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 bob@thechemco.com

Critical Raw Materials Markets

Oil: Current prices are in the $87.00- $90.00/ bbl range. Crude oil futures dropped 28% in Q3, their biggest decline since 1991. Check thechemco.com for up to date info.

Natural Gas: Current prices trading at ~$6.60/MMBtu; Futures contracts at ~$7.45/MMBtu.

Benzene: Benzene prices increased slightly in September despite decreases in crude and naphtha. September pricing was marked at US$4.46/ gallon a $.01 increase over August.

Propylene: September and October prices dropped significantly. Chemical grade at $.635/ lb., polymer grade at $.65/ lb.

Orthoxylene: September contracts settled at $0.58/lb.

Chemicals Markets

Methanol: The Methanex Non-Discounted Reference Price for October set at US$1.50/gallon down US$.08/ gal. from September. Spot average slipped into the $1.20’s until the latest announcement by Southern Chemical that MHTL’s M5000 unit experienced a mechanical failure and has been shut down. It is expected to take 2.5 months to rectify the problem forcing Southern to declare force majeure and allocate their contract customers (100%) retroactive to October 1st. Spot has already jumped on this news and is expected to continue to strengthen. Despite this latest announcement most global producers are operating normally and demand is soft in derivatives, especially formaldehyde.

Urea: Urea prices have crashed as of late due to limited buying interest from both domestic and international players. Global price erosion and cheaper nitrogen options are also cited as reasons for the free fall in price. Current NOLA pricing is seen in the low $500’s per ton.

Adipic Acid: A Force majeur declaration by Invista on September 11th due to the affects of hurricane’s Gustav and Ike at both (Orange and Victoria totaling 530K tons per annum) Gulf Coast AA facilities has firmed pricing in North America. Supply and demand fundamentals are the obvious driver as raw material costs have stabilized or declined in value.

Melamine: Prices have stabilized globally as Urea prices decline. The continued export duty on Urea in China has kept Urea prices down and China has emerged as the low cost alternative foe Melamine supply. Domestic producers report good demand.

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

Ammonium Nitrate: AN prices tied to an ammonia surcharge are peaking. There was a slight dip in Ammonia prices last week fueling hope for continued erosion and a lower surcharge. Demand has softened considerably in some sectors while mining demand remains good. At current Ammonia prices ($880/ ton) the surcharge will be significant.

Ammonia: Prices have slipped slightly and many are hopeful that falling urea and phosphate prices will push ammonia down as well. Current U.S. Gulf NOLA barge pricing is US$868/ ton (NOLA Barge) down US$12/ ton. Lower prices are expected in the coming weeks.

Nitric Acid: Nitric Acid prices will increase in October for those not tied to an Ammonia surcharge. Those that are tied to the Ammonia Surcharge are seeing the cost peak and are hopeful for a decline in the coming weeks. Nitric Acid demand is described as “good” despite the cost increases.

Plasticizers and Plasticizer Alcohols:
Pricing on most plasticizers has come down slightly mainly due to the drop in propylene pricing. North America is seeing some demand improvement after the typical summer slow down while Asia is quite slow. Domestic producers continue to have Asian import pressure on commodity pz’s.

Hurricane’s Gustav and Ike caused outages at several Plasticizer Alcohol plants. Pricing has stabilized in North America and Europe while Asian prices are dropping.

TCC Plasticizers available:
8 10 Trimellitate
Brominated DOP
ChemFlexx 206 Linear Phthalate Plasticizer
Chemflexx 208 Low Temp Linear Phthalate Plasticizer
Citrate Esters
Epoxidized Soybean Oil

Epoxidized Soybean Oil: Prices rolled into October in most cases while demand is very healthy. Producer margins are still snug despite good demand. Soybean prices are down over the last three months shedding 1/3 of their value. There is no allocation- but new demand is not being considered by most producers.

Dicyandiamide: Prices have weakened and inventories in China are high. Many consumers are not happy with what was considered opportunistic pricing and unethical business pre Olympics. As expected prices did come down after the “Olympic Effect.” Many consumers followed our recommendation to order early and increase inventory, those who did not are paying for it (literally) or looking for alternate products to use in their application.

Dicyclopentadiene: Stable Market- feedstock pressures continue. Polyester Resin market reported to be extremely slow.

Fumaric Acid: China remains the most competitive source globally. More stable supply from China has returned now that the Olympics have ended.

Isophthalic Acid: Stable market. Prices remain in excess of $1.00/ lb for both domestic and import.

