and other legitimate agricultural purposes.
Ammonia prices are up slightly From the $270/ ton range to $300/ ton. There are indications that prices will continue to advance.
Nitric Acid: The Nitric Acid situation is trending toward improvement with some regional problems noted. There is talk of more Nitric Acid availability in late 2007 and 2008 vs. downstream nitrogen production due to a switch from corn to wheat crop in the mid-west. Wheat uses far less nitrogen fertilization then corn.
Plasticizers: Demand is good as tightness in plasticizers and plasticizer alcohols continues but slight improvement is noted both domestically and from offshore. A new round of increases has been announced for Nov. this due to constant pressures on feedstocks. Gov. Schwarzenegger signs California “Toy Ban Bill.” (See Chemical Industry News Below)
TCC Plasticizers available:
ChemFlexx 206 Phthalate Plasticizer
DINP — Limited availability, with worldwide tight supply.
8 10 Trimellitate
Epoxidized Soybean Oil: TCC offers ESO to North American consumers at competitive prices. Feedstock pressures continue.
Dicyandiamide: $.10+/ lb. price increase announced as higher energy prices, increased ocean freight and the end to Government Price Support take effect in China as well as a 5000 met ton production scale down by a major Chinese producer.
Dicyclopentadiene: Stable Market- feedstock pressures continue.
Fumaric Acid: Prices increase in China due to the lack of Gov’t tax rebates and increased energy costs. China remains the most competitive source globally.
Isophthalic Acid: PIA remains critically tight but there seems to be a light at the end of the tunnel. November may see some improved production performance and better availabiltiy from the two domestic producers. Imported material still available at a 50+% premium.
Maleic Anhydride: Stable market as UPR is sluggish and the housing slump is affecting demand.
Styrene monomer: Prices seen in the high 60’s per lb. Prices expected to increase in November as Benzene numbers settle higher.
Phthalic Anhydride: Sluggish demand is noted as Ortho settles down $.01/ lb in October. Pricing will follow ortho in November (down $.01/ lb.) but future pricing is seen as stable to increasing as Lyondell moves toward Idling their Orthoxylene production sooner then anticipated (Q1 of 2008).
Chemical Industry News
California governor Schwarzenegger signed legislation banning the use of several phthalates in toys made for young children. This was done over objections that there was no scientific evidence to support the bill. Products affected are DEHP, DBP, DINP, DIDP, DnOP in concentrations exceeding 0.1%. The law goes into effect January 1, 2009. It also says: “manufacturers shall use the least toxic alternative when replacing phthalates in accordance with this chapter.”
The European Commission has initiated proceedings possibly leading to legal action against Germany and eleven other EU countries. They have failed to draw up emergency plans for the areas surrounding chemical plants and other locations where hazardous materials are handled.
In 2008 the European Commission might drop anti-dumping charges on Ukraine’s urea and ammonium nitrate. If this occurs, Ukrainian producers will save about 10 euros per MT of urea.
The American Chemistry Council and the National Association of Manufacturers have expressed concern about two recent court decisions resulting in very large punitive damage awards. They are asking the Supreme Court to provide guidance to lower courts on what constitutes reasonable punitive awards.
NOVA’s leadership stated that its purchase of Sterling’s 1.7billion lbs/year of styrene production was with the intent of eventually shutting it down in order to improve industry operating rates and margins.
DSM has announced that it will sell off its melamine, urea, fertilizers, specialty products and maleic anhydride operations, with total sales of ~$2billions. The company hopes to complete these actions by 2010. Sabic is considered a possible purchaser of the melamine and urea business.
Metafrax (Russia) plans to build a large fertilizers plant, worth $150 – 300 millions, which will produce urea and ammonia. The urea unit will have a capacity of ~600,000MT/year.
Saskferco, a Canadian fertilizer producer announced that it will expand its ammonia and urea production to 2060 and 3250 tonnes/day respectively at its Belle Plaine complex.
Solutia recently announced that it will file a reorganization plan that will enable the company to emerge from bankruptcy by the end of the year.
PPG is selling its automotive glass business to Platinum Equity of Beverly Hills, CA for ~$500millions. It was stated that the move was part of PPG’s increasing focus on the coatings industry and away from the automotive market.
Sodium chlorate prices are expected to continue to increase in 2008, driven by tight supplies and a growing demand for pulp bleaching chemicals. Higher energy costs and the weak dollar have also contributed.
Unisys Corp. has signed a five-year contract with Ciba Specialty Chemicals to provide global IT services to 12,000 Ciba employees in Europe, the Americas, and Asia.
The US is expected to see natural gas inventories at near-record highs, or even to exceed the record by the start of winter. A surplus of gas in storage from last year’s mild winter, little or no production loss caused by Gulf Coast hurricanes, and increased imports have created this scenario. Experts do not predict any dramatic price reductions in the short term as the market generally waits until later in the winter to evaluate demand.
High corn prices and low ethanol prices have led several US energy producers to delay construction of ethanol facilities in Minnesota, Colorado, North Dakota, and Indiana.
A recent study stated that growing corn as feedstock for ethanol production generates up to 50% more greenhouse gases than the fossil fuels being replaced. The “food vs fuel” debate increases as well.
Akzo Nobel has delayed its acquisition of ICI until January.
BASF has increased ethylene oxide production capacity at its Ludwigshafen, Germany and Antwerp, Belgium sites.
Plastics and cellular rubber are becoming important alternatives to metal, paper, and glass particularly in the automotive and aircraft industries. Worldwide consumption of these materials is expected to be 255 million MT/year by 2010.
Last year, companies around the world increased investments in R&D by 10%. Pfizer was reported as the leader among R&D investors at 5.8 billion euros.
Chinese inflation is rising, made worse by the US interest rate cut.
The National Infrastructure Advisory Council stated in a preliminary report that the chemical industry and 16 other business sectors are not prepared to cope with the growing potential for insider terrorist threats.
FedEx Express announced that it would raise its 2008 shipping rates by 4.9% on average, after accounting for a reduction in its fuel surcharge. Officials said that the company will actually raise its rates by 6.9% but would offset it with a 2% surcharge reduction. The new rates are expected to be effective January 7, 2008.
The House of Representatives recently passed a railroad safety bill. The new Federal Railroad Safety Act requires more railroad inspectors, adopts higher penalties for infractions, and limits working hours.
THE DOW JONES INDUSTRIAL AVERAGE CONTINUES ABOVE THE 1300 MARK.
Sales of new single-family homes fell 10.2% in September, a 14 year low. On a year-to-year basis, sales are down 30.8%, with the Northeast as an exception which saw a 45% increase. Permits for new housing were down 7.3% from the previous month.
New orders for durable goods decreased $3.8 billion, or 1.7%, to $214.5 billion in September. This was the second consecutive monthly decrease. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 0.7%.
Consumer Price Index increased 0.3% in September. The September level was 2.1% higher than September 2006.
Interest rates: Prime at 7.75%.
Inflation: Currently 2.7%; lower 2008.
Unemployment: Continued 4.6% in 2007.
Trade Deficit: Decreased to $57.6 billions in August from $59.0 billions in July.
Crude Oil: Some analysts predict continued high prices with possible spike to $95, ending the year at ~$80.
Industrial production for September rose 0.1%, and was 1.1% above its year-earlier level.
Economists predict average 3% GDP growth, slowing in Q4, close to 2% for 2008.
US consumer confidence fell in October to the lowest level in 17 months according to the University of Michigan’s latest consumer sentiment index.
The US dollar trading at 114.01 yen. $1.439 = euro. The British pound sterling = $2.051