A MARKET UPDATE for May, 2012

THE VIEW FROM JAMESTOWN”
A MARKET UPDATE for
May, 2012
From
THE CHEMICAL COMPANY.

 Contact:

The Chemical Company
P.O. Box 436
44 Southwest Ave.
Jamestown, RI 02835
Phone: (401) 360-2800
Website: thechemco.com
Email: Info@thechemco.com

 Special Message:

Recently Delta Airlines entered into an agreement to buy the 185,000 barrel per day ConocoPhillips refinery in Trainer, PA.

Trainer, PA and the soon to be “Delta Airline Refinery” (Actually bought by their subsidiary Monroe Energy) lies just South of Philadelphia roughly half way between Philadelphia and Wilmington. More importantly it is front and center on the Delaware River. Access to offshore crude feeds the refinery where Delta intends to make as much Jet Fuel as possible and the rest will become gasoline. BP has agreed to take this gasoline and market it in exchange for jet fuel in other parts of the country.

Wow! For the price of a new wide body jumbo jet, Delta is now integrated into their most crippling cost factor. Assistance from the state of Pennsylvania made up around 20% of the $180 Million purchase price. What a deal! Or is it?

Why couldn’t ConocoPhillips run it profitably? The consensus is that the central North American refineries are at a significant cost advantage to those depending on imported crude. Crude is just too expensive from offshore sources. Wow, things change fast!

Well this is a call to creative logistics. If the central refineries are at an advantage cost wise then find a way to get the cheaper crude to Trainer, PA. It’s not too far. And then, maybe then… Delta can use their facilities on the Delaware for export. Crazier things have happened!

Quote of the Month:

I have noticed that people who are late are often so much jollier than the people who have to wait for them.”


Essayist E.V. Lucas, quoted in the London Independent

TCC Videos:

http://www.vimeo.com/24834423
http://vimeo.com/38459394
http://vimeo.com/38459041

TCC News:

We are pleased to announce that John Von Thaden has joined the TCC crew with a focus on marketing Iron Oxides. Welcome John!

Upcoming Events:

SPI’s Vinyl Products 23rd Annual Compounders Conference

Date: Sunday, July 15, 2012 – Tuesday, July 17, 2012

Description:
The Vinyl Products Division invites you to join us for the 23rd Annual Flexible Vinyl Compounding Conference to be held July 15-17, 2012 at the Loews Annapolis Hotel, Annapolis, MD.

Links and Social:

 Want to exchange links?? Contact us!


 For immediate updates on Chemical Industry News be sure to follow us on Twitter @thechemicalco or our facebook page here:

Habla Español??? The TCC website is available in Spanish!

TCC Downloadable Brochures

The Chemical Company Brochure
TCC Plasticizers and Plastics Additives
Iron Oxides
Composites
Flame Retardants

New Products In Stock

 Iron Oxide: TCC now offers Iron Oxide in a variety of shades and particle sizes. Please see above data card for more information.

Composites: TCC now offers a variety of composites to the North and South American market. Please see above brochure for more info.

Sydol 61 Silane 850 Kg. Totes and 250 Kg. Drums

Zinc Borate 25 Kg. Bags
Citric Acid: 1,000 Kg. and 25 Kg. Bags (In Stock and Available Now!)
Dicyandiamide: 25 Kg. Bags (In stock and available now!)
Malic Acid: 25 Kg. Bags (In Stock and Available Now!)
Maleic Anhydride Briquettes: 25 Kg. Bags (In Stock and Available Now!)
Acetyl TriButyl Citrate: 1,000 Kg. Totes and 250 Kg. Drums (Our NatureFlexx 509 is in Stock and Available Now!)
Adipic Acid: 25 Kg., 500 Kg. and 1,000 Kg. Bags (In Stock and Available Now!)

