A MARKET UPDATE for JANUARY 2009 / FEBRUARY 2009

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 (401) 360-2800.

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 $40.00/ bbl range. Futures are in the same area or lower.

Check our home page for to the minute info.

Natural Gas: Current prices trading at ~$4.70/MMBtu, reflecting reduced demand. Futures contracts reported at ~$4.50/MMBtu.

Benzene: February Benzene contract pricing moved up $.34/ gallon to US$1.35/ gallon. Prices have firmed worldwide.

Propylene: January prices were settled at $.205/ lb. for chemical grade and $.22/lb. for polymer grade.

Orthoxylene: February contracts settled at $0.35/lb., up $0.045/lb from January.

Chemicals Markets

Methanol: The Methanex Non-Discounted Reference Price for February will remain at US$.70/gallon. Spot barge offers are in the low $.50’s per gallon and active with upward momentum. Methanex will begin shipping out of the Kinder Morgan Terminal, Perth Amboy, NJ in early February replacing American Agip’s position there. The Terra Industries, Woodward, OK facility has been down since Mid- December and Methanex will cease all shipments at the end of the 1st quarter of 2009. At current gas pricing in the USA (approx $4.7/ MMBTU) cash costs per gallon of Methanol is approx $.59/ gallon. Downstream demand is still slow but better than it has been, probably due to restocking.

Urea: Urea prices escalated through January ($100/ ton) but stalled as of late as buyers pushed for lower prices. Lower corn prices, lower international offers, and impending deliveries slowed the upward push but the seasonal demand is expected to develop over the coming weeks. The last reported prices at NOLA were in the $300- $305/ ton range and stable.

Adipic Acid: Adipic Acid prices weakened considerably in Q4 ’08 as Benzene and Ammonia fell exponentially along with demand. It appears prices have hit a floor and are now firming along with Benzene and due to rationalization in Europe (Invista Wilton, UK). Exports from Europe, Korea and the USA to China have fallen dramatically as the new Chinese producers gain a foothold on their market. 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 on lower raw material prices. The extreme run up in raw material prices in 2007 and 2008 has left the remaining producers in a severe cash crunch. Consolidation and rationalization have been rampant in this industry. Demand remains limited as consumers seek alternative chemistries.

Ammonium Nitrate: Low density AN prices are currently stable but pricing should retreat in line with the current ammonia price of $120/ ton. 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 both in Tampa and NOLA. Current U.S. Gulf NOLA barge pricing is US$120/ton (NOLA Barge). Demand continues to be limited but we are rapidly approaching the highest demand season. At current pricing producers will struggle to remain profitable.

Nitric Acid: Nitric Acid pricing is stable at the moment but demand is certainly off. Ammonia surcharges ceased on 1/1/09.

Plasticizers and Plasticizer Alcohols:

Global operating rates remain at a reduced level but demand has improved over a dismal 4th quarter. In the last two months of 2008 consumers depleted inventories and awaited lower pricing. Pricing has stabilized as propylene and orthoxylene prices moved up. Consumers have begun to replenish inventories after reducing levels to zero in line with EBIT accounting practices. Demand on PZ alcohols is improving in Asia yet overall PZ demand is considered flat.

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

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 feedstock costs are on the way up.

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 slow due to the housing slump and tied to this, lackluster demand in UPR. Prices are eroding based on lack of demand and lower butane costs. Huntsman expects to bring up their plant at the end of Q1 2009.

Styrene monomer: With Benzene values increasing so is Styrene Monomer pricing. Demand from all sectors is poor to extremely poor pricing remains at levels not seen in almost 10 years.

Phthalic Anhydride: Demand is poor in North America but Asia and Europe are experiencing a slight uptick. Orthoxylene settled up $.045/ lb. to US$.05/ lb. which will move Phthalic prices higher for March.

Mono Ethylene Glycol: Overall demand improved slightly in January which isn’t saying too much. Producers announced increases of US$.02- $.04/ lb. for February. 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 continue to climb.

Diethylene Glycol: Demand is extremely weak and expected to be throughout 2009 (down 60 million lbs.). Spot offers are made below US$.30/ lb. and contract has followed currently in the low to mid $.30’s per lb.

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

Rohm and Haas sued Dow Chemical Co. to enforce their previously-negotiated $15.2 billion merger contract. The decision will be made by Judge William B. Chandler III, chancellor of Delaware’s Court of Chancery. A Dow spokesperson has stated that the merger would be devastating in the present state of the economy. Dow’s plans for Rohm and Haas were thrown into chaos with the collapse of a proposed Kuwaiti joint venture that would have provided Dow with $7 to $9 billion in cash. Dow was expected to use some of their proceeds to help finance the Rohm and Haas acquisition.

Lubrizol Corp. has acquired Dow’s thermoplastic polyurethane business from the Dow Chemical Company for undisclosed terms.

Pfizer plans to acquire Wyeth Labs for $68 billion.

LyondellBasell Industries, the third-largest independent chemical company in the world, has filed for bankruptcy as anticipated. It has also asked a judge to bar one of its largest creditors, BASF Corp., from seeking a claim of $200 million.

