A MARKET UPDATE for February 2008 / March 2008

Special Announcement: TCC now offers Dioctyl (Di- 2 Ethyl Hexyl) Phthalate shipping in Truck and Railcar from Kinder Morgan Terminal, Philadelphia, PA. For more information please contact Robb Roach at robb@thechemco.com or Tel: (401) 423- 3100.

TCC Will be attending the National Petrochemical and Refiner’s Association Meeting in San Antonio, TX March 29, 2008 through April 2, 2008. To schedule an appointment please e-mail Kathy Rushton at Kathy@thechemco.com

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: hit $100.00/ bbl. Most recent ~$99.50/bbl.

Natural Gas: Current spot prices average ~$/9.00/MMBtu; Futures contracts at ~$8.97/MMBtu.

Benzene: Benzene trading in January at $3.45/gallon, with Feb/March futures in the $3.50/gallon range. For up to the minute information please refer to BZSM Report on TCC Homepage.

Propylene: February US contracts were down $0.02/lb to $0.59/lb from January. Please refer to BZSM report on TCC homepage.

Orthoxylene: February contracts settled at $0.48/lb, a decrease of $0.025 from January.

Chemicals Markets

Methanol: The Methanex Non- Discounted Reference Price for March will decrease by $.20/ gal. to US$1.90/ gallon finally edging North America lower then the quarterly settlement in Europe. European 2nd quarter discussions will begin in the coming weeks and we expect a significant decrease. Methanex is reporting that they continue to have only two plants operational in Chile and not at full operating rates (60%). We expect prices to continue their downward trend as derivative demand is off with the economic slow down and seasonal demand will follow as we move toward warmer weather.

Urea: Urea prices were stable to eroding but firmed late last week. With the massive run up in ammonia pricing (Currently over $600 per ton) one would assume Urea will soon follow. It is very unusual to have ammonia prices higher then Urea on a per unit basis. Most are blaming the cold wet conditions across most of the country for the slower Urea demand. A break in this weather pattern will certainly get the farmers into the field and drive pricing. Urea barges are currently reported at US$370/ ton range fob.

Adipic Acid: A US$.05/ lb. price increase has been announced to take effect on April Fool’s Day (April 1, 2008). With Benzene and especially Ammonia advancing this is no surprise. Supply and Demand will likely affect this increase as China’s AA demand has been very slow to materialize and the Polyurethane demand usually ends in May. The threat of an increase should prompt buying activity but inventories in China are high.

Ammonium Nitrate: AN prices will be tied to an ammonia surcharge escalator. The massive cost adjustment in AN production due to ammonia pricing has forced manufacturers to add the surcharge. At current Ammonia prices he surcharge could amount to thousands of dollars.

Ammonia: Prices have advanced and continue their upward momentum most recently trading in excess of $600/ ton. Since Mid- December Ammonia prices have almost doubled. Outages in Trinidad, higher ocean freight and surging prices in Eastern Europe and Arab regions are noted as reasons for the advance. Many feel that we will see prices decline but most agree it will not happen in March.

Nitric Acid: Nitric Acid prices will be tied to an ammonia surcharge escalator. The current ammonia prices will make this surcharge substantial. Until ammonia prices bounce back to around the $400 per ton level the surcharge will apply.

Plasticizers and Plasticizer Alcohols: Although plasticizer demand has been seasonally flat there is renewed interest, especially in Asia as oil prices top the $100/ barrel mark. PZ Alcohols remain balanced with some regional tightness as there are outages in all of the major production geographies. Pricing on both plasticizers and plasticizer alcohols should continue to move up as energy feedstocks demand higher pricing.

TCC Plasticizers available:

TOTM
DOA
ChemFlexx 206 Linear Phthalate Plasticizer
DINP
Brominated DOP
8 10 Trimellitate
DOP
DUP

Epoxidized Soybean Oil: Fill your inventories! An $.08/ lb. increase took effect on Jan 1, 2008. Feedstock pricing continues to advance. I expect new price increase announcements to take effect in April.