Products In Transit/ Available Soon

Neo- Pentyl Glycol (NPG) 500 Kg. Sacks
Tetrakis-(hydroxymethyl)-phosphonium chloride 2200 lb. Totes
Bio- Succinic Acid 2000 lb. supersacks and 25 Kg. Bags
Antimony Trioxide High Tint, Supersacks

New/ Updated Technical Information (hyperlinked):

Antimony Trioxide
ATBC – Nature-Flexx 509
Chemflexx 206
Chemflexx DOA
Chemflexx TOTM
Citric Acid
Dicyandiamide
Diisononyl Phthalate
Epoxidized Soybean Oil
Fumaric Acid
Malic Acid
Methanol
Succinic Acid
Tartaric Acid
Urea

 Please contact Robb Roach at robb@thechemco.com
or Tel: (401) 423- 3100 for more information.

 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

**Please note that all products are now in Alphabetical Order and many products are hyperlinked to their own information page.**

At the end of each paragraph you will notice a symbol and the meaning of these symbols are as follows:

+ Denotes upward pricing momentum
\ Denotes stable pricing momentum
Denotes downward pricing momentum

CRITICAL RAW MATERIALS MARKETS

Benzene U.S. benzene contracts for May settled higher to US$4.21/ gallon, up just $.09/ gallon from US$4.12/ gallon in April. Spot prices have firmed. +

N Butane Butane prices were trending much lower in the $1.70- $1.75/ gallon range. This is a large drop from the $1.90- $2.00/ gallon seen over the Winter.

Ethylene U.S. May Contract Price decreased by $.005/ lb. to $.5525/ lb. Spot is currently in the low US$.60’s/ lb.

Natural Gas Late April prices were below $2.00/MMBtu, dropping as low as $1.82/MMBtu. However, May contract reported at $2.07/MMBtu and June increased to $2.17/MMBtu. +

Oil Current WTI Crude price is at $95- $100/ barrel range. Recent pricing has been trending lower.

Check thechemco.com for up to the minute info.

Orthoxylene May contracts settled $.03/ lb. lower to $.68/ lb. –

Propylene May contracts decreased by US$.10/lb. to $.675/ lb. for Polymer Grade and $.66/ lb. for Chemical Grade.

CHEMICALS MARKETS

Adipic Acid: Adipic Acid pricing has been steady with healthy supply and mediocre demand. Chinese AA is a factor but with steady local supply shopping is not yet necessary. NA producers eye Western Europe as their growth market. /

For more information please contact Robb Roach at robb@thechemco.com

Ammonia: May pricing in Tampa has increased again and substantially up $75/ ton to $545/ ton. +

For more information please contact Robb Roach at robb@thechemco.com

Ammonium Nitrate: Ammonia pricing will pressure AN costs. Demand remains very good and supply is limited. +

For more information please contact AJ Petrarca aj@thechemco.com

Antimony Trioxide: Demand for antimony trioxide remains weak and pricing has moved lower. Current offers remain in excess of $5.00/ lb. Buyers continue to keep inventories to a minimum and use alternate chemistries where possible.

For more information please contact AJ Petrarca aj@thechemco.com

Dicyandiamide:       

Pricing has leveled after moving up over the last few months.  Seasonal demand will end soon and pricing may react.  Product is in stock and immediately available. / 

For more information please contact AJ Petrarca aj@thechemco.com

Epoxidized Soybean Oil: Pricing has dropped despite higher soy bean prices. Increased competition is noted from both new domestic producers and offshore.

For more information please contact Robb Roach robb@thechemco.com

Fumaric Acid: FA Pricing is stable. Butane has dropped to $1.70 + range but Maleic suppliers are pushing for higher prices. Considering the butane pricing lower prices should be on the horizon. /

For more information please contact AJ Petrarca aj@thechemco.com

 

Glycol (Mono, Di and Tri):

Ethylene has settled down .005 cts/ lb. for May to 55.25 cts/ lb.

MEG – North America will see some turnarounds in May. This will obviously effect supply. MeGlobal has reduced their benchmark for Mauy by $.03 cts/ lb. to $.54/ lb. – /

DEG- DEG spot prices bottomed out at US$.33 cts/ lb. They have now started to move up as some US producers begin their planned turnarounds and inventories move lower. MeGlobal reduced their benchmark by $.02 cts/ lb. to $.42/ lb. for May. /

TEG- Extremely high inventories have prompted some spot offers in the US$.60’s per lb.

