This week's world news

08 December 2008 00:00  [Source: ICB]

DOW AND PIC SIGN K-DOW JV AGREEMENT
US-based Dow Chemical has signed its pivotal agreement with Kuwait’s Petrochemical Industries Co. (PIC) to create the $15bn (€11.8bn) in sales K-Dow Petrochemicals joint venture. Two of Dow and PIC’s existing JVs, MEGlobal and polyethylene terephthalate (PET) maker Equipolymers, will be moved into K-Dow. The JV is expected to close no later than January 1, 2009. Dow expects to receive $9bn in total pretax proceeds, including a special distribution from K-Dow of $1.5bn. It had expected to receive $9.5bn.

K-DOW TO MULL GLOBAL PETROCHEMICAL PROJECTS
The K-Dow Petrochemicals joint venture will begin considering projects around the world, said Andrew Liveris, CEO of US-based Dow Chemical. Under the structure of K-Dow and Kuwait Petroleum Corp, a variety of projects are being considered in places such as China, India and Vietnam, Liveris said. In addition, K-Dow will also discuss gas extraction projects in Egypt and Libya.

DOW WILL NOT REVISE ROHM AND HAAS DEAL
US-based Dow Chemical will not look to renegotiate the terms of its pending acquisition of US specialties giant Rohm and Haas for $18.8bn (€14.9bn), despite falling values, Dow chairman and CEO Andrew Liveris said in an interview with ICIS. In July, Dow agreed to pay $78 (€62) per share for Rohm and Haas. “This is like beachfront property in Malibu. Maybe a storm hit and took a few shingles off the roof, but this is a quality property and markets will recover,” Liveris said.

WORLD RECESSION TO SLOW CHEMICAL GROWTH
Chemical output will slow substantially in 2008 through 2009, the American Chemistry Council (ACC) said. After peaking at 5.4% in 2004, global chemical output will rise by only 2.2% in 2008 and 1.5% in 2009, said ACC chief economist Kevin Swift. Growth in 2010 is expected to recover to 3.3%. The world’s GDP will likely grow by 3.6% in 2008, compared with 5.0% in 2007, the ACC said. Growth will plunge to 2.2% in 2009 before recovering to 3.8% in 2010.

CLARIANT TO CUT OUTPUT AND REDUCE HOURS
Swziterland’s Clariant will freeze wages, cut back production and implement short working hours at selected production sites worldwide due to low demand. “We are cutting production at those sites which are affected by slower markets, but only at those sites,” said Arnd Wagner, spokesman at Clariant’s head office in Muttenz, Switzerland.

EXEC: SABIC SHOULD DRIVE OUT COMPETITORS
A top executive from Saudi petrochemical giant SABIC said that, in his personal opinion, it would be a good business strategy to maintain operations of its large plants to shut down smaller and less economical competitors. “We should not reduce capacities at any of our plants, so we can shut the smaller ones down for good,” the source said on the sidelines of the Gulf Petrochemicals and Chemicals Association (GPCA) forum in Dubai, the United Arab Emirates. “We can take the margin losses for a while, oversupply the market and drive the smaller producers out of business,” the source said, adding that this reflected his opinion and not that of the company.

ACC GAINS CONFIDENCE IN OBAMA ADMINISTRATION
The American Chemistry Council (ACC) is gaining confidence that the Obama administration in the US will take a balanced, centrist approach to energy policy and regulations, president and CEO Cal Dooley said in a meeting with the trade press in New York City. “I am reasonably confident that Obama will mimic former President Clinton’s approach of being very sensitive to maintaining competitiveness in the US manufacturing base,” he said.

ACC: IST MANDATE WOULD THREATEN INVESTMENT
Any move to mandate the use of Inherently Safer Technology (IST) in US chemical site security legislation would put a brake on investment in new plants and chemical process technology, American Chemistry Council (ACC) president and CEO Cal Dooley has argued. “An IST mandate would stifle investment capital to develop new chemical-processes, favoring the ones that have already been ordained,” he said. “We would reject any IST requirement.”

BASF TO SPEND €500M–€550M ON REACH
Germany’s BASF said it would spend about €500m–550m ($395–435m) in implementing the EU’s new Registration, Evaluation, Authorisation and Restriction of Chemicals system Reach chemicals controls policy by the final 2018 deadline. “Reach is an important and necessary reform of European chemicals legislation,” said BASF.

DOW DIVIDEND “VERY SAFE” DESPITE YIELD
Dow Chemical’s quarterly dividend is “very safe,” despite a dividend yield of over 9%, said chairman and CEO Andrew Liveris in an interview with ICIS. A high dividend yield suggests investors are skeptical that it can be maintained. Dow’s quarterly dividend is 42 cents (€0.33), making for an annual payout of $1.68. “What a fantastic deal for anyone who wants to buy Dow stock with an over 9% dividend yield. The decoupling of the equity markets from reality is ludicrous.”

