05 January 2009 00:00 [Source: ICB]
K-DOW DEAL COLLAPSES
US-based Dow Chemical's proposed $17.4bn (€12.3bn) K-Dow joint venture with Kuwait's Petrochemicals Industries Corp. (PIC) has collapsed, following to a Kuwaiti Supreme Petroleum Council (SPC) decision to reverse a prior approval of the agreement. "Dow is extremely disappointed with the decision, and is in the process of evaluating its options pursuant to the Joint Venture Formation Agreement," Dow said in a statement. Dow and PIC finalized the agreement in late November, which called for the formation of K-Dow and $9bn (€6.3bn) in cash payments to Dow. Kuwaiti political group the Popular Action Bloc had reportedly put pressure on the government to scrap the deal. Dow could file an arbitration claim for up to $2.5bn for the break-up of the deal in London under rules laid down by the International Chamber of Commerce.
K-DOW BUST PUTS ROHM AND HAAS IN JEOPARDY
The cancellation of the K-Dow deal could put Dow Chemical's planned $18.8bn (€13.3bn) acquisition of US specialty chemical firm Rohm and Haas in jeopardy, according to Bank of America analyst Kevin McCarthy. "Cancellation of K-Dow could compromise Dow's ability to close its pending acquisition of Rohm and Haas, a key element of Dow's strategic plan, although neither that deal nor related financing is contingent upon closing of K-Dow," said McCarthy. Analysts expect Dow to renegotiate the terms of its deal with Rohm and Haas. Shares of Rohm and Haas plunged $10.16, or 16%, to $53.40 last Monday, while Dow's stock fell $3.59, or 19%, to $15.33.
DOW FACES THREE OPTIONS
Dow Chemical has three options regarding its planned acquisition of Rohm and Haas following the break-up of its K-Dow joint venture deal - going through with the deal and racking up net debt of over $25bn (€17.6bn), paying Rohm and Haas a break-up fee of $725m, or renegotiating the deal to a lower price, said BB&T Capital Markets analyst Frank Mitsch. If the first scenario were to play out, "we believe [Dow's] dividend would likely be a goner, and so could Dow," he said. "We believe Dow would be in drastic cost-savings mode and could possibly reduce Rohm and Haas's 16,500 employees by more than 25%."
PCC CONSIDERS NEW BID
Germany's Petro Carbo Chem (PCC) is considering making a second attempt at acquiring stakes in Polish state-held chemical companies, following the revival of the country's commitment to privatizing the sector. Stakes in Zaklady Azotowe Tarnow and Zaklady Azotowe Kedzierzyn are among assets that have been made available in the current Polish government's new privatization plan, which sees the state exiting the chemical industry by 2011.
US ECONOMY TO WEIGH ON OLEFINS PRICES IN 2009
The sharp downturn in the US economy in the second half of 2008 is expected to last through at least the first six months of 2009, stifling demand for petrochemicals and keeping a lid on monomer prices. The weaker economy and the drop in demand will likely draw market activity to a halt, one olefins market participant said. "We might as well all go fishing in 2009, because it does not look like there will be much else to do," the source said. US monomer prices went into a tailspin in the fourth quarter of 2008, falling by more than 80% from record highs in the summer.
INDIA'S CPIL ACQUIRES ETHANOL FIRMS
Confidence Petroleum India Ltd. (CPIL) announced the acquisition of two ethanol companies to cash in on booming ethanol-blended petrol opportunities in the country. The company acquired Laxmi Nirmal Petrochemicals, which operates a 21,600 kiloliter/year (kl/yr) plant near Pune in Maharashtra State. CPIL also purchased an 80% stake in Garg Distilleries, which runs a 12,000 kl/yr plant near Dhule, in the same State. On December 24, the government announced exemption of additional excise duty on 10% ethanol-blended petrol.
HIP PETROHEMIJA WORRIES RISE AFTER NIS DEAL
Concerns over the fate of Serbian petrochemical producer HIP Petrohemija have grown, following a deal between Belgrade and Moscow on the disposal of Serbia's oil monopoly, NIS, sources at the latter company said. In line with the Serbian-Russian energy cooperation pact, Gazprom's oil subsidiary, Gazpromneft, will purchase NIS for €400m ($564m) and invest €550m in upgrading it to meet EU standards by 2012. However, hopes that the NIS sale would be linked to a commitment from Gazprom petrochemical subsidiary Sibur to acquire HIP Petrohemija, which sits next to NIS's refinery in Pancevo, northeast of Belgrade, remain unfulfilled.