For more information please contact Robb Roach at robb@thechemco.com

Isophthalic Acid:

PIA pricing has moved up some US$.02/ lb. for May. Supply and demand remain stable. /

For more information please contact Robb Roach at robb@thechemco.com

Maleic Anhydride:

Maleic Anhydride supply continues to be balanced to long in North America as blending season ends and UPR demand remains soft. An increase of 3 cts/ lb. has been announced for April 1 sighting higher raw material costs and lower steam value. Consumers are pushing back this latest increase. +/

For more information please contact AJ Petrarca aj@thechemco.com

Melamine:    

Melamine availability is long world-wide on massive new capacities in Trinidad and Qatar. Pricing dropped in Q4 but despite much higher urea pricing melamine prices have been stabile.  /

For more information please contact Javier Fernandez  Javier@thechemco.com 

Malic Acid: Malic Acid supply has improved but long lead times continue. TCC has Malic Acid in stock and available. /

For more information please contact AJ Petrarca aj@thechemco.com

Methanol: The Methanex Non-Discounted Reference Price for May has increased by US$.04/ gallon to US$1.38/ gallon. Spot pricing is currently approx. $1.15- $1.20/ gal. and trending up. +

For more information please contact Robb Roach at robb@thechemco.com

Notes:

Massive new capacities on MTO (Methanol to Olefins) slated for China. Methanol demand in this region could rise sharply and out-strip any new capacity in coming years.

Gas Curtailments in Trinidad continue and likely in the 15% range. The curtailments will continue as long as the gas delivery system cannot manage upstream outages.

Embargo on Iranian Methanol will likely cause a “re-shuffling” of volumes world- wide.

Nitric Acid:

Nitric Acid pricing is stable but increased ammonia pricing will likely pressure pricing in the coming months. Demand is good. /

For more information please contact Robb Roach at robb@thechemco.com

Phenolic Resins:

Phenol is more balanced and raw material pricing, specifically benzene has stabilized. Formaldehyde prices remain stable with methanol prices being relatively stable. /

For more information please contact John Santini at john@thechemco.com

Phthalic Anhydride: Phthalic Anhydride pricing will decrease by $.03/ lb. in June in line with the May orthoxylene price decrease.

For more Information please contact Javier Fernandez at javier@thechemco.com

Plasticizers and Plasticizer Alcohols:

Plasticizer demand has been steady. Most vinyl applications are steady with good demand. DINP has had very good demand but DOP has slowed in both NA and Asia.

Plasticizer alcohol demand has been steady. INA demand is good with very little excess availability. China has several 2-EH plants coming up in the near term future.

No new price changes been announced for June.

For May, Orthoxylene pricing will decrease by 3 cts/ lb., Propylene will settle down $.10/ lb. and Ethylene will also decrease by $.005/ lb. to $.5525/ lb. /-

For more information please contact Forest Goodman at forest@thechemco.com

Note: Some plasticizers have limited availability. Please contact TCC for further details.

TCC Plasticizers available:

Non- Phthalate:

ChemFlexx Dibenzoate Esters
ChemFlexx DiOctyl Succinate (DOSX)
ChemFlexx NP 500” Non- Phthalate Replacement for General Purpose Plasticizers
ChemFlexx NP 600” Non- Phthalate Replacement for DIDP
NatureFlexx 509” Phthalate Free General Purpose (ATBC)
Epoxidized Soybean Oil
ChemFlexx TOTM (TriOctyl Trimellitate)
ChemFlexx DOA (DiOctyl Adipate)
ChemFlexx 8 10 Trimellitate
ChemFlexx DOTP (DiOctyl Terephthalate)

Phthalate:

Vestinol 9 DiIsononyl Phthalate (DINP)
ChemFlexx 206” Functional Linear Phthalate Replacement
ChemFlexx 208” Low Temp Functional Linear Phthalate Replacement
ChemFlexx DOP (DiOctyl Phthalate)
ChemFlexx DUP (DiUndecyl Phthalate)
DMP (DiMethyl Phthalate)
ChemFlexx DOTP (DiOctyl Terephthalate)
Brominated DOP
ChemFlexx 9 11 Phthalate
ChemFlexx L9 Phthalate

Styrene monomer: Styrene Pricing will increase slightly for May in line with higher benzene values (up $.09 gallon). NA demand remains slow. +

For more information please contact Robb Roach at robb@thechemco.com

Urea: After a rocket ship ride the last two months Urea prices have stabilized in the $675- $700/ ton range for barges. Forward pricing looks like it will move lower.