The National Association of Chemical Distributors plans to address specific issues with Congress including making Chemical Facility Anti-Terrorism Standards (CFATS) permanent; a single federal standard for chemicals safety; regulation of hazardous materials transit.

The Government Accountability Office (GAO) has recommended that the new administration make the EPA’s Toxic Substances Control Act a high priority, saying that the agency has inadequate scientific information on the toxicity of many chemicals found in the environment. The GAO has also stated that the EPA should completely reform the act.

Huntsman’s final settlement with Apollo Management’s Hexion Specialty Chemicals ended with a $1 billion cash settlement. Huntsman plans to cut more than 9% of its work force and to close a TiO2 plant as demand declines.

Ineos ChlorVinyls will close three plants at its Runcorn, UK site due to shrinking demand.

The US ethanol industry could get $1 billion to invest in new technologies under the proposed Obama stimulus package.

Deerfield, IL – based CF Industries is offering to acquire Terra Industries in an all-stock deal that values Terra at $2.1 billion. If completed, the deal will result in the world’s largest producer of nitrogen fertilizers with a total capacity in excess of six million tons per year.

French specialty chemical maker Rhodia has agreed to purchase US based McIntyre Group for $100 million. McIntyre specializes in household and industrial surfactants.

EU chemical activity declined for the first time since 2003 in 2008, dropping ~1%.

BASF, the world’s largest chemical company, recently announced plans to reduce working hours for employees at German facilities serving the automotive industry.

It has been reported that chemical antidumping cases are on the rise as producers strive to export their way out of inventory problems. China was involved in 44% of antidumping cases in the first half of 2008. Recent activity included India’s decision to extend duties on Chinese melamine until October, 2009.

Recently released data states that China’s economy grew to the world’s third largest in 2007, bypassing Germany and behind only the US and Japan. This is tenfold growth in the past 30 years, but China’s people are on average among the worlds poorest.

Germany’s GDP growth for 2008 was 1.3%, down from 2.5% in 2007.

Gazprom, the Russian energy monopoly and Ukraine’s Naftogaz signed a contract on January 19 for Russian gas supplies for a ten year period. According to Prime Minister Putin, Gazprom had been instructed to restart natural gas deliveries to Europe via Ukraine. Some analysts believe that the recent problem was not so much about price, fees, etc. as it was Russia wielding the energy club at the pro-Western Ukrainian government and scaring the EU. This recent disruption could lead to a new/revised EU energy strategy.

The European Parliament recently voted to tighten rules on the use of pesticides amid concerns about human health and the decline of the honeybee population. The new rules will ban 22 products, although some lawmakers said food price hikes will result.

Connecticut’s DEPA will launch a study on the safety of artificial turf playing fields. Proponents say industrial chemicals from the rubber cushioning can be released into the air and water runoff and children and others could inhale the chemicals.

The discussion regarding bisphenol A, or BPA, continues. Most recent research indicates that BPA may remain in the body longer than previously known and that it may get into the body through sources other than just food. BPA is used in many food and beverage containers, the coating of food cans, and some medical devices.

Although a leader in the production and consumption of ethanol and other biofuels, Brazil plans to expand its offshore oil resources. Recently discovered oil fields may hold up to 33 billion barrels, big enough to supply every US refinery for six years.

The Department of Transportation’s Federal Motor Carrier Safety Administration issued its final rule on truckers’ hours of service, effective in December. The ruling was applauded by the American Trucking Association.

The DOT has issued a final rule that requires railroad tank cars used to transport highly hazardous chemicals to meet safety standards designed to prevent leaks in the event of a crash. The ruling was supported by the American Chemistry Council.

The Economy

In December, retail sales declined 2.7% from November, and were 9.8% below December 2007. Total sales for the October – December 2008 period were down 7.7% from a year earlier. Total sales for the twelve months of 2008 were down 0.1% from 2007.

Privately owned housing starts in December were 15.5% below the revised rate for November, and 45.0% below the revised December 2007 rate. Single family housing starts declined 13.5% in December.

New orders for manufactured durable goods in December decreased $4.7 billion, or 2.6% to $176.8 billion. This was the fifth consecutive monthly decrease and followed a 3.7% November decrease. Unfilled orders for manufactured durable goods in December, down for three consecutive months, decreased $10.3 billion, or 1.3% to $803.2 billion. This followed a 0.9% November decrease.

Consumer Price Index decreased 1.0% in December.

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

Inflation: December 0.1 %

Unemployment: December 7.2%, with 9% forecast by year end.

Trade Deficit: For November 2008 the goods and services deficit decreased to $40.4 billion from an adjusted $56.7 billion in October as imports decreased more than exports.

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

Industrial production decreased 2.0 % in December. Capacity utilization rate for total industry in December was 73.6%, a level 7.4% below the average for 1972- 2007.

GDP fell by 3.8% in the fourth quarter, a number that was better than anticipated by some forecasters.

The US dollar trading at 90 yen. $1.28 = euro. The British pound sterling = $1.45.

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