A MARKET UPDATE for OCTOBER / NOVEMBER, 2008

TCC now offers Citrate Esters, Urea Molding Compounds, Melamine Molding Compounds 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 $63.00/ bbl range. December futures have been reported as low as $61.00. OPEC’s October meeting resulted in agreement to cut production by 1.5 million bbls/day beginning November 1. Peak price on July 11 of this year was $147/bbl.
Check thechemco.com for up to the minute info.

Natural Gas: Current prices trading at ~$6.35/MMBtu; Futures contracts at ~$6.50/MMBtu.

Benzene: Benzene prices declined 22 cts. per gallon in the U.S. to $4.24/ gallon in October but subsequent action has dropped pricing considerably more.

Propylene: October prices settled at chemical grade $.635/ lb., polymer grade at $.65/ lb., with lower prices seen in future.

Orthoxylene: October contracts settled at $0.50/lb., down $0.08/lb from September.

Chemicals Markets

Methanol: The Methanex Non-Discounted Reference Price for November is set at US$1.40/gallon down US$.10/ gal. from October. Spot offers are now below US$1.00/ gal. Despite the fact that the M5000 unit in Trinidad and Tobago remains down and Southern is on 90% allocation there is very little concern about availability. Why? Downstream demand is “way off,” and seasonal demand has yet to pick up. The Methanex plant in Montinui, New Zealand has been successfully re-started, the Indonesia Petronas 1.7 mill./ met ton per annum plant is expected to start this month and in Iran the Zagros II unit is expected to start by the end of the year. Unless there is one or several major supply/ production interruptions, contract methanol pricing should continue to erode through the remainder of 2008.

Urea: Urea prices had a slight uptick during the last week of October but quickly fell back to the current price level. Current NOLA pricing is seen in the low $300’s per ton. Bagged urea prices will decline in the coming weeks and months as lower priced inventories are brought into play.

Adipic Acid: With Benzene values slipping (Benzene makes cyclohexane the precursor to Adipic) and a lack of demand globally, prices on Adipic Acid are beginning to follow. US producers are holding their ground on pricing to a fault and many domestic customers are seeking alternate supply. Imports to China are falling dramatically as domestic producers gain a foothold on their market.

Melamine: With Urea prices crashing domestically Melamine pricing will surely follow. Demand is starting to erode but remained healthy for much longer than most expected.

Molding Compounds: Prices have stabilized for the moment as consumers eagerly await lower prices. Methanol, melamine and Urea price erosion should mean forthcoming price decreases.

Ammonium Nitrate: Low density AN prices tied to an ammonia surcharge will finally get some relief in the coming weeks. Ammonia pricing has finally dropped prompting sighs of relief heard all around the country. Demand on both low and high density has softened considerably in most sectors and some have successfully found alternate chemistries for their application.

Ammonia: Prices have slipped, Current U.S. Gulf NOLA barge pricing is US$615/ton (NOLA Barge). Lower prices are expected in the coming weeks.

Nitric Acid: Nitric Acid pricing is stable at the moment yet demand is starting to slip. Those that are tied to the Ammonia Surcharge will finally get some relief in the coming weeks.

Plasticizers and Plasticizer Alcohols:
Pricing on most plasticizers and plasticizer alcohols have come down following the drop in oil, propylene, orthoxylene and ethylene. Domestic demand is soft as buyers await lower prices. U.S. producers continue to have Asian import pressure on commodity pz’s.

Asian demand for plasticizers and plasticizer alcohols is absolutely zero and many producers are at reduced operating rates and facing tough times in the near term future.

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. Demand remains good and plants continue at capacity.

Dicyandiamide: Prices have weakened and inventories in China are high. Prices did come down after the “Olympic Effect” and continue to decline on lack of demand and building inventories. Most consumers are looking for lower prices which will come with the new/ lower cost containers arriving in the near term future.

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 lower butane costs. Logisitcal issues due to high water in the Mississippi River have delayed the expected start up date on Huntsman’s new 100 million lb. Maleic Anhydride plant in Geismar, LA. They now expect to bring up their plant at the end of Q1 2009.

Styrene monomer: Pricing will come down in November with lower Benzene values. Demand is extremely soft especially into the UPR market.

Phthalic Anhydride: Demand is poor globally as consumers await lower prices. Orthoxylene settled $.08/ lb. lower to US$.50/ lb. which moved Phthalic prices lower for November.

Mono Ethylene Glycol: MEG prices crashed world wide in the last couple weeks of October. In North America lackluster demand, cheap imports and good operating rates globally pushed prices lower despite a “tight market” just weeks ago. MEGlobal announced a $.15/ lb. decrease for November setting their November benchmark at US$.40/lb. Seasonal (antifreeze) demand is just starting to materialize but polyester fiber and pet resin demand is minimal. Asian prices collapsed even further to under US$.20/ lb. The lack of demand and extremely high global capacity should keep prices declining here in NA.

Diethylene Glycol: DEG is still tight but demand is nil. Polyester polyol and resin demand is falling off the charts along with the economy. The MEG price erosion will prompt lower MEG operating rates hence less DEG. This will likely further tighten this fragile market.