For more information please contact Robb Roach at robb@thechemco.com

Notes:

Corn acreage this year should top 96 million acres!

It appears Urea has seasonally peaked and should move lower over the coming months.

Zinc Borate: Pricing has been relatively steady but demand has increased as consumers scramble to replace a portion of their Antimony Trioxide usage where possible. Product is in stock and immediately available.

For more information please contact Robb Roach at robb@thechemco.com

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

According to the American Chemistry Council (ACC) the US Chemical Production Regional Index rose by 0.1% in March, following a revised 1.0% gain in February, the fourth consecutive monthly gain. Chemical production rose in the Gulf Coast, Midwest, Ohio Valley and Southeast regions during the month. Production declined in the mid-Atlantic and West Coast and was flat in the Northeast. Compared with March, 2011, total chemical production in all regions was up 1.3%.

The FDA rejection of a ban on the use of BPA for food packaging applications was endorsed by the Polycarbonate/BPA Group at the ACC. It said that the agency had followed the right course and will continue to use science as “its compass to protect public health.” Canada and a number of EU countries have banned its use in baby products. BPA is also used to strengthen plastics and as a resin to protect metal containers from corrosion and on the metal lids of glass jars.

US chlor-alkali operating rate for March was 86% of capacity, down from 87% in February.

For the fifth year in a row air pollution in the US has declined, according to a new study by the American Lung Association. Aggregate emissions have dropped by approximately 59% over the past twenty years despite the fact that the manufacturing industry and the population continue to grow.

A proposed SABIC/Sinopec project in Trinidad would produce methanol and convert it into products such as ethylene and propylene. Trinidad’s energy ministry and other government departments are negotiating with SABIC/Sinopec.

Bayer MaterialScience announced the purchase of Arkema’s polycarbonate sheet business although terms were not disclosed.

Chevron Phillips Chemical will construct two planned polyethylene facilities in Old Ocean, Texas at an estimated cost of $5 billion. These will be the first ethylene derivative units at Old Ocean.

Delta Air Lines has entered into an agreement of sale with ConocoPhillips to purchase the 185,000 barrel per day refinery in Trainer (Phila.) PA. The refinery will be operated by a wholly owned subsidiary of Delta called Monroe Energy. The deal has been reported to be worth between $100 and $125 million. Delta has stated that it intends to supply its jet fuel requirements from the refinery.

On April 30, natural gas company Energy Transfer Partners announced that it would buy Sunoco in a deal valued at $5.3 billion. The announcement came a week after Sunoco announced that it had entered into discussions with the Carlyle Group involving the company’s Philadelphia refinery.

Eastman Chemical announced on April 30 that it had completed the retrofit and startup of its Texas City, Texas non-phthalate plasticizer manufacturing facility. Capacity is expected to increase by approximately 60%.

Argentina’s Senate approved on April 26 a government bill to nationalize YPF, the country’s biggest energy company. The government plans to seize 51% stake in YPF from Spain’s Repsol. It has been reported that this takeover could frighten outside investors necessary to develop Argentina’s shale gas reserves, possibly making its petrochemical industry short of feedstock.

Braskem, based in Sao Paolo, Brazil is seeing continued growth with its sugar-based Green polyethylene and is moving ahead with joint venture plans in Mexico. Braskem is also considering manufacture of sugar-based polypropylene. The acquisition of PP businesses of Sunoco Inc. and Dow Chemical Co. in the last two years made Braskem one of North America’s largest PP manufacturers.

Brazil will produce half of the world’s bio-based chemicals by 2020, according to an Eastman Brazil spokesman.

A House-Senate conference committee is scheduled to begin formal negotiations around the major overhaul of federal transportation programs. House Republicans have insisted on including approval of the Keystone XL pipeline as part of legislation. The pipeline holds the potential of moving up to 830,000 barrels of crude oil per day, creating up to 20,000 direct jobs with estimates of hundreds of thousands of indirect jobs.

