This week's world news

23 February 2009 00:00  [Source: ICB]

HIGH LEVEL GROUP ON CHEMICALS REPORTS
The chemical industry has taken advantage of a “once in a decade opportunity” to influence events and, crucially, attitudes towards the sector, the industry’s coordinator said ahead of the release of the final report of the EU’s High Level Group (HLG) on chemicals last week. Cefic’s head of trade policy, Rene van Sloten had coordinated the input by industry executives and trade groups to the project sponsored by the European Commission. The HLG discussed a wide range of industry and related topics with EU officials and politicians over 17 months. See next week’s issue for a full report.

 

LYONDELLBASELL CREDIT RATING DOWNGRADED
LyondellBasell Industries has failed to make interest payments on two European bonds due for Sunday 15 February. The Netherlands-based chemical producer confirmed a report by credit watchdog Standard & Poor’s, which downgraded its credit rating to “D” from “SD” after its European business failed to pay interest on bonds of $615m (€480m) and $500m, which mature in 2015. Another credit ratings agency, Fitch, said it had withdrawn its ratings for the LyondellBasell group, as well as coverage of several of its subsidiaries, following reports on the missed bond payments. LyondellBasell’s US operations filed for Chapter 11 bankruptcy protection on January 6.

 

GLOBAL CHEMICAL M&A TO MODERATE IN 2009
Global chemical industry mergers and acquisitions (M&A) will not collapse, but will slow to a moderate pace in 2009, US consultancy Young & Partners president Peter Young said last week. “M&A activity will continue at a moderate rate – well off the record 2007 and relatively strong 2008 levels, but significantly higher than most industries,” said the investment banker at a meeting of the Societe de Chimie Industrielle in New York City. See M&A article, page 16.

 

US ECONOMY TO WORSEN BEFORE UPTURN IN 2010
The US economy will get worse before it gets better, with a “long and arduous” recovery not likely until early 2010, a national trade group says, predicting a 9% fall in manufacturing output this year. “We are in the midst of a very severe global recession in manufacturing which looks to be the worst recession since 1973–1974,” said Daniel Meckstroth, chief economist for the Manufacturers Alliance. Meckstroth said the group’s economists “believe it may be late in 2009 or in 2010 before the economy can be seen as stabilizing.”

 

POLAND’S PRIVATIZATION PLANS NOT REALISTIC
The merger plans at the heart of the Polish chemical industry privatization process are not realistic because some of the companies involved are not fully state-owned, Citigroup says. “Although we see these plans as reasonable from the business point, in our view, they would only be realistic if all the chemical companies were fully state-owned. Since these companies are publicly traded and have various minority shareholders with various interests, these plans seem to be extremely difficult to execute from a shareholder and logistics point,” the financial conglomerate said in a report. See page 20 for a full report.

 

NO PERFORMANCE BONUSES FOR DOW EXECS
Troubled US giant Dow Chemical said last week that its CEO, Andrew Liveris, and those who report directly to him will not receive a performance payout, based on profit, cost management and business goals. However, all other company employees will still receive bonuses. “The extraordinary events that took place in late 2008 changed many things for our company,” Liveris said. “We, with the board of directors’ full support, believe that Dow’s executive leadership should demonstrate full accountability for these events.”

 

US SOLUTIA FORECASTS FALLING SPECIALTY SALES
Solutia expects full-year 2009 earnings to fall by up to 17% from 2008, with fewer sales offsetting any relief from high raw material costs. The company said it expects plunging demand in the key construction and automotive industries, particularly in the previously stalwart western Europe and China markets, to drain demand for its glass coatings and layer segments. It forecast full-year 2009 earnings before interest, tax, deprecation and amortization (EBIDTA) of $325m–$350m (€257m–277m).

 

US ROCKWOOD AUSTERITY TO CUT JOBS AND SALARIES
Rockwood Holdings plans to ultimately trim 893 jobs – or 9% of its workforce – as it continues its cost-cutting measures, the US specialty chemicals maker said during a conference call. The austerity measures include a global freeze on all salaries for 2009, salary reductions in some business segments, fewer capital expenditures, some travel budget restrictions and other steps begun last year, Rockwood chairman and CEO Seifi Ghasemi said. Although Ghasemi did not offer a timetable, he said the measures were expected to save the company $150m (€119m).

