A MARKET UPDATE for January 2008 / February 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 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: dropping below $90.00/ bbl. Most recent ~$88.00/bbl.

Natural Gas: Current spot prices average ~$/8.20/MMBtu; Futures contracts at ~$8.13/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: US contracts in January were up $0.05/lb from December at $0.61/lb del. Please refer to BZSM report on TCC homepage.

Orthoxylene: January contracts increased $0.03/lb to $0.505/lb.

Chemicals Markets

Methanol: The Methanex Non- Discounted Reference Price for February will decrease by $.40/ gal. to US$2.10/ gallon but will leave North America as the highest priced globally. Inventories have improved and spot prices are trading in the US$1.70- $1.80/ gallon range but with little interest. Large volumes of Methanol continues to arrive from China but some of it has questionable quality. Methanex is reporting that they have only two plants operational in Chile and not at full operating rates (60%). We expect prices to continue their downward trend with decreases on par with the February announcement or possibl larger especially if the spot market continues its rapid decline.

Urea: Urea prices have stabilized for the moment but with better weather in the foreseeable future sellers are not willing to budge. This year is expected to be unprecedented for fertilization and although inventories are swelling it may be difficult to keep up with demand. Barges are reported at US$420/ ton range fob and stable. No increase is expected for February but with ammonia prices spiking and the spring fertilization season on our doorstep things could get ugly.

Adipic Acid: US, Asia and European prices remain flat (a slight increase $50 per ton in Asia). Although expected by many, there is still no sign of a demand rebound in Asia for polyurethane. Most believe that this will not happen until after the Chinese New Year.

Ammonium Nitrate: Prices will increase again in February by $50- $75/ ton based on contracts. This as a result of the jump in Ammonia prices, increased costs from production, security, raw materials, insurance, labor, etc.

Ammonia: Prices have moved up $100/ ton since December creating a ripple effect in all downstream markets. December was seen in the $360/ ton range spot CFR Tampa and most recently Ammonia is $460/ ton spot CFR Tampa. There are indications that prices will continue to advance. The high ammonia prices will likely affect many downstream chemicals the remainder of the quarter.

Nitric Acid: Thanks to the Ammonia price advance Nitric Acid will jump in February as well. An increase of $40- $70 per ton is anticipated. If ammonia continues to advance the same will be true of Nitric Acid.

Plasticizers and Plasticizer Alcohols: Plasticizer demand is improving as we depart from the traditionally slow season. A price increase for linear plasticizers was announced by one major taking effect Jan. 15, 2008 and appears to have gone through. Some plasticizer feedstocks continue to advance (orthoxylene up $.03/ lb. in January). Upcoming outages and production problems should keep this market tight through the middle of the year.

TCC Plasticizers available:
TOTM
DOA
ChemFlexx 206 Linear Phthalate Plasticizer
DINP
Brominated DOP
8 10 Trimellitate
DOP
DUP

Epoxidized Soybean Oil: A $.08/ lb. increase took effect on Jan 1, 2008. Feedstock pricing has leveled.

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: Prices move up following butane for those with butane adjusted contracts. A large increase took place January 1st for those adjusted monthly or quarterly. Demand from UPR is extremely slow.

Styrene monomer: Prices seen in the high 60’s per lb. Continued plant rationalization both domestically and in Europe may tighten availability in the coming year.

Phthalic Anhydride: Demand is seasonally slow. We expect a $.03/ lb. increase in February based on January’s Orthoxylene price.

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

Dow Chemical will close plants and eliminate as many as 1,000 jobs. The facilities most likely to be shut down are in Louisiana, West Virginia, France, and Brazil. It was reported that these actions would make capital available for investments in Asia and the Middle East.

Criticism of the European REACH program continues, with predictions of failure, crashing under its own administrative cost, and similar comments.

It was recently reported that each US automobile contains $2441 worth of chemistry, including products such as anti-freeze, sealants, coatings, and plastics.

DuPont, Dow, ENI and others have been fined a total of US$357 million by the EC for conspiring to fix the prices of chloroprene rubber from 1993 – 2002.

The Russian government has plans to develop its petrochemical industry so as to take advantage of its abundant oil and natural gas reserves. Russia currently imports over 50% of the plastics and commodity chemicals it needs. Plans are to raise overall production by 40% between 2007 and 2015. Dow Chemical and BASF are already taking part in this expansion.

DSM has acquired Soluol, US-based manufacturer and marketer of high performance urethane resins. It will be part of the DSM Resins business group. Financial details were not disclosed.

Perstorp has acquired another business in Shandong province, China, which includes neopentyl glycol production capacity. Perstorp also acquired the neopentyl glycol manufacturing business of Yongliu Chemical Industry.

The Basic Chemicals Business Unit of LANXESS Corp. in Baytown, TX recently received a Gold Performance Improvement award from SOCMA. This top honor was in recognition of strong environmental, health, safety, and security efforts.