MIDEAST FACES CHEMICAL TANKER SHORTAGE
The wave of new petrochemical capacity coming on stream in the Middle East from 2009 may be met by a severe shortage of chemical tankers, as declining freight rates spur cancellations of new-build orders, said Fred du Plessis, president of UK-based consultancy FdP Associates, at GPCA in Dubai. “Ninety-four orders for global shipping vessels have been canceled so far in 2008. This is an alarming number,” he said. The few players servicing the global chemical markets will not have sufficient capacity to meet shipping demands from the additional capacities in the Middle East expected to come on stream through 2009 to 2012, du Plessis said.

NOVA DELAYS CANADIAN POLYETHYLENE EXPANSION
Canada’s NOVA Chemicals will delay an expansion of its eastern Canada polyethylene (PE) assets by 12–18 months as part of an initiative to strengthen its balance sheet in 2009. “The industry is experiencing a feedstock cost correction of historic proportions,” said company president and chief operating officer Chris Pappas. He said fourth-quarter (Q4) orders were expected to be down by 20–25% from Q3. Delaying the 250m lb/year (113,000 tonne/year) PE expansion at two plants in Ontario will save the company $60m (€47m) in 2009, Pappas said.

HONAM, QATAR JV IN FINAL PLANNING STAGES
South Korea’s Honam Petrochemical and Qatar Petroleum’s planned $2.6bn (€2.1bn) joint venture cracker in Mesaieed, Qatar, is in its final stages of designing and is scheduled to come on stream in the second half of 2012, a source from Honam said at GPCA in Dubai. “We have planned for it to come on stream in 2012 as we expect demand and economics to recover by then,” he said.
The ethylene cracker capacity will be 1m–1.3m tonnes/year and would also include
a 700,000 tonne/year polypropylene (PP) unit.

HUNTSMAN RESTRUCTURES TEXTILE EFFECTS UNIT
US-based chemical firm Huntsman plans to consolidate the European and Americas operations of its textile effects business, while it expands it in Asia. The restructuring should remove roughly 470 positions. Huntsman expects to save $60m (€47m)/year when the restructuring is completed. When Huntsman finishes the restructuring, the textile effects business will include a specialty textiles unit and an apparel and home textiles unit.

GAS EXPLOSION SHUTS YARA’S NORWAY PLANT
A gas explosion and subsequent fire last Wednesday halted operations at Yara’s nitrogen-phosphorus-potassium (NPK) fertilizer plant in Porsgrunn, Norway, injuring four. The accident occurred at the older of the two plants at the site, which has a capacity of 400,000 tonnes/year. Total capacity at the site is 2m tonnes/year.

SABIC INTERESTED IN POLAND CHEMICALS
Saudi Arabia’s SABIC Innovative Plastics is interested in taking stakes in Polish state chemical and fertilizer producers. SABIC’s interest was made clear to government officials and company representatives during recent visits to Gulf Arab states by Polish Prime Minister Donald Tusk and Treasury Minister Aleksander Grad. “At this stage we can only say it is initial interest, but it is clear interest,” said a source at Poland’s Ministry of the Treasury.

EASTMAN SEES SHARP DROP IN UTILIZATION RATES
US-based Eastman Chemical is sharply lowering capacity utilization, and it has temporarily shut down production at facilities in Singapore and Malaysia in response to the tough economic environment. Eastman expects a 20% decline in fourth-quarter revenues, both sequentially and year on year, and earnings per share well below earlier guidance of 90 cents.

US MANUFACTURING FALLS IN NOVEMBER
US manufacturing industries fell further into decline in November, dropping to a 26-year low, as new orders for manufactured goods dropped by 24%, according to the Institute for Supply Management (ISM). The institute said its closely watched purchasing managers index (PMI) fell to 36.2 in November, down 2.7 points from the 38.9 reading in October. A PMI reading of 50 or higher indicates that manufacturing industries are experiencing growth, while below 50 indicates contraction.

BOROUGE BREAKS GROUND ON SHANGHAI HUB
United Arab Emirates-based chemical firm Borouge, and Kuwait-based logistics company Agility, have broken ground on a new polyolefins logistics hub in Shanghai, China. Due to be fully operational by May 2010, the Fengxian facility will be capable of receiving more than 600,000 tonnes/year of polypropylene (PP) and polyethylene (PE). Borouge is also building a 50,000 tonne/year compounding facility at the Shanghai site that will serve automotive, domestic appliance, power tool and electrical applications.

CIECH HALTS TDA PROJECT, MULLS TDI CUTBACK
Poland’s Ciech has postponed construction of a toluene diamine (TDA) feedstock installation, and the company is considering cutting toluene di-isocyanate (TDI) production on falling prices. The TDA investment, costing up to zlotych (Zl) 500m ($168m, €131m) and scheduled to be completed in 2013, was to have been its flagship expansion project in 2009 but will now not begin until at least the end of next year.