 

CHINA’S HUBEI XINGRUI BEGINS BUILDING
China-based Hubei Xingrui Chemical has invested nearly yuan (CNY) 600m ($87.7m) to build a 60,000 tonne/year organosilicon monomer unit in Yichang, central Hubei province, a company source said last week. Construction started on February 15 and was expected to take about two years, the source said. “We also plan to expand the capacity to 180,000 tonnes/year in the future in light of the current rising demand,” the source added.

 

EVONIK PREPARES TO LIST REAL ESTATE DIVISION
Germany’s Evonik Industries, which includes the former Degussa specialty chemicals business, is preparing its real estate division for a capital market listing, CEO Klaus Engel has said. Engel told business magazine Capital in an interview that the division, one of the largest apartment rental businesses in Germany, would be listed once capital markets improved. He rejected suggestions that Evonik may seek broad-based increases in rents to boost the division’s market value and strengthen its cash position in the short term.

 

FRANCE’S AZF EXPLOSION TRIAL SET TO OPEN
Eight years after the explosion at the AZF fertilizer factory in Toulouse, Southwest France, a trial is set to open this Monday against Serge Biechlin, former director of AZF, and Grande Paroisse, owner of the factory and a subsidiary of the Total group. Both parties are accused of involuntary homicide and wounding. Thirty people died and thousands were injured when a 300 tonne stockpile of ammonium nitrate exploded at the plant on 21 September 2001. An association representing the victims of the explosion confirmed last week that the court of appeal would film the hearing, which is expected to last four months.

 

EC URGES COORDINATION ON NANOMATERIALS
Research into nanomaterials must be coordinated to produce comparable and reliable risk-assessment data, one of the European Commission’s independent scientific committees says. In its latest opinion on nanomaterials, the Commission’s Scientific Committee on Emerging and Newly Identified Health Risks called for “coordinated research strategies” to further assess exposure to nanomaterials and identify potential hazards.

 

RUSSIA’S PETCHEM OUTPUT COMES SHARPLY DOWN
Russia’s total mineral fertilizer production was down by 41.7% year on year at 946,600 tonnes in January 2009, the Russian statistical agency Rosstat said last week. The country’s overall output of ammonia was down by 17.1% at 1m tonnes, according to the agency. Russia’s total plastics production was down by 15.9% at 324,000 tonnes, while synthetic rubber output saw a 59.1% drop to 43,000 tonnes. See pages 24–29 for more analysis on Russia.

 

MERCK KGAA PLUMMETS TO €279.5M Q4 NET LOSS
Merck KGaA plummeted to a net loss after minorities of €279.5m ($353.8m) in the fourth quarter, down from a profit of €3.39bn in the same period a year ago, on the back of charges and weak results in its chemical division, the German drug and specialty chemical maker said last week. Revenue for the quarter rose by 5.4% to €1.90bn, while the group reported record full-year sales of €7.56bn, up by 7.1% from 2007. Merck posted a €258m loss in earnings before interest and tax (EBIT) in the fourth quarter, compared with a €47.5m loss in the same period a year earlier.

 

UNIPETROL CEO RESIGNS WITH IMMEDIATE EFFECT
Unipetrol CEO Francois Vleugels has resigned with immediate effect. The firm’s supervisory board subsequently appointed Krzysztof Urbanowicz as its new CEO. No explanation for the resignation was provided. Sources at Unipetrol were uncertain about why Vleugels had resigned, but conceded that he had long been unhappy at the failure of Polish owner PKN Orlen to approve his development plans for the company. Vleugels was known to regard Orlen as hamstrung by the fact that it is still state-owned and therefore subject to regular Polish government interference in its management.

 

CHINA STIMULUS PACKAGE AWAITS APPROVAL
China’s yuan (CNY)500bn ($73bn) fiscal package aimed at stimulating the country’s refining and petrochemical sector has been submitted to the National Development and Reform Commission  for approval. Secretary general of China Petroleum and Chemical Industry Association Sun Weishan declined to say how soon the package would be approved, or how the funds would be disbursed. It includes a CNY100bn investment in 2009 and 2010 for upgrades in oil products, and an investment of CNY400bn for the construction of 20 large-scale petrochemical projects, said a report from state newspaper China Daily.

 

AIR LIQUIDE MAY MAINTAIN GROWTH IN COMING YEARS
Citigroup expects French industrial gases producer Air Liquide to sustain 10% in earnings growth over the next four years. Air Liquide posted an 8.6% increase in net profit for the full year to €1.22bn ($1.56bn), while sales were up 11% to €13.1bn. Citigroup expected the company to maintain growth, driven by the development of hydrogen markets, where legislation demands cleaner, desulfurized fuel, and cyclical demand for its low-capital-intensive services.