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. Logistical issues due to high water in the Mississippi River has 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 was stable moving into October but many consumers were having supply issues due to plant outages in hurricane affected areas. Many consumers are paying a premium to maintain supply until those plants affected come back on-line.

Phthalic Anhydride: Despite a reduction in orthoxylene PA prices firmed slightly. This has confused many buyers who were waiting for lower prices based on raw material costs. It is speculated that PA producers increased prices to cover upcoming maintenance expenses.

Mono Ethylene Glycol: Very little spot MEG is available post hurricane affect and this is expected to continue through October. Spot truck and rail offers have been seen in excess of 90 cts per lb. All but one producer affected by Ike and Gustav are expected to be back up at report time, but significant volumes (140k tons) were lost over the last month. Spot pricing is irrelevant with almost no material available for sale. Despite the problems in North America pricing in Asia is way down and unaffected by US producer issues. Pricing and availability should return to normal by mid- November,

Diethylene Glycol: Spot DEG remains very hard to find while opportunistic traders offer material at significant premiums. Demand is good for DEG but many cannot afford to pay the premium prices that are offered. A 3- 10 cts/ lb. increase was announced for October but spot trucks and rail are being offered in excess of 90 cts/ lb. A large amount of imports are expected toward the end of October into November stabilizing this tumultuous 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 continues to grow as reports of food products tainted with melamine increase. Any processed food with milk or protein in it can be suspect. Chinese food producers were found to be adding melamine to watered-down milk in order to boost its apparent protein content. The compromised dairy products, which can include biscuits, cake mix, energy bars, candy, etc. have been blamed for sickening 54,000 children. This issue follows a recent incident of melamine-contaminated pet foods from China.

Honeywell, based in Morris Twp., NJ has patented a method for combining ammonium nitrate fertilizer with ammonium sulfate, which changes the chemical structure so that it is no longer explosive. The Department of Homeland Security has certified the new fertilizer, which Honeywell calls ammonium sulfate nitrate.

The Czech Republic parliament recently overrode President Vaclav Klaus’s veto of REACH. President Klaus had argued that it would be too expensive.

The US Chemical Safety and Hazard Investigation Board (CSB) will open its first regional office in Denver, CO early in 2009. They may add an additional investigative field office in Houston, TX in 2010.

BASF, the world’s largest chemical company, agreed to buy CIBA Holding AG for 6.1 billion Swiss francs (US$5.5 billion) in order to compete better in the paper chemicals market.

Many chemicals produced in the US have come under scrutiny by the EU and the REACH program. Sixteen chemicals, including three phthalates, are already named as “chemicals of concern” under the new system. The US manufactures more than one billion pounds of 14 potential REACH-listed chemicals.

According to a recent court ruling, Hexion must honor its deal to acquire Huntsman Corp. The court ruled that Hexion didn’t have grounds to cancel the US$6.5 billion offer. Hexion has the option to appeal the decision. Most of the proceeds are destined for Utah charities, according to CEO Peter Huntsman.

Perstorp has acquired the isocyanides businesses of Rhodia and Lyondell Chemie, a division of LyondellBasell.

The recent ICIS listing of the 100 top chemical companies showed BASF, Dow and ExxonMobil rankings remained at one, two, and three respectively.

Lanxess has announced that it will be moving its headquarters from Leverkusen to Cologne, Germany. The process is expected to be completed by 2011. The new office will house about 500 of the 8,000 German employees. Lanxess has also combined its Canadian and US-based businesses into a new North American organization based in Pittsburgh, PA. They will continue to operate as separate legal entities.

Velsicol is forming a separate new business, Genovique Specialities Corp. This was formerly known as the Plastic Additives, Benzoic Acid and Derivatives Business of Velsicol.

Westlake Chemical announced plans to build a US$250 – 300 million chlor-alkali plant in Geismar, LA. It is expected to produce 250,000 electro-chemical units (ECU’s) per year. Completion is expected in the first half of 2011.

Huntsman Petrochemical has delayed the start-up of their Geismar, LA 100 million pound maleic anhydride facility from the end of Q4 2008 until the end of Q1 2009.

DSM will be closing its Chinese citric acid manufacturing plant by Q1, 2009 and will result in the loss of several hundred jobs. Because of citric overcapacity in China, DSM will not relocate the plant.

Starting in September, EON will be restructuring its marketing activities in Germany and expects to cut up to 1,800 jobs.

The world’s first pilot plant for researching low carbon dioxide power generation (carbon capture and storage) based on lignite has started operations in the German state of Brandenburg.

Industrial gases producer Linde has entered into a joint venture with SINOPEC, state owned Chinese oil and chemical corporation. Investment will be in the range of 100 million euros.

