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Critical Raw Materials Markets
Oil Price: ~$95.00/bbl.
Natural Gas: Current spot prices average ~$/7.27/MMBtu; December contracts settled at ~$7.835/MMBtu.
Benzene: Spot prices reported $3.39 – $3.51/gal; some December trades at $3.48/gal.
Propylene: US contracts in November were up $0.0725/lb from September at $0.60/lb
Orthoxylene: November contracts increased $0.025/lb to $0.47/lb, with December increase expected.
Methanol: The recent record breaking price level announcement by Southern Chemical is reflective of the critically short methanol market. Spot buyers continue to scramble for mostly unavailable product and contract customers remain allocated. Southern’s price increase announcement of US$.75/ gal. for their December reference price brings their posted barge number to US$2.80/ gal. while truck and rail pricing is announced at US$3.05/ gal. Methanex has yet to announce but I expect a similar increase. The good news from select locations of plant restarts are offset by new outages in China and Algeria while Methanex’s Chilean assets remain at 1 of 4 operational plants.
Urea: Urea prices are again moving up as spot granular barges are in the US$415- $420/ton range and rising. $500/ ton is likely in the not too distant future. PCS has just announced a $100/ ton increase effective December 1, 2007. Expect further increases as agricultural demand is not expected to go away anytime soon.
Adipic Acid: US prices remain flat as Asian prices continue a decline due to a continued lack of demand and oversupply. Asian prices which have been very strong in recent years have dropped an amazing 30+% this year. US Pricing stable and seen at $.88- $.92/ lb. for large consumers.
Ammonium Nitrate/Ammonia/Nitric Acid:
Ammonium Nitrate: Prices will increase at year’s end (1/1/08) from $35- $100/ ton based on contracts. Those protected throughout the year will see the largest increase vs. those already adjusted this calendar year. Increased costs from production, security, raw materials, insurance, labor, etc. are all sighted as reasons for the increase.
Ammonia prices are up from the $300/ ton range to $350+/ ton. There are indications that prices will continue to advance.
Nitric Acid: The Nitric Acid situation continues to trend toward improvement with some regional problems noted. January 1, 2008 ($15.00/ ton) increase anticipated based on increased ammonia prices.
Plasticizers: Another increase on plasticizers and alcohols has been announced for December due to continuing pressure on feed stock costs, precipitated by the rise in oil. Freight costs continue to escalate for both oceanic and inland freight. Demand remains high and supplies continue to be snug but adequate.
TCC Plasticizers available:
ChemFlexx 206 Linear Phthalate Plasticizer
DINP — Limited availability, with worldwide tight supply.
8 10 Trimellitate
Epoxidized Soybean Oil: TCC offers ESO to North American consumers at competitive prices. Feedstock pressures continue as increased prices are noted. We expect further increases as soybean prices continue their upward momentum, some 15% in the last 3 months.
Dicyandiamide: $.10+/ lb. price increase announced in November as higher energy prices, increased ocean freight and the end to Government Price Support took effect in China, as well as a 5000 met ton production scale down by a major Chinese producer. Anti- Dumping regulations on Dicyandiamide from Mainland China begin in Europe.
Dicyclopentadiene: Stable Market- feedstock pressures continue.
Fumaric Acid: Prices increase in China due to the lack of Gov’t tax rebates and increased energy costs. China remains the most competitive source globally.
Isophthalic Acid: PIA remains critically tight but there seems to be a light at the end of the tunnel. December may see some improved production performance and better availabiltiy from the two domestic producers. Imported material still available at a 50+% premium.
Maleic Anhydride: Prices move up following Butane for those with butane adjusted contracts. A large increase is in the pipeline for those adjusted monthly or quarterly.
Styrene monomer: Prices seen in the high 60’s per lb.
Phthalic Anhydride: Demand is generally flat on PA with plasticizers being the exception. But, with two domestic producers having planned outages, available inventories prior to an anticipated December increase of $.025/ lb. are scarce. Prices should continue to trend upward through the end of the year.
Chemical Industry News
The Department of Homeland Security recently released Appendix A of the Chemical Facility Anti-Terrorism Standards, a critical element of its chemical security efforts. It contains a list of chemicals that if possessed by a facility in a specified quantity, trigger a requirement to submit an online consequence assessment tool called a Top-Screen. The Department stated that it then be better able to make a preliminary determination as to whether a facility represents a high level security risk. Appendix A was published in the Federal Register on November 20.
The European Commission has published a second revision of the fees to be charged by the new European Chemicals Agency for registration of chemicals under REACH regulations. They are generally higher than those originally predicted and industry spokesmen have stated that significant damage will be done to the industry.
According to the American Chemistry Council, the US chemical industry has achieved significant energy efficiency gains. Since 1974, the business has reduced its fuel and power energy consumed per unit of output by nearly half. It has improved by 27% since 1990. American chemistry has contributed a significant variety of energy-saving materials as well. The ACC cites lightweight plastics and composites, lubricants, and insulating materials as examples.
DSM has announced that it will expand its China-based engineering plastics compounding capacity by 50%.
