TCC will be attending the International Petrochemical Conference (NPRA) March 29th- 31st in San Antonio, Texas. We welcome the opportunity to meet with you! To schedule a meeting at the TCC conference room or another location please contact Ms. Kathy Rushton at Kathy@thechemco.com or call (401) 360-2800.

TCC now offers Adipic Acid, Citrate Esters, 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 mid-$48.00/ bbl range. Futures are in the same area or lower. Check thechemco.com for up to the minute info.

Natural Gas: Currently trading at ~$3.90/MMBtu.

Benzene: February U.S. Benzene contract pricing moved down $.06/ gallon to US$1.29/ gallon.

Propylene: February prices were settled at an increase of $.06/lb to $.265/ lb. for chemical grade and $.28/lb. for polymer grade. March has almost settled with most agreeing to a $.01/ lb. increase. This will take chemical grade to $.275/ lb. and polymer grade to $.29/ lb.

Orthoxylene: March contracts settled at $0.335/lb., down $0.015/lb from February.

Chemicals Markets

Methanol: The Methanex Non-Discounted Reference Price for March will move down $.05/ gallon to US$.65/gallon. Spot barge offers are in the upper $.30’s to low $.40’s per gallon with little interest. 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 $3.8/ MMBTU) cash costs per gallon of Methanol is approx $.5/ gallon. Downstream demand is still slow and seasonal demand is slowing.

Urea: Urea prices remain in excess of $300 per ton but barely. The last reported prices at NOLA were in the $305- $307/ ton range and stable. Buyers were seeking higher pricing while offers were coming in below the a.m. price range.

Adipic Acid: Adipic Acid prices have stabilized with the major raw materials ammonia and benzene advancing in February. Rationalization has begun, and in Europe the Invista Wilton, UK AA plant has shut down. Further rationalization is expected and many feel that one of the two producers in North America will be next. Exports from Europe, Korea and the USA to China have fallen dramatically as the new Chinese producers gain a foothold on their market yet one NA producer continues to send large volumes to Asia at very low pricing. NA pricing seen in the $1250- $1350 range.

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: Very little business is being transacted but ammonia prices have moved up in Tampa and NOLA alike. Current U.S. Gulf NOLA barge pricing is US$275/ton (NOLA Barge). Demand continues to be limited despite the fact that we are in the highest demand season.

Nitric Acid: Nitric Acid pricing has softened on lack of demand and the depressed ammonia price.

Plasticizers and Plasticizer Alcohols:
Plasticizer global operating rates remain at reduced levels but demand has improved somewhat over a dismal 4th quarter especially in Asia. Price erosion continued in February in the America’s and Europe but Asia pricing has strengthened. Demand on PZ alcohols is improving in Asia yet price erosion continues in the America’s and Europe.

TCC Plasticizers available:
8 10 Trimellitate
Brominated DOP
ChemFlexx 206 Linear Phthalate Plasticizer
Chemflexx 208 Low Temp Linear Phthalate Plasticizer
Citrate Esters
Epoxidized Soybean Oil

Epoxidized Soybean Oil: Pricing has eroded on lower feedstock costs. 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 in decline with underlying crude values. Also the Polyester Resin market continues to be extremely slow.

Fumaric Acid: Global values are eroding as inventories build. Offshore producers are eager to participate in North American markets as demand weakens.

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 extremely slow due to the housing slump and tied to this, lackluster demand in UPR. Prices continue to erode yet butane costs have moved higher. Huntsman expects to bring up their new MA plant at the end of Q1 2009.

Styrene monomer: Benzene values have moved slightly lower but spot demand has picked up along with price. Current spot pricing is approx. $.35/ lb. Domestic demand from all sectors is poor to extremely poor and pricing remains at levels not seen in almost 10 years.

Phthalic Anhydride: Demand is poor globally and PA pricing has turned around from its upward trend moving down slightly in April due to a $.015/ lb. reduction in OX pricing. Orthoxylene settled down $.015/ lb. to US$.335/ lb. which will move Phthalic prices lower for April.

