This week's world news

25 January 2010 00:00  [Source: ICB]

Correction: In the article below headlined "And bodes well for Dow Chemical," please read "Saudi Arabian chemical giant SABIC's strong fourth-quarter (Q4) volumes highlight signs of a global recovery," instead of "Saudi Arabian chemical giant SABIC's strong fourth-quarter (Q4) polyvinylidene chloride volumes highlight signs of a global recovery." A corrected story follows.

DSI TO STOP OPERATIONS
Netherlands-based DSM Specialty Intermediates (DSI) said it would discontinue operational activities by December 31, 2010, citing increasing competition from China and India. DSI added that its production activities at the Chemelot industrial site at Sittard-Geleen, the Netherlands, would be stopped on July 1 as a consequence, resulting in the loss of 37 jobs. The prices and margins for the intermediates DSI produces and sells for the automotive, food and pharmaceutical industries have been under heavy pressure for a number of years.

HEXION EXITS EUROPEAN SOLVENT-BORNE COATINGS
US-based Hexion Specialty Chemicals has signed a definitive agreement to sell its Italy-based solvent-borne alkyd and polyester coating resins business to an affiliate company of Italy-based Tenax. The sale marks Hexion's exit from the European solvent-borne coatings market. Terms were not disclosed, but the sale is expected to close in late January. The sale includes a production facility at Cola di Lazise, in Italy. Tenax plans to continue to operate the plant and offer employment to the 44 people associated with the business.

FIRMS DONATE TO HAITI
Chemical producers Total and Bayer were among the latest companies to donate to earthquake relief efforts in Haiti, the American Chemistry Council (ACC) noted. France-based Total donated €1m ($1.44m) to finance a program that involves setting up an emergency medical clinic, installing a water purification unit, providing shelter and basic necessities for 20,000 people and establishing 10 treatment centers for about 10,000 people. Germany-based Bayer will provide medicine worth about €90,000 and will donate up to €100,000. A number of US chemical firms - including Arch Chemicals, Dow Chemical and Mosaic - have said they would provide relief.

RPM ACQUIRES UK-BASED UNIVERSAL SEALANTS
US-based specialty chemical firm RPM International has bought the Universal Sealants group of companies, based in the UK and producing construction products - including waterproofing systems, protective coatings, expansion joints and concrete repair products. Universal Sealants is headquartered near Newcastle, with annual sales of about $55m (€38m), according to RPM. Terms were not disclosed.

KINDER MORGAN BUYS ETHANOL TERMINALS
US-based energy transport and storage firm Kinder Morgan is buying three ethanol terminals from US Development Group (USD), while forming a joint venture with USD to coordinate access to the facilities. The transaction includes the acquisition of terminals in New Jersey, Maryland and Texas. Kinder Morgan will pay around $195m (€135m) for the facilities, including over $80m in equity.

LSB BEHIND SCHEDULE FOR UAN PRODUCTION
The new Pryor Chemical nitrogen fertilizer plant in Pryor, Oklahoma, US, started producing anhydrous ammonia in January, but has yet to produce any urea ammonium nitrate (UAN), US-based parent company LSB Industries said. Production of ammonia, the feedstock for UAN, was originally expected to begin during the third quarter of 2009. "Equipment and supplier issues have played a role in the delays at Pryor," LSB CEO Jack Golsen said. When in full production, Pryor Chemical is expected to produce and sell about 295,000 tonnes/year of UAN and 31,750 tonnes/year of ammonia.

RELIANCE MAY HAVE TO REWORK STRATEGY
Indian industrial and chemical conglomerate Reliance Industries will have to reevaluate its strategy for acquiring Netherlands-based chemical company LyondellBasell Industries, following a recent ruling by a US bankruptcy court, a source familiar with the developments said. "The unsecured creditors' bid [to include the Reliance offer] has been rejected. That route is closed. And the exclusivity period [for the management plan] is until April 15, so Reliance will have to rework its strategy," said the source. "Reliance can still make a binding bid to the LyondellBasell management and then they can take it to court; it can also increase its offer. Reliance will have to evaluate [options]."

SABIC Q4 NET PROFIT UP
Saudi Arabian producer SABIC's fourth-quarter (Q4) 2009 net income came in at Saudi riyals (SR) 4.58bn ($1.22bn) - significantly higher than profits in the same period a year ago of SR310m and up by 26% on Q3. The petrochemical, steel and fertilizer giant's net profit for 2009, however, was down by 59% to SR9.1bn, despite 5% higher sales volumes of 46m tonnes.

AND BODES WELL FOR DOW CHEMICAL
Saudi Arabian chemical giant SABIC's strong fourth-quarter (Q4) volumes highlight signs of a global recovery and should bode well for US producer Dow Chemical's commodity portfolio, according to Alembic Global Advisors, a New York-based equity research firm. Dow's commodity business, by dint of its ethane bias, had a cost position similar to mixed-feed crackers in Saudi Arabia at current energy prices. Alembic expects Dow to report Q4 market share gains relative to naphtha-based Asian and European producers. According to Alembic, SABIC's Q4 net income was well above market expectations.

