A MARKET UPDATE for JUNE / JULY, 2009

Events:

Visit with TCC Representatives at:
Vinyl Products Division 20th Annual Compounding Conference
Sawgrass Marriott Golf Resort & Spa
Ponte Vedra Beach, FL
July 19-21, 2009

New Product:

TCC is proud to Introduce our New Non- Phthalate Plasticizers ChemFlexx NP 500 and ChemFlexx NP600. ChemFlexx NP 500 is our non-phthalate replacement for general purpose plasticizers like DOP and DINP where the NP 600 is our non-phthalate replacement for DIDP. Both products are available immediately in Bulk, Drums and Totes. Technical data and samples are also available upon request.

NatureFlexx 509 Phthalate Free General Purpose Plasticizer! This high molecular weight plasticizer is an excellent, phthalate free replacement for general purpose phthalate plasticizers like DINP, DOP, DEHP, DOTP, Etc.

New Product Lines:

TCC now offers Chlorinated Paraffin Oil, 85% Phosphoric Acid, Sulfonic Acids, Phenolic Resins 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 $62.00/ bbl range. Futures are trending higher.

Natural Gas: Current pricing reported ~$3.37/MMBtu.

Benzene: U.S. Benzene pricing for July has settled strongly to US$2.92/ gallon! May was US$1.90/ gallon; June $2.42/ gallon. Benzene pricing was ~$.90/ gallon at the start of 2009.

Propylene: July has not completely settled but it appears that there will be an increase of approx. $.01/ lb. If this increase is agreed upon prices will be 0at $.395/ lb. for chemical grade and $.41/lb. for polymer grade.

Orthoxylene: July contracts remain at $0.395/lb.

Chemicals Markets

Methanol: The Methanex Non-Discounted Reference Price for July increased by US$.08/ gallon to US$.68/gallon. Spot barge offers are in the upper $.50’s to low $.60’s per gallon and demand is mixed to relatively strong. Spot dependent sellers have increased pricing based on the strengthening spot values. We expect prices to continue to firm over the next few months.

Notes: Uncertainty still surrounds Hugo Chavez’s move to put Chemical producing entities under state control. Many consumers dependent on producers operating here are understandably nervous.

Chinese demand is notably higher than expected this year and pushing prices up globally. This demand will continue until prices reach a profitable point where local producers can ramp up their coal based production. China’s Ministry of Commerce has announced an “anti- dumping” investigation into methanol produced in Saudi Arabia, Malaysia, Indonesia and New Zealand. The effects of this will be forthcoming.

China has also set a national standard for M85 Fuel (85% Methanol and 15% Gasoline) which will be implemented on December 1, 2009. This will obviously have a remendous affect on demand and is an important development in what many consider the future of methanol, its use as a fuel.

Urea: Urea prices have strengthened to the US$255- $265/ ton range. Strong rice demand and few available barges are pinned as the reason for the upward movement. Prices are expected to continue to climb for the short term.

Notes: CF Posted August at $270/ ton and September at $275/ ton. Most agree that Urea inventories are currently very low. There are however major disagreements on future pricing as some feel prices will move down when rice demand goes away while others feel wheat demand will pick up the slack. Those having the ability to use ammonia or UAN will certainly be moving away from Urea while the alternatives offer price advantage.

Adipic Acid: Adipic Acid prices have moved up with global rationalization, production issues and with the major raw material benzene advancing in May ,June and another big jump in July. Adipic Acid is now considered very tight and is expected to be for the foreseeable future. With the current market conditions Chinese Adipic Acid is now finding its way into Europe and North America despite its lower quality.

Melamine: Melamine pricing is considered stable. Demand remains weak. China remains the low cost supplier worldwide but not all consumers can use what is considered lower quality product.

Phenolic Resins: Prices have firmed with increased Phenol and Formaldehyde pricing. A limited number of players has resulted in few options for consumers and many have opted to seek toll manufacturing opportunities.