Dicyandiamide: Limited availability from China as higher energy prices, increased ocean freight and the end to Government Price Support takes effect. Anti-dumping regulations on dicyandiamide from China take hold in Europe.

Dicyclopentadiene: Stable Market- feedstock pressures continue.

Fumaric Acid: Prices increase and availability is limited in China due to the lack of Gov’t tax rebates, local demand and increased energy costs. China remains the most competitive source globally.

Isophthalic Acid: IPA remains tight but there seems to be some relief. Imported material still available at a 50+% premium.

Maleic Anhydride: Although demand continues to be slow feedstock pressures remain. Prices are expected to increase both on domestic molten and imported briquettes.

Styrene monomer: Prices advance and availability becomes more limited. Announcements of $.08- $.10/ lb. were made for March but have yet to settle.

Phthalic Anhydride: Demand is seasonally slow. Although Orthoxylene declined in February an increase was announced by at least one major to recoup energy costs. With increasing feedstock costs buying interest will likely return.

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

Evonik Industries AG (former Degussa) is expanding its oxo alcohol capacity at their Marl, Germany site by 60,000MT per year. It was also announced that 2-propyl heptanol (2-PH) will be produced there starting in 2009.

Solutia has sued the banks that failed to arrange US$2 billion in exit financing, a critical step towards emerging from bankruptcy. The banks have stated that a clause in the agreement allows them to drop the funding if credit markets change adversely.

Libya’s National Oil Corp. (NOC) and Norwegian fertilizer producer Yara recently signed an agreement to expand NOC’s state owned ammonia and urea plants. Yara will market output.

ICIS Pricing, the global oil and chemical market price service, and Chemease, a Chinese commodity information company, have combined to launch weekly English language pricing reports covering the Chinese market.

The UN’s Food and Agriculture Organization has taken issue with a recent statement by a UN Special Rapporteur that biofuels are a crime against humanity. It was stated that the opportunity for biofuel producers to purchase food with cash made from the sale of their crops was not discussed.

SABIC (Saudi Arabia) and Sinopec (China) have signed an agreement for a 1,000,000 MT/year ethylene derivatives project in eastern China. It will produce polyethylene and ethylene glycol.

Signs of a biofuels backlash have been appearing. Because of the diversion of corn into ethanol production, it has been stated that food prices are on the rise. About 25% of the 2007 US corn crop went into ethanol production. Water supply, particularly in the western US, is seen as an increasingly critical issue.

In another opinion, a Brazilian spokesman recently said that biofuels and food production can be developed in harmony within an integrated system.

Many German biodiesel producers are facing bankruptcy following a January 1 tax increase. The amount of increase was from 2 euro cents to 15 cents per liter and German demand for 100% biodiesel has dropped to near zero.

OSHA and the Process Safety Alliance have agreed to work together in order to provide process safety information, guidance, and access to training resources. Organizations represented by the Alliance are the American Chemical Society; American Chemistry Council; API; NPRA; SOCMA; AICHE; Chlorine Institute; EPA.

With pressure from environmental groups, which claim PVC is toxic and hazardous to both human health and the environment, US retailers such as Wal-Mart, Sears, and Target are planning to phase out the use of PVC in their private label merchandise and packaging. In another threat to PVC, companies such as Microsoft, Dell, HP and others have stated that they intend to phase it out in their products.

Bisphenol-A, a primary feedstock in polycarbonate and epoxies, has become a target of environmentalist groups. A recent “toxic baby bottle” report has been refuted by the American Chemistry Council as having no relevant information regarding the material. Polycarbonate baby bottles have a long record of safety, based on a number of evaluations.

According to the American Chemistry Council, a study to be published in March in the Journal of the American Academy of Pediatrics attempts to relate the use of infant care products such as lotions or powders with claims of increased evidence of the presence of phthalates. It was noted by the ACC that the study seems to point towards sources of infant exposure that contain no phthalates.

China has been hit with the worst snow storms in 50 years. The government has said that this bad weather has resulted in economic loss of US$3 billion. Combined with lower growth from the US economic slowdown, this could result in a lower Chinese GDP.