Britain’s economy slid into its second recession after official data showed a fall in output in the first three months of 2012. The Office for National Statistics said that Britain’s gross domestic product fell 0.2% in the first quarter after contracting by 0.3% at the end of 2011. Most economists had expected Britain’s $2.4 trillion economy to show modest growth.

Germany’s seasonally adjusted unemployment rate remained essentially the same in April at 7%, a drop from the adjusted March rate of 7.2%. Germany has led the 17 nation eurozone with two years of strong economic growth.

Unemployment in the eurozone rose to 10.9% in March, the highest level since the euro was introduced in 1999. A year ago, the rate was 9.9%. Spain had the highest rate in the eurozone at 24.1%. Eight countries have seen their economies shrink for two quarters or more, the common definition of recession.

China’s consumer price index rose 3.6% in March, an increase from February’s 3.2% and was above expectations. The country’s producer price index fell 0.3% in March after a flat February. For the March period, China posted a surprise trade surplus of $5.35 billion after a $31.5 billion deficit in February.

Growth in China’s gross domestic product slowed to 8.1% year-on-year in the first quarter of 2012. This is the lowest rate of economic growth since the first quarter of 2009. Chinese government GDP growth projections are less than 8% for the year.

India has shown a slowing in industrial production, with reported annualized growth rates of 1.14% and 4.1% in January and February respectively. In comparison, the growth rate in January 2011 was 6.8%.

The American Trucking Association reported that tonnage increased 0.2% in March, after increasing 0.5% in February. Annual increase is seen at 3% for 2012, less than the growth rate of 5.8% in 2011. Trucking represents 67.2% of tonnage carried by all modes of domestic freight transportation.

Shale oil and gas-related:

ExxonMobil Chairman and CEO Rex Tillerson was quoted that the shale natural gas drilling boom in the US is good news for the country and the rest of the world.

Four states have active or proposed laws for oversight of fracking operations according to a recent report issued by the National Conference of State Legislatures.

According to Interior Secretary Salazar, the Department will implement proposed rules covering hydraulic fracturing on federal lands “once we complete the refinement of those rules.”

The Texas Chemical Council estimates that 10,000 employees will be needed if chemical companies invest a predicted $15 billion to $20 billion in the state.

Dow Chemical will build its new US ethylene plant in Freeport, Texas, with start-up scheduled for 2017. Dow stated that the new facility formed part of its plan to further connect US operations with cost-advantaged shale gas feedstocks.

Chesapeake and multiple partners are investing $900 million in a 90,000 bbl/day fractionator in Harrison County, Ohio. It is expected to be on line in the second quarter of 2013.

Production of shale oil, which is high grade light crude, is forecast to exceed 1,000,000 barrels/day by 2015, and is expected to be close to double by 2020. Major producing areas are the Bakken (N. Dakota), Eagle Ford (Texas), and Niobara (Colorado).

THE ECONOMY

The Congressional Budget Office reported that the federal budget deficit was almost $780 billion in the first six months of fiscal year 2012, $53 billion less than the deficit recorded in the same period in fiscal 2011.

The Treasury Department reported that the federal debt was $15.6 trillion as of April 30, 2102. It stood at $5.7 trillion in 2001. The debt is now roughly larger than the entire US economy.

The Bureau of Economic Analysis reported that first quarter 2012 Gross Domestic Product increased at an annual rate of 2.2%, that is, from the fourth quarter to the first quarter. In the fourth quarter, real GDP increased 3.0%. Current-dollar GDP, the market value of the nation’s output of goods and services, increased at a rate of 3.8% or $142.4 billion in the first quarter to a level of $15,461.8 billion. Fourth quarter increase was also reported as 3.8% or $143.3 billion.

The Conference Board’s Leading Economic Index increased 0.3% in March to 95.7 (2004=100) following a 0.7% increase in February and a 0.2% increase in January.

The Conference Board Consumer Confidence Index which had decreased slightly in March was virtually unchanged in April. It stands at 69.2 (1985=100) down from 69.5 in March.