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: Current U.S. Gulf NOLA barge pricing is reported at US$170- 180/ton (NOLA Barge). Little change is expected until August when business is conducted in Tampa. Ammmonia is an affordable alternativwe to Urea at this time prompting a limited increase in demand.

Nitric Acid: Nitric Acid pricing has moved slightly lower in line with the lower ammonia price. Demand is relatively weak.

Plasticizers and Plasticizer Alcohols: Plasticizer demand is improving but the big news continues to be rapidly escalating raw material prices (propylene/ orthoxylene). Price increase announcements were made for May 1st, June 1st , June 15th, July 1st and now another increase of US$03/ lb. has been announced for August 1st. State level phthalate restrictions/ bans could have a more rapid and greater affect on phthalate plasticizers in the USA.

TCC Plasticizers available:
Phthalate:
DINP (DiIsononyl Phthalate)
“ChemFlexx 206” Linear Phthalate Plasticizer
“ChemFlexx 208” Low Temp Linear Phthalate Plasticizer
DOP (DiOctyl Phthalate)
DUP (DiUndecyl Phthalate)
DMP (DiMethyl Phthalate)
Brominated DOP
9 11 Phthalate
Non- Phthalate:
“ChemFlexx NP 500” Non- Phthalate Replacement for General Purpose Plasticizers
“ChemFlexx NP 600” Non- Phthalate Replacement for DIDP
“NatureFlexx 509” Phthalate Free General Purpose
Epoxidized Soybean Oil
TOTM (TriOtcyl Trimellitate)
DOA (DiOctyl Adipate)
8 10 Trimellitate

Epoxidized Soybean Oil: Pricing is level with one major recently exiting Chapter 11. Demand is good.

Dicyandiamide: Prices are level but demand is relatively slow. Many consumers have worked off over priced inventories from last Summer and will be returning to the market soon.

Dicyclopentadiene: Prices are stable with underlying crude values. The Polyester Resin market continues to be extremely slow. Chevron Phillips plans to exit market after inventories are sold.

Fumaric Acid: Global values have moved up as demand improves slightly and raw material costs move up. China remains the low cost option for consumers.

Malic Acid: Global values have improved slightly with demand and increased raw material cost. China remains the low cost option for consumers.

Isophthalic Acid: Prices have stabilized in line with underlying raw material costs. Demand has also improved in most major markets.

Maleic Anhydride: Demand remains slow and prices are down. Huntsman’s new MMA plant is operational adding 100 million lbs. to an already over- supplied market. Prices have eroded in recent months as buyers seek lower prices and producers position for business. Rationalization of older plants is expected to happen in the near future.

Styrene monomer: Benzene values have moved up and so is SM pricing. Price increase announcements of $.08- $.10/ lb. were made for July. Domestic demand from all sectors is poor to extremely poor and pricing remains low despite benzene values.

Phthalic Anhydride: Orthoxylene rolled at US$.395/ lb. in July hence phthalic anhydride pricing will not change in August. Demand is poor globally and the peak demand season affecting orthoxylene is waning- we expect price erosion in the coming months. Imports are available at a slight discount.

Mono Ethylene Glycol: Producers announced a US$.02- $.05/ lb. Increase effective July 1st. A US$.05/ lb. increase has been announced for August 1 taking the transaction price up to US$.37/ lb. Rationalization in the U.S. and Europe has begun.

Diethylene Glycol/ Triethylene Glycol: Producers announced a US$.02- $.05/ lb. Increase on DEG effective July 1st. A $.05/ lb. increase has been announced on DEG for August 1 taking the transaction price up to US$.38/ lb. TEG benchmarks are stabilizing in the high $.50’s/ 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

The United Nations has proclaimed 2011 the International Year of Chemistry. The goal is to emphasize chemistry’s achievements, its contributions to the well-being of humanity, and its role in meeting global challenges.

