A MARKET UPDATE for March 2008 / April 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

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 maintaining above $100.00/ bbl. Most recent pricing hovering around $105.00/ bbl.

Natural Gas: A heavy uptick in pricing occurred in February and the beginning of March. Despite recent declines, current spot prices average ~$/9.11/MMBtu; Futures contracts at ~$9.24/MMBtu.

Benzene: Benzene prices have advanced worldwide due to underlying crude value. The US benzene contract price increased some 12% to US$3.97/ gallon. Although benzene prices are near record highs they have only kept pace with crude and naptha and are therefore less profitable. Based on this some producers are trying to reduce operating rates.

Propylene: February contracts settled down $.03/ lb. Chemical grade pricing was $.58/ lb. del. While polymer grade pricing was $.595/ lb. del. In February. An increase of $.03- $.05/ lb. is expected for March contracts.

Orthoxylene: March contracts settled at $0.52/lb, an increase of $0.04 from February.

Chemicals Markets

Methanol: The Methanex Non- Discounted Reference Price for April will decrease by $.30/ gal. to US$1.60/ gallon. Spot is seen in the low $1.20’s per gallon and trending down. Downstream markets and seasonal demand continue to weaken. Methanex is reporting that they continue to have only two plants operational in Chile and not at full operating rates (60%). This is only 30% of their total capacity in Chile. We expect prices to continue their downward trend as inventories build and the recession deepens.

Urea: Urea prices were stable due to tremendous rains in the agricultural regions of the United States. Upwards of 10 inches of rain were reported in some areas causing barge traffic issues on several rivers. A break in this weather pattern will certainly get the farmers into the field and drive pricing. Urea barges are currently reported at US$360-US$370/ ton range fob.

Adipic Acid: One North American major has announced a US$.05/ lb. price increase to take effect on April Fool’s Day (April 1, 2008) with an additional $.05/ lb. announced for April 15th. Another has announced a US$.065/ lb. increase to take effect on April 1st as well. With Benzene and especially Ammonia advancing the latest increase is no surprise. China’s AA demand is beginning to materialize and spot values are slowly increasing especially with Asahi’s announcement that they will reduce operating rates (to 90%) on slow demand. Overall the availability of AA in Asia is very good with some calling it “oversupplied.”

Ammonium Nitrate: AN prices are now tied to an ammonia surcharge escalator. The massive cost adjustment in AN production due to ammonia pricing has forced manufacturers to add this surcharge. At current Ammonia prices the surcharge will be significant.

Ammonia: Prices have advanced worldwide but the upward momentum has stalled at the current US$635/ ton. Most feel that we will see heavy price erosion in April as demand weakens. This anticipated decline will be warmly welcomed by many down stream producers whose margins have been slammed by the massive cost spike.

Nitric Acid: Nitric Acid prices are now 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. Nitric Acid demand is described as “good” despite the cost increases.

Plasticizers and Plasticizer Alcohols: Although plasticizer demand has been seasonally flat there is renewed interest, especially in Asia as oil prices top the $100/ barrel mark. A US$.04/ lb. increase has been announced in North America to take effect April 1st. PZ Alcohols remain balanced to tight as planned outages in all of the major production geographies begin. 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: Since the beginning of 2008 ESO prices have increased by $.20- $.30/ lb. depending on the manufacturer. An April 1st increase has been announced by all producers in the $.15- $.20/ lb. range. An $.08/ lb. to $.10/lb. increase took effect on Jan 1, 2008. Feedstock pricing has leveled but at escalated pricing.

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. Polyester Resin market reported to be extremely slow.

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 25- 50+% premium.

Maleic Anhydride: Although demand continues to be slow feedstock pressures remain. Huntsman will bring on an additional 100 Million lbs. plant in Geismar, LA in the 4th quarter of this year. The addition of this capacity in a slower demand market could devastate pricing despite feedstock pressures.

Styrene monomer: Pricing advanced in March in line with Benzene pricing. Availability has become more limited.

Phthalic Anhydride: Demand is seasonal but with Orthoxylene prices advancing again in March PA pricing will surely follow. Buying interest has returned as well, pushing prices higher in many geographies.

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 EPA’s recent draft version of the “Contaminant Candidate List” (CCL) identified 11 microbes and 93 chemicals as contaminants in drinking water that could be regulated by the agency. It was reported that being on the list does not mean that a substance will be subject to restrictions. The materials on the list are under review by the EPA. The list was generated in response to requirements of the Safe Drinking Water Act that mandates that the EPA must determine whether or not new regulations are required.

A recent announcement from the American Chemistry Council stated that the US recycled 812 million pounds of post-consumer film (including plastic bags) in 2006. This was 24% higher than 2005 and the volume is expected to continue to climb. A major use for recycled plastics, especially grocery bags, has been for manufacture of “green” building materials.

Solutia stock is once again listed on the NY Stock Exchange, under the new symbol SOA. An agreement on financing was reached after Solutia sued its creditors. The emergence from bankruptcy first declared filed in 2003 was delayed due to tightness in credit markets.

The chlor-alkali market is expected to remain strong with high pricing through 2008. High transportation costs will add to this price pressure.