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 list of companies facing potential product recalls due to melamine contamination continued to grow. Any processed food with milk or protein in it can be suspect. The FDA says it has been testing the food entering the US and thinks the food supply is safe. It has been suggested that Halloween candy be checked for “made in China” identification, and to be safe, throw it away.

At a meeting of top Wal-Mart executives, nongovernmental organizations, and more that 1,000 suppliers in Beijing on October 22, the retailer announced an ambitious plan aimed at ensuring that its products are made according to strict environmental and labor standards. It was reported that Wal-Mart sourced Chinese products worth close to $10 billion last year.

The New Jersey Work Environment Council says it has identified nearly 100 industrial sites around the state that pose “potential catastrophic risks” to the public. The Council, an alliance of labor, environmental, and community organizations, states that New Jersey has not done enough since 9/11 to secure dangerous chemical facilities in the state.

A year ago, the Bayer Group withdrew from the New York Stock Exchange, and is now looking to delist its shares from the Tokyo Stock Exchange as well.

After winning a court decision regarding acquisition by Hexion Specialty Chemicals, Huntsman now says two banks providing funding have backed out of the deal. Hexion is a subsidiary of Apollo Management, a private equity firm, which has offered to contribute $540 million in order to close the deal.

The US Congress recently lifted the 26 year ban on offshore energy exploration and production. After the election, the Congress and Administration will need to address comprehensive energy legislation.

Conoco Phillips and Canadian partner EnCana are building a 356,000 bbl/day petroleum products refinery in Roxana, IL. At a cost of $3.6 billion, the operation will convert heavy residual oil and oil-sands bitumen into lighter oils and gases.

Falling gasoline prices appear to be lessening the appeal of biofuels. Ethanol producers are seeking new customers as their production ramps up, and are expected to produce 10 billion gallons of ethanol this year. Support for ethanol subsidies is wavering in an unsettled economic market.

Rising tension between Russia and the West has created potential sourcing problems for oil and chemical groups in Central and Eastern Europe. Russian crude oil supplies were recently cut to Poland and the Czech Republic when those countries agreed to US missile shields on their soil.

The European Commission has fined nine petrochemical companies a total of 676 million euros ($950 million) for taking part in an industry-wide paraffin wax trading cartel. Companies involved are ENI (Italy), ExxonMobil (US), Hansen and Rosenthal (Germany), Tudapetrol (Hungary), Repsol (Spain), Sasol (South Africa), Total (France). Sasol’s fine was increased by 50% for leading the cartel.

PVC resin prices declined 9% in October due to an oversupplied market. US producers continue to push material into export markets.

Under legislation recently signed into law, the US will ban the federal sale and export of elemental mercury immediately. All exports of the substance will be barred as of January 1, 2013.

Concern over Bisphenol A (BPA) risk continues. In October, Canada declared it a toxic substance and will now move to ban plastic baby bottles containing it. Some retailers have already begun removing BPA-based food-related products from their shelves. BPA is used to make polycarbonate plastic, a transparent, durable, and shatter-resistant material in products including water bottles, plastic utensils and medical devices. The American Chemistry Council announced that its members will abide by whatever decision comes from the FDA. The dental sealants painted on children’s teeth to prevent decay also contain BPA, but the American Dental Association noted that exposure is negligible and temporary.

The issues addressed in the Railroad Safety Improvement Act of 2008 range from rail worker hours of service to new training standards to railroad bridge safety and resolving disputes that arise when commuter and freight railroads share track. All these requirements are likely to affect rail operations, including increased cost to shippers.

Five major multilateral agencies from Europe, Asia, and Latin America have offered to finance the Panama Canal expansion project and the Panama Canal Authority. Total cost of the project has been estimated at $5.25 billions.

The Economy

In September retail sales declined 1.2% from August, and were 1.0% below September 2007. Total sales for the July-September 2008 period were up 0.8% from a year earlier.

Privately owned housing starts in September were 6.3% below the revised rate for August, and 31.1% below September 2007. Single family housing starts declined 12.0% in September.

New orders for durable goods in September increased 0.8% to $207.8 billion. This was the fourth increase in the last five months, following an August decrease. Unfilled orders for manufactured durable goods, up thirty-one of the last thirty-two months, increased 0.4% in September to $829.6 billion, following a 0.3% increase in August.

Consumer Price Index decreased 0.1% in September. This was 4.9% higher than September 2007.

Interest rates: Prime at 4.50% as of 10/08/08.

Inflation: September 4.9 %

Unemployment: September 6.1%.

Trade Deficit: For August 2008 the goods and services deficit decreased to $59.1 billion from an adjusted $61.3 billion in July.

Crude Oil: Average $95/bbl predicted for 2008, with continued low numbers in 2009.

Industrial production decreased 2.8 % in September, due in part to hurricane damage. For the third quarter as a whole, industrial production decreased at an annual rate of 6.0%. Capacity utilization rate for total industry in September was 76.4%, a level 4.6% below the average for 1972- 2007.

GDP grew at a revised annual rate of 2.8% in the second quarter.

The US dollar trading at 97 yen. $1.27 = euro. The British pound sterling = $1.60.

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