A MARKET UPDATE for September / October 2009

Events:

TCC will be attending the APLA from November 7 – 10, 2009 at the Nikko Hotel in Mexico City. To schedule time with a TCC Representative please contact Angela Diaz at angela.diaz@thechemco.com

New Product Lines:

TCC now offers Food Additives, Chlorinated Paraffin Oil, 85% Phosphoric Acid, Sulfonic Acids, Spray Dried UF Resins, and Specialty Chemicals to the Americas. For more information please contact Robb Roach at robb@thechemco.com or Tel: (401) 423- 3100.

New Products:

FOOD ADDITIVE PRODUCT LINE

Food Grade Acids:
Ascorbic Acid
Citric Acid (fine, granular)
Fumaric Acid (CWS, granular)
Malic Acid (DL, L, D)
Folic Acid
Succinic acid
P-Anisic Acid
P-Toluene Sulfonic Acid
Picolinic Acid
Lactic Acid & salts
Citrazinic Acid
Tartaric Acid (Granular & Powder)
Difluorophenylboronic Acid
Squaric Acid
Etc.
Food Preserving Agents:
Methyl Paraben, NF
Propyl Paraben, NF
Sodium Benzoate
Potassium Benzoate
Potassium Sorbate
Benzoic Acid
Butylated Hydroxy Toluene
EDTA (Disodium, Etc)
Sodium Erythorbate
Erythorbic acid
Sorbic Acid
Etc.

Others:
Caffeine Anhydrous USP
Glycine
L-glutamine
Casein
Methyl Salicylate
Taurine
Sucralose
Gums (Xanthan, Guar, Etc.)
Aspartame
Xylitol
Vitamins (B1, B2, Etc.)
Phosphates (dipotassium, tricalcium etc.)
Creatine Compounds (monohydrate,
citrate. Etc.)
Specialty food grade oils

Samples and tech data available upon request.

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.

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 $77.00- $80.00/ bbl range.

Natural Gas: Current pricing ~ $4.80- $5.00/MMBtu. November futures settled at $5.10/MMBtu. Natural gas in storage as of mid-October was at a record high, 13% above the five year average.

Benzene: US Benzene contract pricing increased by US$.25/ gallon in November to US$2.85/ Gallon. Spot prices are currently at $2.72/ gallon.

Propylene: October US contract prices were decreased $.10/lb bringing chemical grade and polymer grade to $.455/lb and $.47/lb respectively.

Orthoxylene: October contracts settled down $.025 at $0.375/lb. November is expected to increase.

Chemicals Markets

Methanol: The Methanex Non-Discounted Reference Price for November increased by US$.05/ gallon to US$1.00/gallon. Spot barge offers are currently in the $.95- $.98/ gallon range and firm with little availability. Despite a mid-month drop in spot pricing, in line with the Chinese Holiday, spot pricing rebounded quickly when Chinese buyers returned. North American inventories remain tight as producers and marketers push material toward China. Producers/ marketers continue to cut back North American consumers claiming limited availability on the spot market and unexpected outages. We expect prices to continue to firm over the next few months.

Notes:
U.S. pricing is now the highest in the world. This is getting the attention of producers/ traders.

There are unconfirmed reports of plant issues in the Atlantic Production Region. This is undoubtedly adding to the continuing supply issues on the East Coast and Gulf.

Iran’s Zagros units continue to run at a reduced rate (50%) due to energy supply issues.

The Petrona’s plants (Malaysia) are still at extremely reduced rates. Labuan-1 is down completely while Labuan-2 is running at reduced rates.

Chinese methanol producers (coal based and natural gas based) continue to gain confidence as prices increase and dumping investigations continue.

Current Contract Methanol prices in USD$ per gallon globally are approximately US $1.00/ gallon, Asia $.96/ gallon, and Europe $1.00/ gallon. Europe is a quarterly price and will change on Jan. 1st.

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 continues to be ravenous. 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 tremendous affect on demand and is an important development in what many consider the future of methanol, its use as a fuel.

Urea: Urea prices are in the US$250- $260/ ton range and quiet.

Notes:
Ammonia pricing is escalating which will eventually prompt upward momentum in Urea.

Adipic Acid: Adipic Acid remains very tight especially in Europe where Rhodia (France) declared force majeur in Mid- October. The force majeur was a result of their inability to receive raw materials. A very dry Autumn has brought the water level on the Rhine River to a point where barge traffic has become restricted.

Both the U.S. and Europe remain tight due to a combination of limited availability and a notable increase in demand. Prices have increased on higher benzene costs. Most North American and European consumers are not getting the volumes they need and therefore spot offers in excess of $1.20/ lb. are noted.

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$325/ton (NOLA Barge). Higher numbers are seen in Tampa ($355/ met ton Del.).

Nitric Acid: Nitric Acid pricing is stable at the moment. Demand is relatively weak. Pricing is expected to remain stable through Q4, 2009 and into Q1, 2010.

Plasticizers and Plasticizer Alcohols:

Plasticizer demand flat to good in most geographies. Pricing in North America is considered anything but orderly. There were several price increase announcements for varying amounts over the last few months and the success or failure of these increases varies depending on who you talk to. Consumers were hoping for some price relief in November but the current run up in oil pricing has squashed their hope temporarily.