A number of multinational chemical producers are looking toward emerging African economies as potential investment opportunities.

The period for the EU’s pre-registration program for REACH of June 1 to November 30 is fast approaching. Reports indicate that only about half of US manufacturers outside the chemical industry are even aware of their obligations under the program’s requirements. Trans-Atlantic supply disruptions have been predicted.

Perstorp has entered exclusive negotiations for the purchase of the isocyanates businesses of Rhodia and Lyondell Chemie.

On April 1, Wal-Mart will begin screening chemical-intensive products for adverse environmental effects. In some cases, it may seek product reformulation. The process will be operated by third-party firms.

The Responsible Care Conference & Expo held by the American Chemistry Council will take place on April 27-30 in Miami. A topic planned for discussion is the design of stewardship programs to meet REACH, global product strategy requirements, Responsible Care security code and more.

Environmental groups around the US are suing to halt construction of ethanol-producing activities as more facts emerge regarding environmental/economic impact of such projects. For example, the city of Tampa put approval of ethanol plant permits on hold when it emerged that a proposed facility would require 400,000 gallons of water per day to operate. This is more than the drought-stricken city can supply. Similar legal battles are being fought in Missouri, Minnesota, Iowa, Nebraska, Kansas and Illinois. Present forecasts are that more than 33% of all US-grown corn will go toward use in ethanol in the next ten years and this could result in future conflict.

Brazilian ethanol output has been predicted to climb past 100 billion liters/year by 2025 from 22 billion in 2007.

Bell Bio-Energy, Inc. has stated that the company has isolated and modified specific bacteria that will, on a very large scale, naturally change plant material such as the biomass that often ends up in a dump into hydrocarbons for motor fuels. The company’s work has received support from the US Department of Defense, Department of Energy, Department of Agriculture and committees in both houses of Congress. A pilot plant is planned for start-up within the next few months with larger facilities in operation within approximately two years.

Despite setbacks in energy projects in Nigeria and Russia, Royal Dutch Shell is presently tapping more oil and gas reserves than it is selling. Thanks to large investment in these new reserves, from 2010 onwards the company’s production is expected to increase by up to 3% per year. Current daily oil output is 3.44 million bbls.

Chevron expects to increase its natural gas and oil reserves by 5% in the next three years. However, this increase will not compensate for the 7% drop in reserves. Natural gas and oil reserves will reach the equivalent of 11.3 bbls of oil by the end of 2010, slightly less than Chevron’s level in 2005.

The president of the American Trucking Association has urged President Bush to release oil from the Strategic Petroleum Reserve in an attempt to stem the increasing crude oil prices and their impact on diesel fuel. ATA reports that the US trucking industry is expected to spend $135 million for diesel fuel this year, an increase of $22 million from a year earlier.

New proposals from the European Commission would establish heavy fines for companies with high levels of Global Warming Gas emissions. Target date of 2020 would require the chemical, fertilizer, and aluminum industries in the EU to reduce carbon dioxide and other greenhouse gases by 10% vs 1990 levels. It’s been estimated that implementation will cost $80 billion/year and reduce global competitiveness of European companies.

Venezuela scored a partial victory in its dispute with Exxon Mobil over nationalizing oil fields. Frozen $12 billion assets of PDVSA, the state-owned oil company, have to be released according to a recent court decision.

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.

The low value of the US dollar has resulted in a large increase in export activities. This surge in business has put unusual demand on carrier capabilities. Concurrently, lower import activity has resulted in fewer available containers, reversing the balance of recent years. Carrier rate increases/fuel surcharges have been predicted when carrier contracts expire.

The number of incidents where railcars released hazardous materials increased in 2007 from 28 to 43 in the US. The total number of rail accidents declined 14% but hazmat incidents increased. An official of the Federal Railroad Administration stated that the increased shipment of ethanol likely contributed to the number of hazmat incidents.

The Economy

Privately owned housing starts in February were .6% below the January rate. On a year to year basis, single family housing starts declined 28.4% in February.

New orders for durable goods in February decreased $3.6 billion, or 1.7%, to $210.6 billion. This followed a 4.7% January decrease. Excluding transportation, new orders decreased 2.6%. Excluding defense, new orders decreased 1.6%.

Consumer Price Index increased 0.3% in February. The February level was 4.0% higher than February 2007.

Interest rates: Prime at 5.25% as of 3/18/08; possible further reduction.

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

Unemployment: February 4.8%.

Trade Deficit: Decreased to $711.6 billion in 2007 from $758.5 billion in 2006. For January 2008 the goods and services deficit increased to $58.2 billion from an adjusted $57.9 billion in December.

Crude Oil: Average $90/bbl predicted for 2008.

Industrial production fell 0.5% in February, after an increase of 0.1% in January. Much of the decrease resulted from a weather-related drop in utilities output. Total industrial production in February was 1.0% above its year-earlier level. Capacity utilization rate for total industry in February fell 0.6% to 80.9%, the lowest rate since November 2005.

GDP slowing to 1% for 2008.

The US dollar trading at 100.07 yen. $1.56 = euro. The British pound sterling = $2.OO.

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