ANALYSTS WARY ABOUT GERMANY'S RECOVERY
Analysts have become more skeptical in their outlook for Germany's economy, according to a survey by the ZEW center for European economic research. The center's key economic sentiment indicator fell to 47.2 points in January, down by 3.2 points from December, marking its fourth consecutive decline. The indicator was based on 295 analysts surveyed from January 4-18 who were asked about their expectations for Europe's largest economy in the coming six months. The latest data suggested a "burdensome and long" way out of the recession, said ZEW president Wolfgang Franz.

GRACE SEEKS NEW PLAN
US specialty chemical firm W.R. Grace plans to seek less expensive, longer-term financing in order to emerge from bankruptcy. Its current debtor-in-possession loan offers a financing commitment of as much as $165m (€114m), and is set to expire on April 1, according to court filings. The company's new plan would end that agreement, while including a one-year cash collateralized letter of credit for $100m. That agreement is more cost-effective and takes better advantage of the company's substantial cash reserves, Grace said.

US HOMEBUILDER CONFIDENCE SLIDES
US builder confidence in the market for newly built, single-family homes in January fell to its lowest level since June 2009, extending concerns about the poor job market and large number of foreclosed homes for sale, said the National Association of Home Builders (NAHB). The NAHB/Wells Fargo Housing Market Index (HMI) declined by one point, to 15. Each new single-family home accounts for about $16,000 (€11,040) in chemicals, plastics and related products.

LYONDELL GETS MORE TIME
A US bankruptcy court gave Lyondell Chemical more time to exclusively file a reorganization plan. Lyondell now has until April 15 to file the plan. During that time, no other competing reorganization plans can be filed with the court. Lyondell's plan calls for a debt-for-equity exchange with creditors. In addition to the exchange, Lyondell would also raise $2.8bn (€1.9bn) in equity, money that would help fund its emergence from bankruptcy protection.

CSB TO PROBE TEXAS TECH LAB EXPLOSION
The US Chemical Safety Board (CSB) will investigate the causes of a January 7 laboratory explosion at Texas Tech University earlier this month, and it also plans a broad review of similar accidents at school and university labs across the US. The explosion in Lubbock, Texas, severely injured a graduate student. The accident appeared to have occurred in the chemistry department during the handling of a high-energy metal compound, which suddenly detonated, it said.

ABENGOA UNVEILS ETHANOL POWER PLAN
Spanish ethanol producer Abengoa Bioenergy plans to sell electricity from a cellulosic ethanol plant it will build in the US state of Kansas, touting it as a way to promote energy independence in the heartland of the US. Abengoa signed an agreement with Mid-Kansas Electric under which it will supply Mid-Kansas with 75MW of baseload electricity. The $550m (€380m) facility, should start up in 2012, will produce 15m gal/year of ethanol, using 2,500 tonnes/day of biomass feedstock such as corn stover and wheat straw.

SOLVIN PICKS CHEMPOINT TO SELL PVDC RESIN
SolVin, a division of US-based Solvay Advanced Polymers, has selected e-distributor ChemPoint to provide sales, marketing and related services for its Ixan brand of SGA-1 polyvinylidene chloride (PVDC) resin in the US market. ChemPoint is part of Nether-lands-based distributor Univar.

EVONIK STEPS UP A GEAR IN THE INDIAN CAR MARKET
Germany-based specialty chemical major Evonik Industries has said it is focusing on India's car market because it is a key growth opportunity for its automotive engineering and specialty products. India's automotive sector is growing at 3%/year, making it the only country, except for China, where the car industry is still booming, according to the company.

LANXESS SOON TO BUILD BUTYL RUBBER FACILITY
German producer LANXESS aims to start building Asia's biggest butyl rubber facility, in Singapore, in the third quarter, with commercial production slated to begin in 2013. The 100,000 tonne/year plant will cost €400m ($571m). "We expect to create approximately 200 skilled jobs here in Singapore. This will be the largest single investment made by LANXESS," said Ron Commander, global head of the butyl rubber business unit at LANXESS.

EASTMAN ACQUISITION
US-based Eastman Chemical has completed its acquisition of Tongxiang Xinglong Fine Chemical, a cellulose-based specialty polymers plant near Shanghai. The plant will support Eastman's coatings, adhesives, specialty polymers and inks segment by providing additional capacity to meet growing demand in China, the company says.

FORCE MAJEURE FOR ACN
US-headquartered INEOS Nitriles has declared force majeure on acrylonitrile (ACN) output at its 300,000 tonne/year facility in Cologne, Germany. The contractual caveat, which came into effect at midnight on January 11, was prompted by the declaration of force majeure on propylene at the Cologne site following an outage of the smaller, cracker 4 on December 10. Customers are now on allocation.

DORF EYES SPECIALTY CHEMICAL FIRM IN THE US
Mumbai-based Dorf Ketal Chemicals is planning to buy a US-based specialty chemical firm for around $75m (€53m). "The talks are still on. We expect to clinch the deal in six to eight months. This new acquisition will help us widen our base and increase our product offering," a company source said, but declined to provide further information on Dorf Ketal's targeted company.

