The world this week

11 February 2009 14:34  [Source: ICB]

RIO TINTO SELLS POTASH ASSETS TO VALE
International mining company Rio Tinto has sold its undeveloped potash assets to Brazilian mining firm Vale for $850m (€655m). The potash sale includes the Potasio Rio Colorado project in Argentina and the Regina exploration asset in Canada.

CHINESE DROUGHT HITS FERTILIZER APPLICATION
One of the worst winter droughts in living memory is likely to hit phosphate fertilizer application in northern China, a trader said. Yunnan province received its lowest rainfall since 1961 and the north is forecast to receive little or no moisture for the next two or three weeks, said the source. Northern China is the main consuming area of phosphate and nitrogen fertilizers. "It's a serious drought," said the trader, adding that spring application of diammonium phosphate (DAP) would be hit.

MITSUBISHI RAYON SHUTS MMA LINE IN JAPAN
Japan-based Mitsubishi Rayon has shut down a 107,000 tonne/year line for methyl methacrylate (MMA) in Otake until the end of February.

UTAH UNIVERSITY EXPLORES HIGHWAY TO BIODIESEL
Millions of miles of land alongside US roads could be used for biodiesel feedstock production, according to a Utah State University research team that planted about an acre of canola and safflower along a stretch of highway to harvest oilseeds for biodiesel production. Despite the hottest, driest year in Utah history, crop yield was about 30%, and biodiesel was produced for about $2/gal (€1.56/gal). "No one's done this before. We're kind of in crazy land," said researcher Dallas Hanks. The group has expanded to include 10 universities and three companies to form the Freeways to Fuels consortium.

DOW OFFENDED BY PROBE INTO FAILED K-DOW
US giant Dow Chemical has rejected allegations by members of the Kuwait parliament that it had paid bribes to secure the $17.4bn (€13.2bn) K-Dow joint venture, which collapsed late last year. "With due respect to the internal events in Kuwait, the Dow Chemical Company is highly offended about any suggestion of improper actions of Dow Chemical," Dow said in a statement issued to the Wall Street Journal. "The contract between Dow Chemical and Petrochemical Industries Co. was entirely appropriate, as was Dow's conduct."

FRANKFURT AIRPORT TO PAY CELANESE €323M
Germany-based chemical firm Celanese will receive a €323m ($413m) upfront payment from Germany's Frankfurt airport in a change to an ongoing settlement stemming from the airport's expansion. Celanese's engineering polymers subsidiary Ticona is relocating its Kelsterbach plant to the Hoeschst Industrial Park in the Rhine Main by 2011 as a result of the airport's growth.

AMERICAN PEPTIDE EXPANDS CAPACITY
American Peptide Company (APC) has said that it is expanding its GMP (good manufacturing practices) peptide manufacturing facility in Vista, California, US. APC will add four purification suites and two large-scale suites with 1,000-2,000 liter reactors for solution-phase synthesis, and 260-500 liter vessels for solid-phase synthesis.

INDIA IMPOSES 25% DUTY ON PA IMPORTS
India has imposed a provisional safeguard duty of 25% on imports of phthalic anhydride (PA) from select countries. The safeguard duty, which will last until August 26, will not apply to imports from countries classified as "developing" under India's Customs Tariff Act, excluding Pakistan, Indonesia and Thailand.

DOW'S BASIC BUSINESSES ATTRACTS MANY SUITORS
US major Dow Chemical has found more than a dozen potential buyers for its basic plastics and chemicals businesses, after the segments were spurned by Petrochemical Industries Co. of Kuwait, Dow CEO Andrew Liveris said on the company's earnings conference call. Dow is now narrowing down the list of potential buyers and has even started face-to-face negotiations with some of the buyers, he added. "We have 12 assets that we are working on right now - including the K-Dow assets - of varying sizes, with divestment teams and also investment banks to work out which ones are realizable," Liveris said.

DOW FIGURES SLUMP TO A $1.55BN Q4 NET LOSS
US-based Dow Chemical reported a net loss of $1.55bn for the fourth quarter (Q4) of 2008, as demand dropped away sharply and the company took restructuring and other charges. The loss compares with a net profit of $497m (€388m) in Q4 2007. Dow's sales in the quarter fell by 23% to $10.9bn. Volumes declined by 17% and were down in all operating segments and geographic regions, reflecting the global economic downturn and destocking through most product chains, Dow said. Operating rates were reduced to historically low levels of 44% in December. The Q4 operating rate of 64% had not been seen in 25 years.

DOW BLASTS FORCED ROHM AND HAAS MERGER
Forcing through Dow Chemical's merger with Rohm and Haas would benefit only one party - the current shareholders of Rohm and Haas - but it could hurt the US-based companies' employees, Dow said in a court filing. Dow, which responded to Rohm and Haas's lawsuit to force the merger, reiterated that under current financial market conditions and the prevailing uncertainty, the merger would threaten the viability of the new entity and was contrary to the interests of the 55,000 Rohm and Haas and Dow employees, the associated communities, suppliers and customers.