State level phthalate restrictions/ bans are having a more rapid and greater affect on phthalate plasticizers, especially DOP, in the USA.

TCC Plasticizers available:
Phthalate:
DINP (DiIsononyl Phthalate)
“ChemFlexx 206” Linear Phthalate Plasticizer
“ChemFlexx 208” Low Temp Linear Phthalate Plasticizer 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 and demand is considered stable.

Dicyandiamide: Prices are moving up quickly on demand and increased raw material costs. Producers are reporting tight inventories and higher prices moving forward.

Dicyclopentadiene: Prices are stable with underlying crude values. The Polyester Resin market continues to be extremely slow.

Fumaric Acid: Fumaric Acid has become relatively snug and prices are moving up in line with butane values. Global values have also increased as demand improved and raw material costs move up.

Malic Acid: Global values have improved slightly with demand and increased raw material cost. Non- food/Technical applications are being re-looked at as other acid values remain inflated (eg. Citric).

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

Maleic Anhydride: Demand has improved slightly (although supply and demand remains completely imbalanced) and prices are moving up. Prices have increased between $.05- $.08/ lb. over the last two months. Underlying butane costs are the driver as supply obviously isn’t an issue. Rationalization of US plants is expected.

Styrene monomer: Benzene values have moved higher and so has SM pricing. Dow announced that they will close the styrene monomer and ethylbenzene unit in Freeport, TX by the end of this year.

Phthalic Anhydride: Orthoxylene decreased to US$.375/ lb. in October hence phthalic anhydride pricing will decrease by the same amount for November. Demand is weak but a plant issue at Koppers has put a lot of pressure on flake consumers. Many customers have been forced to scramble for flake product while Koppers works out the issues.

Mono Ethylene Glycol: MEGlobal has reduced their benchmark from US$.40 to US$.37/ lb. for November. Spot pricing remains around US$.31/ lb.

Diethylene Glycol/ Triethylene Glycol: Diethylene Glycol benchmark pricing dropped by $.06/ lb. to US$.37/ lb. for November. Spot pricing is seen around $.27/ lb. on rising inventories. Triethylene Glycol demand is weak as natural gas demand is off. Prices remain in the US$.70/ lb. range.

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

Solvay SA is selling its pharmaceutical business to Abbott Laboratories for US$6.6 billion. The deal is expected to close in Q1 2010 pending approval by European authorities.

Evonik Industries is planning to sell its Alzchem Group operations to BluO, a Luxembourg-based buyout group. Evonik doesn’t consider Alzchem a core business. No price was stated.

Evonik has commissioned a plant to produce 2-propylheptanol (2-PH) at Chemiepark Marl, Germany. Plant capacity is 60,000 MT/year.

DuPont representatives have stated that it may take up to three years before the company returns to its 2008 profit levels. DuPont showed an 11% increase in third quarter profits after a 19% sales drop in the second quarter.

Swiss specialty chemicals manufacturer Clariant recently announced that it would cut another 800 jobs worldwide in addition to the 1,850 job losses already in place this year.

Dow Chemical is planning to establish a research and development facility at the recently opened King Abdullah University of Science and Technology in Saudi Arabia. Completion of the center is planned for the end of 2010.

Dow Chemical said that it will lay off a number of workers at the Rohm and Haas headquarters in Philadelphia. Dow acquired R&H for US$15.7 billion in April. The company will pay the remainder of its loan for the acquisition through the sale of Morton Salt to Germany’s K+S for US$1.675 billion. This will make K+S the world’s largest salt company.

Dow is in a coalition of about 300 companies urging federal lawmakers to extend the tax credit for research and development which is due to expire at year end.

Force majeure was declared by Dow on its Voranate toluene di-isocyanate (TDI) at its Freeport, TX operation.

Cytec Engineered Materials and Mitsubishi Rayon Co., Ltd. have agreed to combine their leading resin and fiber capabilities for high performance composites applications.

BASF reported US$19 billion in sales for the third quarter, up 2.4% from the previous period.

US chemical plants were running at 71% of capacity in August, according to the American Chemistry Council. This figure is up from a low of 67% in December of 2008. Major chemicals manufacturers are expected to post stronger sales and earnings for the rest of 2009.

On October 5, President Obama ordered federal agencies to set a goal within 90 days for cutting their greenhouse gas emissions by 2020. This was said to be “leading by example” in fighting climate change.

The EPA has said that the Toxic Substances Control Act needs to be reformed because it has fallen behind industry. The American Chemistry Council agreed that regulations need to be modernized and was encouraged by the fact that the EPA approach was similar to one recently advanced by the ACC.

Surface trade between Canada, the US and Mexico was down 28% in July, compared to a year earlier. NAFTA surface trade dropped for the seventh consecutive month.

Russia’s January – August 2009 chemical output fell by 14.1% compared with the same period a year earlier.

Major Russian chemical companies have objected to proposed legislation entitled “On the Safety of Chemical Products” saying that it only complicates an already difficult procedure. The goal of the new regulations is to conform to the European REACH system.