The sale of a 25% stake in Evonik Industries AG to CVC Capital Partners, British private equity company, is complete. Sale price was reported as 2.4 billion euros.

Shell recently became the first western oil company to return to Iraq. Iraqi and Royal Dutch Shell representatives have signed a contract to extract natural gas in southern Iraq.

Reflecting an increasing Russian presence in global energy supply, Gazprom, the Russian gas monopoly has entered a partnership with Vietnamese oil and gas company Petrovietnam to explore and tap gas fields. The venture is known as Vietgazprom. Gazprom is also weighing possible projects in Algeria, Egypt, Pakistan and Bolivia.

On September 26, 1908, Jersey City, NJ made history when it became the first city to chlorinate drinking water supply and deaths caused by waterborne disease plunged.

The Russian government recently ordered a cut in export duty on crude oil and petroleum products. The government revises these duties every two months.

Bisphenol A (BPA) continues to come under scrutiny. The plastics and food packaging industries maintain that for certain uses there are no alternatives to BPA. There is activity demanding banning of it in products such as baby bottles. BPA is used to make polycarbonate plastic, a transparent, durable, and shatter-resistant material in products including water bottles, plastic utensils and medical devices.

Recent “green chemistry” demands have resulted in new product innovation. Genomatica, a San Diego-based company says it can now make 1,4 butanediol (BDO) using sugar. The annual global market for BDO is approximately 3 billion lbs. Dow is constructing a plant in Brazil, scheduled for start-up in 2011, to make polyethylene out of sugar cane.

Kemira plans to open an R&D center at the Georgia Tech campus in Atlanta, GA in the summer of 2009. The center, which will employ 85 R&D professionals, is part of the Finnish company’s efforts to consolidate R&D sites.

US ethanol producer POET plans to start up a pilot plant in S. Dakota later this year in order to produce ethanol using corn cobs as feed stock.

3M announced that it will create a new business unit to focus on renewable energy and to increase the company’s stake in the business. The company presently has sales of ~US$200 million/year from the manufacture of Fresnel lenses, mirrored solar panels and films for the $20 billion solar energy industry.

Leading oil companies are working with government agencies and universities to determine the potential for using algae as a source of biomaterial for the production of biofuels, including gasoline, kerosene, naphtha, heating oil, and jet fuel. The “biocrude” potentially could be cost-competitive with fossil fuels.

The Russian government has suspended the regulations regarding transition to European fuel standards. It’s been reported that Russian enterprises are not able to meet the new grades of gasoline in the near term.

The Mexican government has announced plans to establish a new port at Punta Colonet, 150 miles south of Ensenada in Baja Mexico. Mexico plans to have the port in business in 2012. This new facility is expected to relieve the congestion at the ports of Los Angeles and Long Beach.

Congress has approved legislation combining important rail safety provisions with the reauthorization of Amtrak. Some issues addressed are train crew staffing and operations. The American Chemistry Council has endorsed this action as critical to the chemical industry.

The Economy

The rescue bill finally passed by the Congress and signed by the President finally amounted to more than $800 billion, including more than $100 billion in add-ons. The general agreement seemed to be that “the cost of doing nothing is greater than the cost of doing something.”

In August, retail sales declined 0.3%, but were 1.6% above August 2007. Holiday sales are anticipated to bring only a 2% increase.

Consumer debt projected to be $2.6 trillion by year end, close to $8500 for every man, woman, and child in the US.

Privately owned housing starts in August were 6.2% below the revised rate for July, and 33.1% below August 2007. Single family housing starts declined 1.9% in August. However, nonresidential construction is much healthier. New government data shows that it has increased by 14% above January – July 2007, with 4% due to inflation.

New orders for durable goods in August, after three consecutive monthly increases, decreased 4.8% to $207.6 billion. Unfilled orders for manufactured durable goods in August increased 0.4% to $827.2 billion, following a 0.7% increase in July.

Consumer Price Index decreased 0.4% in August. The August level was 5.4% higher than August 2007.

Interest rates: Prime at 5.00% as of 4/30/08; 4.5% in 2009.

Inflation: August 5.4 %

Unemployment: August 6.1% up from 4.7% a year ago.

Trade Deficit: For July 2008 the goods and services deficit increased to $62.2 billion from an adjusted $58.8 billion in June.

Crude Oil: Average $110/bbl predicted for 2008.

Industrial production decreased 1.1 % in August after an increase of 0.2 % in July. Capacity utilization rate for total industry in August was 78.7%, a level 2.3% 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 106 yen. $1.41 = euro. The British pound sterling = $1.78.

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