DOW BOARD URGED TO "TAKE CONTROL"
Rohm and Haas's board of directors sent a letter to Dow Chemical's board, urging them to "take control" of the merger stalemate situation and proceed with the closing of the merger with Rohm and Haas. "You are the individual overseers of Dow's obligation to comply with the merger agreement. If Dow is in the terrible financial condition that your chairman suggests, we do not know how you could have paid the January 30, 2009 cash dividend of almost $400m,[€312m]" Rohm and Haas said in its letter. The board advised Dow to pursue asset sales, cut its quarterly dividend to a penny and seek to raise equity to complete the deal.

LAWYER: MERGER FAILS ON "ESSENTIAL PURPOSE"
Dow Chemical should not be forced to close its planned merger with Rohm and Haas as the resulting entity would be severely impaired, said Dow's lead litigator, David Bernick, with law firm Kirkland & Ellis. "This is a contract that as a result of some very unique circumstances, at this point in time, cannot and should not be performed because it fails on its essential purpose, which is to create a combined entity that would have financial health and create value through synergies," said Bernick. "Dow is looking to see whether a merger can be done, but that will take some time and we would hope that Rohm and Haas would discuss that with us on a cooperative basis."

DOW EXPLORES FURTHER PLANT CLOSURES
US major Dow Chemical may announce another large round of plant closures and layoffs, as overall chemical demand will remain weak through 2009, CEO Andrew Liveris said. "The basic chemical sector is going to have a terrible '09," Liveris said during an earnings conference call. "We are preparing for the recession to persist through 2009 and are running our business accordingly. That could mean more plant shutdowns and layoffs. We are already working on another round - to seek another round if necessary." Dow will announce more details about possible cost-cutting programs within three months, Liveris said.

CELANESE POSTS $159M Q4 LOSS AS VOLUMES FALL
Celanese recorded a fourth-quarter loss of $159m (€124m), compared with a profit of $214m in the same period a year ago, as sales dropped by 27% to $1.29bn. The US chemical company cited significantly lower volumes due to weak global demand and unprecedented inventory destocking throughout its end-consumer supply chains. "During the fourth quarter, historically weak market ­conditions drove a dramatic decline in overall global demand for many industries that we ­supply," CEO David Weidman said. Celanese expects volumes to remain under pressure in 2009, even with easing of inventory destocking.

GAIL TO COMPLETE PATA EXPANSION IN 2010
Indian petrochemical firm GAIL expects to complete an expansion of its gas cracker at Pata, in Uttar Pradesh state, in the first half of 2010, a company source has said. The project involves adding a sixth furnace to the unit, which would raise the cracker's ethylene capacity to 500,000 tonnes/year. The cracker's current capacity is 410,000 tonnes/year and the company plans to retrofit the unit this year to enhance operational ethylene capacity to 440,000 tonnes/year.

NOVA STOCK JUMPS ON REPORT OF FUNDING
Shares of Canadian producer NOVA Chemicals rose by 52 cents, or 54%, to $1.62 per share last Wednesday, following a report that the company could reach a $100m (€77m) funding agreement. NOVA needs to raise $100m in financing by February 28 to retain access to its credit facilities, according to US credit rating agency Standard & Poor's. According to market sources cited by the Globe and Mail, NOVA may raise the $100m through a bond issue to Alberta Investment Management Corp. (AIMCo). A spokesman for AIMCo said the report was wrong. NOVA could also borrow money from ATB Financial, the Globe and Mail reported.

CLEAN COAL NEEDED IN US ENERGY POLICY
The US needs a comprehensive energy policy that relies on domestic production sources and that fosters clean coal technology, said Randy Dearth, president and CEO of LANXESS Corp, the North American arm of Germany-based specialty chemical firm LANXESS. "We must force [coal] forward. This becomes an issue of competitiveness. When you consider natural gas has increased its price fourfold in the past 10 years, and when the US is competing with India, China and South America, it becomes critical to keep up," he said. Moreover, if new laws limit coal burning in power plants, those facilities would turn to natural gas, a crucial feedstock for the US chemical industry, he added.

CF TO NOMINATE TERRA DIRECTORS IN HOSTILE BID
US fertilizer firm CF Industries said it would nominate three independent Terra Industries directors as part of its hostile takeover attempt of the US-based company. Terra's annual meeting of shareholders is usually held in May and has yet to be scheduled. CF has offered 0.4235 shares of CF for every share of Terra. The deal is expected to be worth $2.1bn (€1.64bn), said CF spokesman Charles Nekvasil.