China’s economy expanded more than 7% in the first nine months of the year and will surpass the growth target of 8% for the year, a Chinese economic official announced. The government $586 billion stimulus package was credited for the rebound. The program was focused largely on construction projects.

China National Offshore Oil Corporation stated that it will be bidding for an interest in Nigeria’s oil fields. This will put it in competition with Shell, Total, Chevron, etc.

Leaders from China, Japan, and South Korea have said that they would explore the idea of a free-trade pact, with the intent of moving toward regional integration. The three leaders agreed on the need to continue their economic stimulus efforts.

On October 1, 2008 the moratorium on offshore drilling expired but the Department of the Interior Secretary Salazar has indicated that no plans may be advanced until 2012. The Senate’s version of a cap-and-trade program says nothing about offshore exploration and largely ignores nuclear power.

The House of Representatives is planning to discuss a bill aimed at improving the security of chemical facilities that are at high risk for terrorist attack.

The director of the Congressional Budget Office recently said that legislation to curb carbon dioxide emissions would cause job losses while the economy transitions to clean energy sources. Industries such as oil refineries and coal fired power plants are expected to be most affected.

A group of chemical companies is proposing using the established ethanol facilities to make higher margin, environmentally friendly chemicals. This trend could aid the new green chemicals industry, and help to revive ethanol producers.

A Niagara Falls, Ont. company, 310 Holdings, Inc. has developed a proprietary process for producing oil from scrap plastics.

Ford, Lincoln, and Mercury US third quarter sales were 5% higher than a year ago, making Ford the only full-line manufacturer to report a sales increase in the period.

Demand for truckload services is increasing into the fourth quarter, and there have been some small rate increases in selected areas. The LTL market remains extremely competitive, with steep discounts.

The Transpacific Stabilization Agreement, a group that represents ocean carriers shipping from Asia to the US has announced that it is pushing for rate increases in an effort to restore the levels of 2008. A general increase of $800 is proposed for each 40 foot container moving to the West Coast and $1000 to the East Coast.

No further US government action has been reported regarding removal of Mexican tariffs placed against a variety of US exports after the US Congress cut the funding for its cross-border trucking pilot program.

The Economy

The Conference Board’s index of leading economic indicators increased in September following a 0.4% gain in August and 1.0% in July. The Conference Board noted that this was the sixth consecutive increase.

The Federal Reserve has stated recently that the recession is likely history; the housing market shows upticks and household spending is stabilizing. But consumer spending remains constrained by ongoing job losses, indicating a weak economy for some time in future.

In September, retail sales decreased 1.5% from August and were 5.7% below September 2008. Total sales for the July – September 2009 period were down 6.6% from a year earlier. Gasoline station sales were down 25.3% from September 2008.

Privately owned housing starts in September were 1.2% below the revised rate for August of 580,000 and 28.9% below the September 2008 rate of 806,000. Single family housing starts in September 2009 were at a rate of 501,000 or 3.0% above the revised August figure of 464,000.

New orders for manufactured durable goods in August decreased $4.0 billion or 2.4% to $164.4 billion. This was the second decrease in the last three months, following a July 4.8% increase. August unfilled orders for manufactured durable goods decreased $2.8 billion or 0.4% to $737.1 billion. This was the longest streak of consecutive monthly decreases since 1992, and followed a 0.1% July decrease.

Consumer Price Index rose 0.2% in September. The index has decreased 1.3% over the last 12 months, not including seasonal adjustments.

Interest rate: Prime at 3.25% as of 12/16/08 with possible 0.5% increase in the fourth quarter.

Inflation: Down .6% in September on an annual basis, with a modest increase expected in 2010 based on a recovering economy.

Unemployment: September 9.8%, the highest since June, 1983. A 10% rate or slightly higher is expected in early 2010.

Trade Deficit: For August 2009 the goods and services deficit decreased to $30.7 billion from an adjusted $31.9 billion in July as imports decreased and exports increased. Exports increased to $128.2 billion while imports decreased to $158.9 billion.

Crude Oil: Currently trading at ~$80/bbl, with little change in short term forecasts.

Natural Gas Spot prices and futures saw moderate increases in October. Supplies are more than adequate for short-term demand and inventory is higher than the five year average. A forecast for the coldest winter in a decade in the US Northeast is considered responsible for recent increases in natural gas and heating oil futures prices in spite of present high inventories of both fuels.

Industrial production increased 0.7 % in September, following a revised increase of 1.2% in August. For the third quarter as a whole, output rose at an annual rate of 5.2%, the first quarterly gain since the first quarter of 2008. Capacity utilization rate for total industry in September was 70.5%, up from 69.6% in August, a level 10.4% below the 1972 – 2008 average.

Revised estimates issued by the Bureau of Economic Analysis on September 30 show Gross Domestic Product drop of 0.7% in the second quarter of 2009. In the first quarter, real GDP decreased 6.4%. A modest increase is expected at year-end.

The US dollar trading at 92.1 yen. $1.50 = euro. The British pound sterling = $1.63.

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