Sunoco announced on June 15 that it completed its purchase of the Volney, NY 100 million gallons per year ethanol manufacturing facility of Northeast Biofuels, LP. It is the largest ethanol manufacturing operation in the northeast US. The price was $8.5 million. Meanwhile, Sunoco is actively pursuing the sale of its chemicals business.

Arizona Chemical will permanently close its plant in Port St. Joe, FL in July. Production will be transferred to other existing plants.

A group of Lyondell Chemical creditors is seeking permission to sue the lenders and officers involved in the company’s merger with Basell. The group alleged that the deal left LyondellBasell Industries, the new firm, with excessive debt.

It has been reported that in 2012 DuPont is to launch large scale cellulosic ethanol production in a venture with Denmark’s Danisco. DuPont Danisco Cellulosic ethanol will use corncobs and switch grass as raw materials.

US and Chinese regulatory agencies have approved the $2.3 billion takeover of NOVA Chemicals (Canada) by Abu Dhabi based International Petroleum Investment Co.

Huntsman has settled with Deutsche Bank and Credit Suisse, the lenders in its failed merger with Hexion. Both banks will pay $316 million each, as well as providing $550 million each of senior debt financing. Huntsman had sought in excess of $4 billion in damages. Hexion has already paid Huntsman $1 billion.

Huntsman intends to purchase India’s Metrochem Industries dyestuffs plant for $28.4 million.

At the recent meeting of the American Chemistry Council, industry leaders generally agreed that demand bottomed out in early 2009 and that a gradual recovery is now under way. Asia, excepting Japan, is leading the rebound. The ACC is cutting its communications spending from $20 million to $12 million/year in order to be more focused on priority issues. The US chemical industry output dropped 4.7% in 2008, and is expected fall 8.1% in 2009 before recovering modest growth in 2010 and 2011.

Chemical companies have cut more than 55,000 jobs worldwide since September, 2008.

Pending federal government funding approval, Dow Chemical will build a $665 million advanced battery plant in Midland, MI. Commercial product for possible use in electric vehicles is expected to be available in 2012. In another action, Dow and Russia’s Gazprom Marketing and Trading Ltd announced that they will work together to develop and implement greenhouse gas reduction projects world wide.

The ongoing Agrium offer to acquire CF Industries is still being resisted. The bid has been extended to July 22.

SNF Holding Co., the US subsidiary of SNF Floerger (France) will build a $362 million polymers plant in Iberville Parish, LA. The deal included a $26 million incentive package from the state for infrastructure, including a rail spur.

Lanxess will acquire the chemical business of Gwalior Chemical in India for $115 million.

It was recently announced by the EPA that it has suspended a key regulatory program that prioritized commercial compounds for further regulatory action. This affects part of the Chemical Assessment and Management Program begun in 2007 by the Bush administration, which has strong industry backing.

Management for the 18th International Trade Fair for Plastics and Rubber (K Show) reports that more than 3,000 exhibitors will be present at the fairgrounds in Düsseldorf, Germany from October 27 to November 3, 2010.

Manufacturers of plastic additives are coming under increasing pressure to supply products that are safer and more environmentally friendly. The Consumer Products Safety Improvement Act introduced controls on phthalates and increasing attention is now being paid to flame retardants and other products.

The governor of Connecticut recently signed a bill that will make it the first state to ban Bisphenol-A from infant formula and baby food containers, and a number of reusable food and drink containers. The ban takes effect October 1, 2011. Approximately 55 bills in 20 states propose to curtail the use of the chemical.

The Cap and Trade legislation narrowly passed by the House on June 26 faces what appears to be tough sledding in the Senate and in industry.

China Petroleum & Chemical Corp. (Sinopec) has agreed to purchase Addax Petroleum, a Swiss oil and gas group, for $7.2 billion in cash. This will give Sinopec oil sources in Iraq, Kurdistan, and Africa.

OPEC has slightly lowered its forecast for 2009 global oil demand, with a reduction of 1.9% from last year.