Mono Ethylene Glycol: Overall demand is poor. MeGlobal has yet to announce their Benchmark for March but others have rolled over so we can assume a roll or decrease from MeGlobal. Global demand is still weak which probably won’t change but considering Ethylene values, the end of the Chinese New Year and continued rationalization prices could climb in the second quarter.

Diethylene Glycol: Demand is extremely weak and expected to be throughout 2009 (down 60 million lbs.). All producers are operating at reduced levels. Spot offers are made in the mid US$.20’s/ lb. but there are no takers.

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

With the final approval of the $787 billion economic stimulus bill some observers see a benefit for the chemical industry through demand for construction-associated products.

On March 9, Dow and Rohm and Haas reached a tentative agreement to complete their disputed $15.2 billion merger. It will not be entirely in cash, enabling Dow to take on less debt than under the original terms. Additional investors include the Haas family trust, Berkshire Hathaway, and Kuwait Investment Authority. It was reported that Dow will cut an additional 3,500 jobs on top of the 6,000 cuts previously announced. Dow is also required to pay shareholders the proceeds from a daily $3 million ticking fee for not closing the deal after it was approved by regulators. The revised agreement must be completed no later than April 1, 2009.

The American Chemistry Council (ACC) reported that global chemical industry production fell in January for a third consecutive month. A total of 37,000 jobs have been lost in the global industry as well. In North America, the largest declines by sector were in man-made fibres, petrochemical and organic chemicals, plastic resins and specialty chemicals.

The ACC has called for reform of the Toxic Substances Control Act (TSCA) which governs the ~83,000 chemicals in commerce. It is asking for action which will lead to more intelligent evaluations of chemicals and regulatory decisions regarding them.

A recent study has shown that US companies are considering re-establishing domestic manufacturing. It was stated that in the past three years off-shore costs have seen a significant increases in costs of transportation, commodities, and wages.

In contrast to the declining global economy, US soda ash producers reported record production of 11.2 million tons in 2008. Foreign ownership now accounts for ~60% of domestic nameplate capacity with Tata’s acquisition of General Chemical.

Bankrupt LyondellBasell Industries, the third-largest independent chemical company in the world, would like longer than the one year required to complete its bankruptcy.

Huntsman Corp. and the Russian company Zavod Sintanolov have signed an agreement to develop the Russian surfactants market. Huntsman’s Performance Products Division will market and sell 50% of the anionic and amphoteric surfactants manufactured in a new St. Petersburg plant.

Chemicals and plastics manufacturer Nova Chemicals Corp. recently agreed to be acquired by International Petroleum Investment Co., an Abu Dhabi company. The total value, including Nova’s debt, of the agreement was reported as $2.3 billion. As Canada’s largest chemical maker, Nova’s acquisition is to come under review by the Canadian government.

Deerfield, IL – based CF Industries has run into competition in its effort to acquire Terra Industries, which rejected the $2.1 billion offer. Agrium, a Canadian fertilizer company, has now announced that it wants to acquire CF at a cost of $3.6 billion which is a premium over stock trading price. Agrium stated that its offer was contingent on CF terminating its offer for Terra.

The Obama administration has called for a treaty to cut mercury pollution, which has been described as the world’s gravest chemical problem. Each year, approximately 6000 tons of mercury enters the environment. An administration spokesman said that the US wants negotiations on limiting mercury to begin this year and to conclude within three years.

The Consumer Products Safety Improvement Act, which bans the sale of children’s products containing dangerous amounts of lead/phthalates took effect in February. Many retailers and manufacturers say that they still don’t understand the rules, including those regarding products made before the new law.

Catalyx Nanotech, a California company, plans to commercialize a technology that will generate “green” hydrogen and nanomaterials from landfill gas. Methane from landfill will be used for the raw material for the process.

It was reported that Russia’s industrial output in January fell 16% compared with a year earlier and 19.9% from December 2008.

Robert Slaughter, the president of the National Petrochemical and Refiners Association (NPRA) has resigned after nine years of service. While a search is under way for his successor, NPRA Executive VP, Charles T. Drevna will lead the organization.

China’s exports declined 17.5% in January while it was reported that imports declined 43.1%. Part of the slide was due to factory shut-downs for the lunar New Year. China’s $73 billion fiscal package aimed at stimulating the country’s refining and petrochemical industries was submitted to the National Development and Reform Commission for approval. It includes investment in a number of petrochemical projects.