 

MORE JOB LOSSES FOR GEORGIA GULF IN Q1
US producer Georgia Gulf will lay off another 5% of its workforce during  the first quarter as part of plans to cut operating costs by $47m (€37m), said president and CEO Paul Carrico. The cost-cutting plan includes earlier layoffs from 2008, salary and pension freezes, and the closure of its Sarnia polyvinyl chloride (PVC) resin plant, according to the company. The initiative is expected to help Georgia Gulf better cover its interest, and pay off some of its debt.

 

PETROBRAS PLANS FLAWED
Plans by Brazil’s Petrobras to build a new fertilizer plant in the country may not be feasible because of weak prices, a lack of domestic natural gas and the global recession, said Renata Marconato, an analyst with MB Agro. Petrobras plans to build a 1m tonne/year facility to produce ammonia and urea. The company says the plant’s location and cost are still being considered. “Brazil depends mainly on imported gas, and its price is usually in line with the price of oil, which should continue lower for now,” Marconato said. As such, it would be much cheaper to import fertilizer. He added that Petrobras might end up delaying the fertilizer project.

 

OIL PRICES LOOK SET TO STAY BELOW $60/BBL
Oil prices are unlikely to breach $60/bbl in 2009 due to a lack of demand, said Gati al-Jebouri, CEO of Russian traders Litasco at last week’s International Petroleum Week conference. This is $10/bbl lower than the $70/bbl limit touted by industry experts at the end of 2008. The overriding fundamental is the weakening demand for the product, fueled by the global economic crisis, said Al-Jebouri.

 

CRODA REPORTS POSITIVE FOURTH QUARTER RESULTS
UK oleochemical company Croda has posted an 11% increase in fourth-quarter (Q4) 2008 continuing pretax profit to £20.9m ($29.8m, €23.2m), up from £18.8m in the same period a year earlier. Continuing sales rose by 8% year on year to £221m in Q4, driven by the consumer care segment, Croda said. Consumer care increased its continuing operating profit by 18% to £24m, while sales were up 46% to £113.9m.

 

REFINERY RESTARTED, BUT RUNNING AT REDUCED RATE
Philippine oil major Petron restarted its 180,000 bbl/day refinery in Limay, Bataan province, on February 11 and is running it at around 40% of capacity. It is producing 70,000–75,000 bbl/day. Petron’s refinery was taken off line in early December for a maintenance turnaround originally scheduled for early this year to speed up its tie-in with its new $300m petrochemical facility, which is is slated for commissioning in Q1.

 

CHINESE PTA OUTAGE ENDS
China’s Xiang Lu Petrochemical has restarted its 1.5m tonne/year purified terephthalic acid (PTA) plant in southern Fujian province after shutting it down on February 12. A company source said that the plant is now running at 50–60% of nameplate capacity. No official reason was given for the sudden outage, but market sources close to the company said that a lack of feedstock paraxylene (PX) was responsible.

 

COLORADO CONSIDERS A BAN ON BAGS
Colorado is considering a bill to make it the first US state to ban plastic bags at supermarkets and large stores. The proposal, Senate Bill 156, passed by a state Senate committee, would be enacted in 2012. Smaller stores and franchise operations would not be impacted. All three Republicans on the committee voted against the bill, saying it would increase the use of paper bags, which they said take more energy and water to produce.

 

TEXAS PETROCHEMICAL POSTS A NET LOSS
US-based producer Texas Petrochemicals has posted a fiscal second-quarter net loss of $26.7m (€20.8m), compared with a profit of $2.2m in the period a year earlier. This was due to a sharp decline in demand and impact from last September’s US Gulf Coast hurricanes. Revenues for the three months ending December 31, fell by $100m to $410m, down from $509.9m the year before.

 

SIBUR PLOWS AHEAD
Russia’s Sibur has moved ahead with its gas processing expansion despite the adverse economic conditions. Sibur had started the second stage of its Yuzhno-Balyk project, which would double the plant’s capacity to 3bn m3/year of associated gas by the third quarter of 2009, it said in a statement. The first stage of the plant’s expansion, which raised its capacity from 900m m3/year to 1.5bn m3/year, was completed in 2008.

 

CLARIFICATION
Dow Corning wishes to clarify the statement in the “Fuel for thought” feature in last week’s ICIS Chemical Business. Its investment of $3bn over the next five to 10 years is to provide materials to the solar technology industry, not in the company’s own energy efficiency improvements.


By: Will Beacham
+44 20 8652 3214



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