The Venezuelan National Assembly has passed a law placing its petrochemical industry under joint ventures controlled by the government.

The federal mandate for ethanol content in gasoline has prompted some investigation of domestic costs. The biofuel industry receives $.45/gallon tax credit for every gallon of ethanol produced, while import tariffs of $.54/gallon and additional tax of four to seven cents per gallon keep out ethanol from Brazil and the Caribbean. The CBO has reported that Americans pay another surcharge for ethanol in higher food prices. Three billion bushels of corn were diverted to ethanol from food production in 2007.

On June 23 the US and the EU accused China of unfair trade practices saying that the Chinese government was restricting exports of raw materials in order to give Chinese manufacturers a competitive advantage in markets such as steel, chemicals, and aluminum. Complaints have been filed with the World Trade Organization. Chinese exports dropped by 26.4% from a year earlier, but investments in fixed assets set a record in the opposite direction.

The Peoples Bank of China announced that the economy accelerated during the second quarter and that the trend should continue, enabling the economy to meet the central government’s target of 8% this year.

According to a report from the Council of Supply Chain Management, the overall logistics market in the US declined 3.5% last year to $1.3 trillion, its first decline in six years.

It’s been projected that LTL rates will continue to decline into the third quarter due to continued overcapacity in the LTL market.

A recent report stated that a group of 4,500 Mexican truckers plans to sue the US for $6 billion, due to the US Congress’s decision to shut down the cross-border pilot program between the two countries. It’s been alleged that the cancellation came in part from pressure from the teamsters union. It resulted in tariffs of $2.4 billion on 89 US agricultural and manufactured products that this country exports to Mexico. Transportation Secretary Ray LaHood hopes to have a Mexican program reinstated. Under NAFTA, the US is required to open its border to both Canadian and Mexican carriers who meet US standards. The Canadian border is open; the Mexican is not.

The Economy

In May, retail sales increased 0.5% from April but were 9.6% below May 2008. Total sales for the March – May 2009 period were down 9.7% from a year earlier. Gasoline stations sales were down 33.8% from May 2008.

Privately owned housing starts in May were 17.2% above the revised rate for April of 454,000 but 45.2% below the revised May 2008 rate of 971,000. Single family housing starts in May 2009 were at a rate of 401,000 or 7.5% above the revised April figure of 373,000.

New orders for manufactured durable goods in May increased $2.8 billion or 1.8% to $163.9 billion. This was the third increase in the last four months, following a 1.8% April increase. May unfilled orders for manufactured durable goods decreased $2.0 billion or 0.3% to $747.5 billion. This made the eighth consecutive monthly decrease.

Consumer Price Index increased 0.1% in May on a seasonally adjusted basis after a flat April and a decrease of 0.1% in March. This index has fallen 0.7% over the past twelve months, primarily due to lower energy costs.

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

Inflation: Down 1.3% in May on an annual basis.

Unemployment: May 9.4%, with ~10% forecast by early next year, compared to peaks of 10.8% in 1982 and 25.2% in 1932.

Trade Deficit: For April 2009 the goods and services deficit increased to $29.2 billion from an adjusted $28.5 billion in March. Exports again decreased more than imports.

Crude Oil: Currently trading at ~$68/bbl with futures on the increase. OPEC target levels are $70 – 75/bbl. OPEC’s next meeting is scheduled for September 9.

Natural Gas Total consumption of natural gas is projected to decrease by ~2% in 2009, leading to lower prices.

Industrial production decreased 1.1 % in May, following a downward-revised 0.7% in April. The average decrease in industrial production during the first quarter was 1.6%. At 95.8% of its 2002 average, output in May was 13.4% below its year-earlier level. Capacity utilization rate for total industry in April was 68.3%, 12.6 points below its average for 1972 – 2008. The previous historical low was 70.9% in December 1982.

Final statistics show GDP drop of 5.5% in the first quarter.

The US dollar trading at 95.2 yen. $1.41 = euro. The British pound sterling = $1.65.

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