BASF has announced that it plans to expand its Asia-Pacific plasticizer business, specifically by increasing annual capacity of its oxoC4 plant in Nanjing, China by 55,000MT to 305,000MT. This is to ensure reliable supply of n-butanol and 2-ethylhexanol. Plasticizer demand in this market is expected to increase by 4 to 5% per year through 2015. At the same time, BASF inaugurated the region’s first plasticizer applications laboratory in Shanghai. Efforts are planned to concentrate on the use of DINCH, a non-phthalate plasticizer designed for food and medical applications, and Palatinol 10P, with application in automotive, wire and cable uses.

Venezuela’s “petrochemical revolution” is expected to see investment of ~$45billion into olefins, aromatics and fertilizer projects over the coming 14 years. The country’s proposed petrochemical complexes are located mainly along the northern coastal region. Part of the revolution is the development of associated petrochemical-consuming industries.

BASF has officially become a European company, changing its official name from BASF AG (Aktiengesellschaft) to BASF SE (Societas Europaea.) The newly named corporation has named a works council consisting of 23 members from 12 European countries.

Sears plans to phase out products and packaging containing PVC, citing associated health and environmental concerns. Sears said it plans to show preference for PVC-free products and will encourage vendors to reduce or eliminate use of vinyl in products and packaging.

The German chemicals industry anticipates additional growth of 6 – 7% in 2008.

While Western companies have placed their investments in the Iranian oil and gas industry on hold, billion dollar contracts have been signed with groups representing China and Malaysia. It’s reported that the Iranian oil and gas industry urgently requires foreign capital for its modernization and expansion.

China National Chemical plans to spend $96millions this year on a pilot project to curb emissions at a number of its chlor-alkali plants and refineries.

Business forecasters believe that China will begin investing in Midwest manufacturing plants, similar to the Japanese automobile industry 20 years ago.

France has prohibited the cultivation of genetically modified maize (corn). The only genetically modified maize in France is from Monsanto, and may no longer be used due to health concerns. There is an EU protection clause that permits such action by member states, and Austria, Hungary, and Greece have already made use of it. A majority of scientists on the French committee making the decision objected to the action.

Total, the French oil and gas group, wants to build nuclear power plants in the United Arab Emirates. Total representatives have stated that this is proof of their desire to find alternatives to oil and gas dependence.

The New York City Council has passed a plastic bag recycling law, requiring any store in NYC that uses plastic bags and occupies 5,000 or more square feet to establish an in-store recycling program for plastic bags. Nationwide, over 650 million pounds of plastic bags and film are recycled each year. This legislation is very different than other cities considering a ban on plastic bags. This action received very strong support from the American Chemistry Council’s Plastics Division.

According to ExxonMobil, transportation fuels will be the fastest growing energy sector by 2030. Government mandates and dwindling petrochemical reserves will be the major drivers. Conversely, it’s also been predicted that growth of biofuels/chemicals will encounter increasing resistance due to the perceived food vs fuel issue.

Ford Motor Company and U-Haul recently launched the industry’s first fleet of vehicles painted with Ford’s environmentally responsible new technology, which is reported to reduce greenhouse gases and cut Ford production costs.

It appears that the proposed Shanghai-Beijing high-speed railway is going to happen. The proposed rail line will be 1,318 kilometers long, and costs are estimated at US$13.7 billions. Five construction companies are said to be bidding on the project.

Initially driven in part following 9/11, in which hijackers had legitimate drivers’ licenses, the Department of Homeland Security set a final rule for the REAL ID regulation. This would establish minimum security standards for state-issued drivers’ licenses and ID cards. The rules could complicate air travel and 17 states to date have passed legislation objecting to the program’s provisions.

The Economy

SLUMPING BELOW 12,000, THE DOW JONES INDUSTRIAL AVERAGE IS DOWN ~10% SINCE THE FIRST OF THE YEAR; ITS WORST FIRST 14 TRADING DAYS IN HISTORY. THE FEDERAL GOVERNMENT IS PROPOSING QUICK ACTION IN THE FORM OF “REBATES” AND ACCELERATED BUSINESS EXPENSE TAX DEDUCTIONS.

Privately owned housing starts in December were 14.2% below November. On a year to year basis, single family starts declined 24.8% in December.

Permits for the construction of new single family homes are down 34.4% from a year ago.

New orders for durable goods increased $.2 billion, or .1%, to $214.7 billion in November. This followed three consecutive monthly decreases. Excluding transportation, new orders decreased 0.7%. Excluding defense, new orders increased 1.2%. December data not available at time of publication.

Consumer Price Index decreased 0.1% in December. The December level was 4.1% higher than December 2006.

Interest rates: Prime at 6.50% as of 1/22/08

Inflation: December 4%; lower to ~3.05% in 2008.

Unemployment: December 5.0%.

Trade Deficit: Increased to $63.1 billions in November from $57.8 billions in October.

Crude Oil: Average $85/bbl predicted for 2008.

Industrial production was unchanged for December. Total industrial production in December was 1.5% above its year-earlier level. Capacity utilization for total industry showed a slight decrease to 81.4%, slightly below to its year earlier level, and 0.4% above its 1972 – 2006 average.

GDP close to 2% for 2008.

The US dollar trading at 106.76 yen. $1.461 = euro. The British pound sterling = $1.958.

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