BRENNTAG ACQUIRES AUSTRO'S ASSETS
Global chemical distributor Brenntag has acquired the chemical distribution assets of Mexico's Austro. The acquisition will allow Brenntag to enter the Mexican food market and further strengthens its position in the oil and gas market.

DOW CORNING Q4 PROFIT UP BY 4% TO $174M
US specialty chemical firm Dow Corning posted a consolidated adjusted fourth-quarter (Q4) net income of $174.2m (€134.1m), up by 4% year on year on flat sales of $1.3bn. Results were impacted by significantly slower demand for silicones.

BASF CONSIDERS LEATHER, TEXTILES BUSINESS SALE
Germany's BASF is considering selling its leather and textile chemicals business after restructuring and efficiency programs failed. The business unit has introduced another program to increase efficiency, which is expected to reduce costs by €25m ($32m) by 2011. BASF said it was also reviewing future strategic options, including the formation of a joint venture or the complete sale of the business.

ARCH CHEMICALS POSTS $18.9M Q4 LOSS
US biocides producer Arch Chemicals had a fourth-quarter (Q4)net loss of $18.9m (€14.5m), compared with a profit of $10.5m in the same period a year ago, as sales declined by 10% to $344m. The results included a $24.6m impairment charge for goodwill in Arch's industrial coatings business, it said.

MGP EXITS FUEL ALCOHOLS
US food ingredients company MGP Ingredients is exiting the fuel-grade alcohol business effective immediately as market conditions erode. "The decision to exit the fuel-grade alcohol business represents a huge step in our business transformation process, which is to ultimately return MGP Ingredients to profitability," said MPG president and CEO Tim Newkirk.

S&P AND FITCH LOWER NOVA CHEMICALS RATING
Ratings agencies Standard & Poor's (S&P) and Fitch Ratings downgraded petrochemical producer Canada-based NOVA Chemicals last week on liquidity issues and new financing requirements. S&P cut NOVA's corporate credit rating three notches to "CCC+" and kept it on CreditWatch with negative implications. Fitch downgraded NOVA by three notches to "B-."

SDK TO DISSOLVE GASES JOINT VENTURE WITH TGC
Japanese chemical producer Showa Denko KK (SDK) is dissolving its industrial gas joint venture with Tokyo Gas Chemical (TGC) by the endof March. TGC will buy out the 50% stake held by SDK in their joint venture company TG Showa for an undisclosed sum, and make it a wholly owned subsidiary.

LANXESS, UNION AGREE ON FEWER HOURS, PAY CUTS
German producer LANXESS and union IG BCE have agreed to introduce short-time working hours for 5,000 nonmanagerial workers in Germany. A 35-hour work week with corresponding pay cuts will be introduced in March, initially for 12 months, and there will be no bonus for 2009. Managerial salaries will be "adjusted," salary reviews will be postponed, and the board of management will take a pay cut equivalent to about 10% of fixed salary.

CHEMTURA PUTS TWOBUSINESSES UP FOR SALE
US specialty chemical producer Chemtura has put its crop-protection and petroleum-additive businesses on the selling block, sources in the financial community said. "We are exploring potential asset sales," Chemtura spokesman John Gustavsen remarked, but he did not offer specifics.

BRASKEM STARTS BUILDING ETHANOL-TO-PE PLANT
Brazilian producer Braskem has begun building a 200,000 tonne/year polyethylene (PE) plant that will use ethanol as a feedstock. The $218m plant, which will also produce ethylene, will be in the Triunfo petrochemical complex in Rio Grande do Sul. Operations are expected to start in the second half of 2010.

ITALY'S MITENI ACQUIRED BY PRIVATE INVESTORS
International Chemical Investors Group has acquired Italian producer Miteni from Japan's Mitsubishi and other shareholders, the privately held investment company said last week. Miteni is a manufacturer and supplier of fluorine intermediates and specialty chemical products.

DOW TO SLASH 400-500 JOBS IN MICHIGAN
US-based producer Dow Chemical has added 400-500 salaried positions at sites in and around its home town of Midland in Michigan to plans for layoffs and shutdowns announced in December. Employees laid off have been offered separation packages that include a lump-sum severance payment, continued health-care benefits and career and personal counseling.

BAYER MATERIALSCIENCE CUTS HOURS BY 6.7%
Bayer MaterialScience will reduce the working hours of its German nonmanagerial employees by 6.7%, effective on 9 February, and cut wages and salaries accordingly. A 3.3% pay increase agreed under the collective agreement with chemical union IG BCE will go into effect in April as planned.

FMC MAY CUT 180 JOBSIN THE UK AND NORWAY
US chemical producer FMC may cut some 180 jobs as it consolidates its alginate business. Alginate extract production will be consolidated at Haugesund, Norway, while finished-product blending will be done mainly at Girvan, Scotland. A blending plant at Slippen, Norway, is expected to be shut down, and extract production will be transferred from Girvan.

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