OLTCHIM GETS NOD TO START DEAL TALKS
Shareholders have given directors of Romania's plastics and agrochemical firm Oltchim permission to begin negotiations for the acquisition of the petrochemical operations of compatriot oil and gas produccer Petrom's Arpechim refinery. Backing for the directors' plans to accept a €100m ($141m) loan, guaranteed by controlling shareholder AVAS, the Romanian state privatization agency, had also been obtained.
RUSSIAN CHEM PRODUCERS IN LINE FOR STATE SUPPORT
Russia's major chemical producers are among 295 "strategic" companies eligible to receive state support, according to a government list seen by ICIS. Apart from Gazprom, Rosneft and Russia's other energy giants, the list also included Sibur, KuibyshevAzot, TogliattiAzot, Sayanskkhimplast, Acron, Silvinit, Uralkali, Phosagro, Ufanefthekhim and Uralkhim. The government will aim to secure sustainability of "strategic" companies by a number of measures, including restructuring of back taxes, state orders, subsidized interest rates and customs tariffs.
JAPAN'S CARMAKERS GET LITTLE HOLIDAY CHEER
Regional automakers such as Japan's Nissan and Toyota have announced dismal car sales ahead of the year-end holidays, bringing little cheer to regional petrochemical makers. Top car maker Toyota Motors has forecast its first operating loss in 70 years at yen 150bn ($1.67bn) for its fiscal year ending March 2009 after it reported marked declines in car sales for the month of November 2008 in all its divisions. Tumbling car sales throughout the world have resulted in severe cutbacks in production, with carmakers such as Nissan Motors slashing production by 78,000 units in addition to the 272,000 units announced just under two months ago.
HMC TO START UP NEW PP LINE IN AUGUST
Thai polypropylene (PP) producer HMC Polymers plans to start up its new 300,000 tonne/year plant at Mab Ta Phut this coming summer, a source close to the company said. "Construction should be completed in time for the plant to start up in August," the source said. HMC's total PP capacity will be raised by around 65% to 755,000 tonnes/year, from the current 455,000 tonnes/year, when the new plant comes on stream.
US STYRENICS FACE LONG SUPPLY, WEAK DEMAND
US styrene participants have predicted a slow 2009 market with no recovery expected until late in the first half. Buyers said roughly half of US capacity was offline, indicating that the oversupplied situation that has long defined styrenics would persist amid chronically weak downstream demand. Dow Chemical and INEOS had lines down in December, while Westlake Chemical and American Styrenics were heard to be reducing rates and giving consideration to idling operations. Styrene prices dropped by 68% in the fourth quarter of 2008 through mid-December.
ASIAN ACETIC ACID FACES GLOOMY 2009 OUTLOOK
New acetic acid capacities in the Middle East and China, coupled with the global economic downturn have painted an overall gloomy outlook for the Asian acetic acid market, producers and buyers said. Buyers are expected to replenish depleted inventories in January at current prices of below $400/tonne CFR (cost and freight) Asia, believed to be the bottom of the market. However, there appears to be little cheer beyond January 2009. "Given the global economic gloom and doom, there's nothing to look forward to next year," a key eastern China-based acetic acid producer said.
POLYONE TO CUT COSTSON GLOOMY OUTLOOK
US-based plastics processor PolyOne expects its US business to lose money in 2009 and plans further action to cut costs. Earlier in 2008, the company announced plans to close eight plants. "While we are pleased with the improved short-term outlook for operating income before special items, we recognize that the recent demand decline presents a challenging scenario for 2009," said CEO Stephen Newlin. The company will announce the details of its latest cost-cutting plan in February, he said.
HUNTSMAN LIFTS FM ON ETHYLENE AMINES
US-based chemical producer Huntsman has lifted force majeure on all but one of its ethylene amine products from its Freeport, Texas, US, facility, according to correspondence obtained by ICIS. Force majeure was lifted on December 5 for ethylenediamine and diethylenetriamine, triethylenetetramine, tetraethylenepentamine and ethylene amine E-100, according to the letter. Aminoethyl-piperazine remained on 70% allocation for the month of December, following ongoing mechanical issues.
MITSUBISHI CHEMICALTO SHUT BTX LINES
Japan-based Mitsubishi Chemical plans to take three aromatics units in Kashima and Mizushima offline for 45-60 days each from May 2009, in line with an earlier tentative schedule, a company source said. The company will shut down production at one of its two lines in Kashima from the beginning of May to the end of June. The second line in Kashima will be taken offline from the beginning of June until mid-August. The Mizushima-based aromatics line will be brought down for almost two months, beginning in June.