The US exports hundreds of thousands of tons of electronic waste. Workers in countries such China, India, and Nigeria then extract the recyclables, creating toxic exposures. The EPA is working with environmental groups, recyclers and electronics manufacturers to certify companies that recycle responsibly.
The Russian government has approved a zero rate of export customs duties on some chemical products effective January 1, 2008. The zero export duties will apply to butanols, virgin propylene polymers and other olefin polymers, and some pharma grade products. The current export duty is presently 6.5% on these products.
Russia’s Gazprom is considering splitting its gas chemicals business into two companies. The first will make methane-based products, e.g., ammonia, methanol, fertilizers, while the second will produce polymers and rubber based on light hydrocarbon feedstock. This strategy provides for a more than twofold increase in output by 2015. In order to implement the strategy, Gazprom is planning significant plant expansions.
An explosion early in November at the Valero Energy Corp. Port Arthur refinery resulted in an emergency shutdown. There were no injuries and the refinery is reported to be back to 60% of capacity.
Biofuels made from food crops are a “crime against humanity” according to the UN’s Special Rapporteur on the Right to Food, Jean Ziegler, and there should be a five-year moratorium on their production, according to a recent Reuters article.
Although the ethanol and biodiesel industries are booming and appear to be a good first step toward curbing our reliance on petroleum producing countries, concerns about biofuels are beginning to surface in the US and other areas. In this country, a new coalition of environmentalists and advocates for the poor have started raising questions about the tax breaks, subsidies, and mandates that have fueled the growth of the industry. The US and Europe are both seeing the growth of the “food vs fuel” debate. Increased ethanol production has led to a spike in corn prices and has resulted in food shortages in some third world countries. European biodiesel producers are requesting that the US withdraw its $1/gallon blenders excise tax credit, claiming an unfair advantage to American exporters. The IMF recommends that the US and Europe eliminate tariffs on biofuels so that production will shift to more efficient operations.
Akzo Nobel shareholders recently approved the acquisition of ICI, to be completed on January 2, 2008.
PolyOne has agreed to acquire GLS, a specialty thermoplastic elastomer. The acquisition will give PolyOne access to health care and electronics markets.
Dow India has announced plans to set up an R&D facility with an investment of ~$102millions. They expect to employ 500 researchers by 2010.
Chinese energy company PetroChina recently overtook ExxonMobil as the world’s largest firm by market capitalization.
Chinese inflation increased to 6.5% in October; annualized inflation is expected to be 4.5% vs a government target of 3%. Chinese banks have been given “guidance” that in effect limits lending levels. Bank reserve requirements have been increased.
China’s third quarter GNP growth slowed to 11.5% vs 12% in the previous period.
Starting December 1, China will impose restrictions on new PVC and caustic soda projects for environmental reasons. It was stated that for reasons of economy of operation the capacity of any new such facility should not be less than 300,000MT/year.
The Federal Motor Carrier Safety Administration stated that starting in November trucks crossing the US-Mexico border will be tracked using satellite technology. The technology is GPS based.
Transpacific container shipping costs will increase in 2008. The rate is expected rise by $400 to US West Coast from Asia, and by $600 to all other US locations. It’s also expected that there will be a $400 peak season surcharge from June to October.
Rail strikes in France and Germany continued to disrupt European chemical supplies. Low water levels in the Rhine River have also caused barge shipping problems.
THE DOW JONES INDUSTRIAL AVERAGE SLIPPED SLIGHTLY BELOW THE 1300 MARK.
According to the Commerce Department, sales of new single-family homes increased by 3% in October. This may be an aberration, because building permits dropped 6.6% during the same period as builders face mounting inventories of unsold homes.
New orders for durable goods decreased $3.8 billion, or 1.7%, to $214.5 billion in September. This was the second consecutive monthly decrease. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 0.7%.
Consumer Price Index increased 0.2% in October. The October level was 3.5% higher than October 2006.
Interest rates: Prime at 7.50%.
Inflation: Currently 2.7%; lower 2008.
Unemployment: October 4.7%; expected to continue.
Trade Deficit: Decreased to $56.5 billions in September from $56.8 billions in August.
Crude Oil: Some analysts predict continued high prices with spike to $100, ending the year at ~$90. OPEC’s Secretary General recently reiterated OPEC’s contention that there is plenty of oil in the market, blaming high prices on speculation. US crude stocks are below last year’s level.
Industrial production for October decreased 0.5%, after a 0.2% increase in September and was 1.8% above its year-earlier level. Capacity utilization for total industry declined to 81.7%, equal to its year earlier level, but 0.7% above its 1976 – 2006 average.
GDP was reported up 3.9% in Q3, but some economists are skeptical due in part to the housing industry. Average 3% GDP growth, slowing in Q4, close to 2% for 2008.
US consumer confidence fell in October to the lowest level in 17 months according to the University of Michigan’s latest consumer sentiment index.
The US dollar trading at 108.17 yen. $1.483 = euro. The British pound sterling = $2.056.
Economists expect the US economy to grow slowly next year, aided largely by the falling dollar, so that “made in the USA” is a selling point. This should help to buffer a possible recession, but may create domestic shortages from time to time.