China’s imports of crude oil and coal increased 12% and 34% respectively in 2007 over a year earlier.

Venezuela’s state-owned oil company, PDVSA, has stopped oil deliveries to Exxon Mobil. PDVSA said it was reacting to “hostile industrial actions” by Exxon, the freezing of Venezuelan accounts to the value of US$12 billion. However, the only deliveries affected are ~80,000 bbls per day destined for Exxon. Additional deliveries of 60,000 bbls/day that go to a refinery operated jointly by Exxon and PDVSA are not affected. About 75% of Venezuelan exports go to the US, which represents 8% of American imports.
Serbia’s government has agreed to sell 51% of its national oil monopoly to Russian energy giant Gazprom. Analysts are concerned that the deal might be politically motivated.

In February, for the second time in a year, Russian oil giant Lukoil has stopped deliveries to Germany via the “Druschba” (friendship) pipeline. A company spokesman said that they “do not agree with the price,” and deliveries have been halted until further notice.

BP management has announced that its workforce will be reduced from 96,000 to 91,000 by mid-2009. The planned spin-off of the filling station business in North America will result in the loss of additional 9,500 jobs.

The ACC, National Association of Manufacturers (NAM) and the National Paint and Coatings Association (NPCA) have combined forces to fight a recent lower court ruling in Rhode Island having to do with lead paint. The ruling finds paint manufacturers liable for the remediation/removal of lead based paints in structures throughout the state. This could cost close to $4 billion. The ruling ignores the fact that the product was produced prior to any bans on its use.

In a recent survey of members of Synthetic Organic Chemicals Manufacturers Association (SOCMA), it was reported that the quality of chemicals sourced from emerging markets is declining.

US postal rates will increase starting May 12. First class stamps will rise to $0.42, while other services such as advertising mail, periodicals, packages, etc. will also increase.

A recently leaked UN report shows that international shipping accounts for three times the emissions of carbon dioxide than originally thought. Including shipping emissions within climate change laws could result in significant cost increases.

The Long Beach (CA) Harbor Commission and the Port of Long Beach have agreed to begin charging a $35 fee on containers brought in or shipped out through the port. The funds are to be used for the purchase of diesel fuel trucks and for pollution reduction.

The Economy

The International Monetary Fund (IMF) World Economic Outlook recently stated that the world economy will slow to a growth rate of 4.1% in 2008, down from a forecast of 4.4% made last October.

THE DOW JONES INDUSTRIAL AVERAGE IS ABOVE 12,600 AFTER A DISASTROUS PERIOD IN JANUARY. THE FEDERAL GOVERNMENT WILL BE ISSUING TAX “REBATES” IN ORDER TO STIMULATE THE ECONOMY.

Privately owned housing starts in January were.8% above December. On a year to year basis, single family housing starts declined 27.9% in January.

New orders for durable goods in January decreased $12.0 billion, or 5.3%, to $212.8 billion. This followed two consecutive monthly increases. Excluding transportation, new orders decreased 1.6%. Excluding defense, new orders increased 4.7%.

Consumer Price Index increased 0.5% in January. The January level was 4.3% higher than January 2007.

Interest rates: Prime at 6.0% as of 1/30/08; possible further reduction mid-year.

Inflation: January 4+ %; lower to ~3.0% in 2008.

Unemployment: February 5.0%.

Trade Deficit: Decreased to $711.6 billion in 2007 from $758.5 billion in 2006. For December, the goods and services deficit decreased to $58.8 billion from $63.1 billion in November.

Crude Oil: Slowing in second quarter; average $85/bbl predicted for 2008.

Industrial production increased 0.1% in January. Total industrial production in December was 2.2% above its year-earlier level. Capacity utilization rate for total industry remained 81.5%, slightly above its year earlier level, and 0.5% above its 1972 – 2007 average.

GDP close to 2% for 2008.

The US dollar trading at 106.38 yen. $1.513 = euro. The British pound sterling = $1.992

Leave a Reply

Your email address will not be published. Required fields are marked *