China’s monthly vehicle sales surpassed those in the US for the first time in January, moving the country closer to becoming the world’s biggest auto market.

Wacker Chemie is investing in a new $1 billion plant in Charleston, TN.

The Russian Federation has temporarily removed import duties on expandable polystyrene, effective February 14 for a period of nine months.

The pressure to create bisphenol A (BPA)-free compounds, particularly for food-contact containers for infants has resulted in a new product. PolyOne has released its first BPA-free compounds, marketing them under the name Edgetek. The maker says that they are ideal for reusable food containers and infant care items.

In February, the Obama administration postponed for six months action on an offshore oil and gas development plan issued by former president George W. Bush. The move has been criticized as unnecessary delay.

The International Energy Agency’s 2009 forecast for global oil demand has been revised downward to 84.7 million bbls/day. Demand in 2008 was 85.7 million bbls/day.

Petrobras, the Brazilian state-run oil company said that it plans to invest $2.8 billion in biofuels during 2009- 2013, which is an increase of 87% over their previous five year investment plan. Braskem, also Brazil-based, has begun building a 200,000 tonne/year polyethylene plant that will use ethanol as a feedstock. Start up is expected in the second half of 2010 with an investment cost of $218 million.

With a cheaper barrel of oil, ethanol biofuel has encountered increasing problems, with corn-base plants shutting down due to high costs. Verasun, which had declared bankruptcy in October, has halted operations at three of its ethanol plants; Pacific Ethanol has temporarily idled its Madera, CA plant. Corn prices have remained high, conversion cost to liquid fuel, which gets worse mileage than gasoline, is expensive, and the fuel can’t be shipped through regular pipelines.

Butanol in the form of biobutanol is being investigated as an alternative to ethanol for biofuel use. It has been stated that it offers several advantages over ethanol; it has higher energy density, can be transported in existing pipelines, and is easier to mix with gasoline. A joint venture between DuPont and BP has been established and an operational pilot plant is on track for this year.

Diesel fuel prices have been in recent decline and it’s been forecasted by analysts that they may soon drop below that of gasoline.

Despite decreasing volumes throughout the fourth quarter, major railroads such as Union Pacific and Burlington Northern Santa Fe reported higher revenues based on higher rates and fuel surcharges.

The Economy

In January, retail sales were up 1.1% from December, but were 11.0% below a year earlier. Total sales for the November 2008 – January 2009 period were down 9.5% from a year earlier. Total sales for the twelve months of 2008 were down 0.1% from 2007.

Privately owned housing starts in January were 16.8% below the revised rate for December, and 56.2% below the revised January 2008 rate. Single family housing starts declined 12.2% in January.

New orders for manufactured durable goods in January decreased $9.0 billion, or 5.2% to $163.8 billion. This was the sixth consecutive monthly decrease and followed a 4.6% December decrease. Unfilled orders for manufactured durable goods in January, down for four consecutive months, decreased $15.3 billion, or 1.9% to $785.0 billion. This followed a 1.5% December decrease.

Consumer Price Index increased 0.4% in January.

Interest rate: Prime at 3.25% as of 12/16/08.

Inflation: 0% over the past 12 months, driven by lower energy costs.

Unemployment: January 7.6%, with 9% forecast by year end, compared to peaks of 10.8% in 1982 and 25.2% in 1932.

Trade Deficit: For December 2008 the goods and services deficit decreased to $39.9 billion from an adjusted $41.6 billion in November. The goods and services deficit was $677.1 billion in 2008, down from $700.3 billion in 2007. As a percentage of US GDP, the deficit was 4.7%, down from 5.1% in 2007.

Crude Oil: Average $90 – 95/bbl for 2008, with prices as low as the mid $30’s/bbl in early 2009.

Industrial production decreased 1.8 % in January. Capacity utilization rate for total industry in January was 72.0%, a level 8.9% below the average for 1972- 2008.

GDP fell by a revised 6.2% in the fourth quarter and is expected to contract further in 2009.

The US dollar trading at 98 yen. $1.26 = euro. The British pound sterling = $1.43.

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