LINTEC STARTS SOLAR CELL BACKSHEET OUTPUT
Lintec, a leading Japanese producer of film and adhesives, has started production of its own brand of backsheet for solar cell modules, targeting sales from local solar cell manufacturers. The backsheet is made by layering polyethylene terephthalate (PET) resin with electrical insulating properties, special coatings and ethylene vinyl acetate (EVA). Lintec is producing the solar cell backsheet for the Japanese market under the Liprea brand.

JPMORGAN LOWERS PROFIT FORECAST FOR ROCKWOOD
JPMorgan has lowered its earnings forecasts for US specialty chemical company Rockwood, reflecting slowing demand in end-user markets. Rockwood’s full year 2008 earnings per share (EPS) estimate was reduced to $1.95 (€1.54) from $2.10, while its 2009 forecast was cut to $1.40 from $2.20. The earnings revision reflected slowing global demand, increased customer inventory reductions, and lower expected earnings from its titanium dioxide joint venture.

EQUATE STARTS UP OLEFINS II CRACKER
Kuwait’s Equate Petrochemical has begun commercial production at its 850,000 tonne/year Olefins II cracker at Shuaiba. The cracker, owned by Kuwait Olefins and operated by Equate, will provide ethylene to Equate’s benzene-styrene monomer unit and expanded polyethylene (PE) and monoethylene glycol (MEG) plants. Equate is a joint venture that includes Kuwait’s Petrochemical Industries Co. and US-based Dow Chemical, with each owning a 42.5% stake.

SHELL, SHANXI EXPLORE COAL GASIFICATION
Shell Global Solutions International and Shanxi Institute of Coal Chemistry have signed a research and development agreement to enhance the process of turning coal-based synthetic gas (syngas) into higher alcohols. “It has the potential to become an attractive route to realize the clean use of coal and reduce petroleum dependence for cleaner fuels and fuel additives,” Shell said.

MONSANTO INVESTS IN SUGARCANE TECHNOLOGY
US agricultural group Monsanto has announced the $290m (€229m) acquisition of Brazilian firms CanaVialis and Alellyx. CanaVialis is a sugarcane breeding company, while Alellyx focuses on developing biotech traits for sugarcane.

NACD WARNS ON REGULATIONS
The US National Association of Chemical Distributors (NACD) wants to keep the contradictory regulations produced by the array of federal agencies that oversee the safety and security of the chemical industry from getting worse. “We can expect more regulations that could be difficult for the industry to swallow,” said James Boldt, chair of the NACD’s government affairs committee at the NACD meeting in Scottsdale, Arizona, US.

ASHLAND TO BOOST CASH THROUGH DIVESTITURES
Us specialty chemical firm Ashland is looking to divest noncore assets to generate cash, CEO Jim O’Brien told analysts in New York. The measures would come on top of the cost savings, synergies and improved asset utilization that follow the acquisition of us firm Hercules.

ING DOWNGRADES “EARTHQUAKE” CHEMICAL SECTOR
Noting the sharp fall in demand and weakening macro-economic environment, global financial firm ING has lowered recommendations for several European chemical stocks, likening the uncertain sector to an “earthquake zone.” ING downgraded shares of BASF, Solvay and DSM to “sell” from “hold,” while AkzoNobel was dropped to “hold” from “buy.” Satchell said the sector is significantly at risk of further corrections during the next six months as end-markets show little signs of recovery.

DSM SELLS FILTRATION PRODUCTS BUSINESS
Netherlands-based life and material sciences company DSM has agreed to sell its Solutech filtration products business to US-based Lydall for an undisclosed sum. Solutech, which operates two production facilities in the Netherlands, contributed about €3m ($3.8m) to DSM’s net sales in 2007.

JIANGSU YANHAI STARTS BUILDING CAUSTIC UNIT
China-based Jiangsu Yanhai Chemical has started construction at its yuan 1.2bn ($174m) Yancheng project, which will include a 300,000 tonne/year caustic soda plant. The caustic soda plant is expected to come on stream by the end of 2009.

TOTAL’S VIETNAM JV BUYS LOCAL LPG DISTRIBUTOR
French oil major Total, through its 86%-owned joint venture, Elf Gas Saigon, has acquired Saigon Gas Holdings, an liquefied petroleum gas (LPG) distributor, boosting Total’s gas market share in Vietnam to about 15%. “Vietnam is one of our key countries for development [in Asia-Pacific] and this opportunity for growth fits well with our strategy in the region,” Thierry Pflimlin, senior vice president of Total Oil Asia-Pacific said.

RECESSION TO SLAM US CHEMICAL OUTPUT – ACC
US chemical output is expected to decline by 1.5% in 2009, as the global recession hits key end-markets such as automotive and construction, American Chemistry Council chief economist Kevin Swift said in a meeting of the New York Society of Security Analysts. “We’re in a global recession with both mature and emerging markets being impacted by the credit crisis,” he said. “Leading indicators suggest that this will continue for at least another six months.” The outlook for 2009 is “more severe” than other downturns, he said.





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