AKZONOBEL TO BUY GERMAN CHLORINE FIRM
Netherlands-based AkzoNobel has made an irrevocable bid for Germany-based chlorine company LII Europe. The deal is expected to be completed in this quarter. Akzo expects operational synergies to be achieved with two of its other industrial chemical plants in Germany. LII Europe operates a multiclient chlorine cluster on the Hoechst Industrial Park near Frankfurt. The company also runs a chlorinated hydrocarbon plant, along with calcium chloride and solid caustic facilities.
LURGI TO BUILD BIOFUELS PLANT ON EU FUEL QUOTA
German engineering firm Lurgi will build a second-generation biofuels pilot plant at Forschungszentrum Karlsruhe, Germany, on the back of EU requirements on biogenic motor fuels, said Air Liquide, its France-based parent company. The joint project with Karlsruhe Institute for Technology (KIT) will demonstrate the viability of the company's three-stage Bioliq process. The first stage of the pilot plant was completed in 2007, and in its second stage, the Bioliq SynCrude generated from straw will be processed into synthesis gas (syngas). The project comes on the back of EU requirements that the proportion of biogenic motor fuels should be increased to 5.75% by 2010, as well as German targets for a significantly higher quota of fuels generated from renewable resources by 2020.
EASTMAN, SK PLAN ACETATE TOW PLANT
US producer Eastman Chemical has formed a joint venture with SK Chemicals to build a 27,000 tonne/year cellulose acetate tow plant in Ulsan, South Korea. Eastman will hold 80% and be the operator of the facility, to be named Eastman Fibers Korea. SK, with the remaining 20%, will be responsible for building the plant. Construction is expected to start in the first quarter of 2009, with completion in the second quarter of 2010.
POTASHCORP SHUTS THREE CANADIAN POTASH MINES
Eight-week lay-off notices have been sent to 940 workers at three Potash Corporation of Saskatchewan (PotashCorp) mines, the Canadian fertilizer producer said. The moves will affect 400 hourly workers at its Rocanville plant, 300 at its Lanigan unit and 240 at its Allan facility. The three potash plants will be shut down from January 18 to March 15.
ALBEMARLE BUILDING UP CASH FOR M&A - CEO
Albemarle is building up cash reserves to take advantage of upcoming merger & acquisition (M&A) opportunities in the weak economic and market conditions, the CEO of the US specialty chemical and catalyst producer said. "We believe the shake-out is already under way. We plan to be ready and opportunistic," Mark Rohr told analysts in a briefing.
EU MINISTERS MOVEON PESTICIDES BILL
A raft of pesticides commonly used by farmers in the EU could be banned under a compromise reached by European Parliament negotiators. The agreement proposes creating an EU list of approved "active substances." Pesticides that are genotoxic, carcinogenic or toxic to reproduction will be banned unless their effect would in practice be negligible. Developmental neurotoxic, immunotoxic and certain endocrine-disrupting substances would also be banned if they are deemed to pose a significant health risk. If a substance is needed to combat a serious danger to plant health, it may be approved for up to five years, even if it does not meet the agreed safety criteria. The full Parliament will vote on the bill in January. It must then be endorsed by the full council of ministers before it becomes law.
MOL ANNOUNCES PETCHEM PROJECTS IN 2009 CAPEX
MOL's 2009 capital expenditure (capex) program will include revamps of an olefins plant and an ethylene steam cracker as well as the construction of a new low density polyethylene (LDPE) unit, the Hungarian energy group said. The three projects are the only petrochemical division initiatives to be confirmed for the year under MOL's new "strict cost and capex management" introduced in response to the economic downturn. Any other projects would be postponed or renegotiated, rather than scrapped.
LANXESS DELAYS PLANT EXPANSIONS AMID SLUMP
LANXESS has postponed several projects due to a global decline in demand for its products. The company's 100,000 tonne/year butyl rubber project in Singapore is now expected to start up in 2012, put back from late 2010, with groundbreaking delayed from January 2009 to the following autumn. Capacity expansions at LANXESS plants in Leverkusen, Germany and Antwerp, Belgium, and the planned move of group headquarters to Cologne from Leverkusen have also been put on hold.
EASTMAN ANNOUNCES $100M COST CUT
US producer Eastman Chemical will reduce costs by over $100m (€72m) in 2009 in response to the global economic downturn. The bulk of the reductions, some $80m, are expected to come from labor-related savings. Eastman said it will cancel planned 2009 wage and salary increases, cut overtime wherever possible, reduce the use of contractors and part-time labor, and cut management staff, among other measures.
European and Asian deliveries of the December 15, 2008 magazine had the wrong image of Cytec Industries chairman and CEO-elect Shane Fleming on the cover and contents page. The photograph was of Dow Corning European area president Klaus Hoffman. We regret the error. Magazines delivered in the Americas were published with the correct photo.
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