The Institute for Supply Management’s Manufacturing Index registered 54.8% in April, an increase of 1.4% from March’s 53.4% indicating expansion in the manufacturing sector for the 33rd consecutive month. A reading above 50% indicates that the manufacturing economy is generally expanding. The Non-Manufacturing Report for March was 56.0%, lower than February’s 57.3% and indicating continued growth at a slower rate.

In March, retail and food services sales adjusted for seasonal variations were $411.1 billion, an increase of 0.8% from February, and 6.5% above a year earlier.

Privately owned housing starts in March of 654,000 were 5.8% below the revised February estimate of 694,000 but 10.3% above the March 2011 rate of 593,000. Single family housing starts in March were at a rate of 462,000 or 0.2% below the revised February figure of 463,000. New home sales declined 7.1% in March, to a seasonally adjusted annual rate of 328,000, but were 7.5% above the March 2011 figure of 305,000. That was less than half the 700,000 new homes that economists say should be sold in order to sustain a healthy housing market.

The National Association of Realtors reported that sales of existing homes declined 2.6% in March to a seasonally adjusted annual rate of 4.48 million, but were 5.2% above the March 2011 figure of 4.26 million.

A recent Gallup survey reported that 62% of Americans who say that they own their own homes marks a new low since tracking began in 2001.

New orders for manufactured durable goods in March decreased $8.8 billion or 4.2% to $202.6 billion. This decrease, down two of the last three months, followed a 1.9% February increase.

March unfilled orders for manufactured durable goods, up twenty-three of the last twenty-four months, increased slightly to $930.1 billion and followed an adjusted 1.2% February increase.

Consumer Price Index for all urban consumers increased 0.3% in March. In the last twelve months, the index for all items increased 2.7% before seasonal adjustments. Over the past 12 months the energy index has increased 4.6%. The gasoline index increased 1.7% in March, and has increased 9.0% over the past twelve months.

The Producer Price Index for finished goods was unchanged in March, seasonally adjusted, following a 0.4% February increase, a 1% increase in January and 0.1% decrease in December. On an unadjusted basis, prices for finished goods increased 2.8% for the twelve months ended March 2012.

The economic impact of the firearms industry is up since the beginning of the Great Recession, providing a boost for the economy, according to a new study by the National Shooting Sports Foundation. It reported that the economic impact of firearm sales, including jobs, taxes, and sales, hit $31 billion in 2011, up from $19 billion in 2008.

Interest rate: Prime at 3.25%, unchanged since 12/16/08. Richmond Federal Reserve Bank President Jeffrey Lacker said on April 27 that he believes that the central bank will raise interest rates in mid-2013. General opinion is that no increase will be seen until 2014.

Inflation: Inflation rate eased slightly in March to 2.7% after February’s advance of 2.9%. A rate of 2% is projected for 2012.

Unemployment: The March 2012 rate was reported at 8.2% by the Bureau of Labor Statistics, little changed from February. The BLS reported that the long-term unemployed, i.e., jobless for 27 weeks and over was little changed at 42.5%, down from February’s 42.6%. More Americans than expected filed applications for unemployment benefits at the end of April.

Trade Deficit: For February 2012 the goods and services deficit decreased to $46.0 from a revised January figure of $52.5 billion as exports increased and imports decreased.

Crude Oil: Prices remain volatile in excess of $100/bbl. Present WTI spot price ~$105/bbl.

Natural Gas Henry Hub price closed on May 2 at $2.31/MMBTU. Working natural gas in storage remains above the five year average.

Industrial production in March was unchanged for a second month, but rose at an annual rate of 5.4% in the first quarter of 2012.

At 96.6% of its 2007 average, total industrial production for March was 3.8% above the level of a year earlier.

March capacity utilization rate for total industry decreased to 78.6%. This was 2.1% above the rate a year earlier but 1.7% below 1972 – 2011 average.

The US dollar trading at 81.3 Japanese yen; $1.32 = euro. The British pound sterling = $1.62. Canadian dollar trading at US$.98

Current US gold price reported as $1646/ounce compared to the record price of $1920/ounce in September, 2011.

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