RESTART OF CHINA PX UNIT SEES FURTHER DELAYS
China's CNOOC-Kings has delayed the restart of its Huizhou-based 900,000 tonne/year paraxylene (PX) unit because of continued mechanical difficulties. It attempted its restart on January 16 as planned, but the facility could be down for the remainder of the month. The company had shut the plant on January 9 following technical problems and estimated a production loss of 30,000 tonnes as a result of the unscheduled shutdown. The delay in restarting the plant will add further strain to PX supply in Asia.

SABIC SOURCES FUNDS FOR ITS JV CHEMICAL COMPLEX
Saudi Arabia-based chemical giant SABIC says it has obtained financing for its petrochemical complex joint venture (JV) with Chinese energy group Sinopec, in Tianjin, northern China. The financing deals are worth $2.68bn (€1.9bn). The company started up a 1m tonne/year cracker at the site on January 16. SABIC says it has started trial operations at the ethylene cracker and other plants at the Tianjin complex, which has a production capacity of 3.2m tonnes/year. The JV obtained yuan (CNY) 12.26bn ($1.8bn) in long-term financing from Chinese banks and financial institutions and CNY6bn to cover its working capital needs.

CAZENOVE OUTLOOK
UK-based investment bank Cazenove expects chemical companies to show "relatively robust" performances in their fourth-quarter (Q4) 2009 results against weak comparatives, following a strong performance from pan-European chemical stocks during Q3. It says share prices over the past six months had been within investors' expectations of recovery, and performance could be subdued in the short term, given current valuations and ahead of full-year 2009 results.

KERLING GROUP EMERGES
UK-based INEOS will create the Kerling Group from its INEOS Norway polyvinyl chloride (PVC) assets and the INEOS ChlorVinyls business. The businesses will be refinanced and held under the new financing structure. "Upon completion of the transaction, the Kerling group will become Europe's leading producer of PVC and caustic soda," INEOS said. In the year to September 30, 2009, the combined business generated revenues of €1.8bn ($2.5bn).

CZECH BIOFUELS DEAL
Biofuel producers, refiners and Czech government officials have struck a deal on raising minimum biofuel component requirements, according to the Czech environment ministry. Instead of the government's proposed increases to 4.5% and 6.3% for biofuel components in gasoline and diesel respectively, the minimum thresholds will be 4.2% and 6%. In 2009, the minimum levels were 3.5% and 4.5%. Czech refiner and petrochemical group Unipetrol said the deal would slightly reduce pressure on refiners that lose profits because bio-components are more expensive than diesel and gasoline. The extra cost could not be passed on to the consumer in the current fuel marketplace, it added.

CORRECTION
The capacity table in the benzene chemical profile of January 18 incorrectly listed Atofina (now part of Total) with 200,000 tonnes/year at Gonfreville, France. The plant should have been included in Total's entry.

GAS SUPPLY IS AN ISSUE IN POLAND PRIVATIZATION
Investors may raise the issue of Poland's ongoing struggle to strike a long-term gas supply deal with Russia when it comes to the privatization of the country's flagship package of chemical companies, said Polish Deputy Treasury Minister Adam Leszkiewicz. He held out hope that a bilateral deal may be struck before February, when the ministry is due to begin negotiations with the bidder it considered to be the likely winner of the privatization tender.

EUROCHEM TO LOSE 40KT OF DAP/MAP OUTPUT
Phosphate fertilizer producer EuroChem will lose 40,000 tonnes of production at its plants in Russia and Lithuania because of a 70,000 tonne shortage of phosphate rock. Three vessels of Moroccan rock, each carrying around 25,000 tonnes of phosphate rock, were delayed out of the ports of Laayounne and Casablanca in Morocco because of high wind and rain that has affected the region for several weeks. As a result, EuroChem said it would lose around 25,000 tonnes of diammonium phosphate (DAP) production at its Lithuanian facility, plus another 10,000 tonnes of DAP and 5,000 tonnes of monoammonium phosphate (MAP) output at its Kingisepp plant in Russia.

CABOT AND BLUESTAR WILL EXPAND SILICA FACILITY
Cabot (China), a subsidiary of US carbon black producer Cabot, and China's Bluestar New Chemical Materials, have signed an agreement to expand the fumed silica capacity at the companies' joint-venture plant in Jiangxi province, China. The expansion would in its first stage increase the Jiangxi fumed silica capacity from 5,000 tonnes/year to more than 15,000 tonnes/year by the end of 2011.

UZKIMESANOAT RAISES AMMONIA CAPACITY
Uzkimesanoat, an Uzbek state-run chemical company, has increased the capacities of two fertilizer plants operated by its Ferganaazot and Maxam-Chirchik subsidiaries. Ferganaazot raised its ammonia capacity from 320,000 tonnes/year to 400,000 tonnes/year at a total cost of $23m (€15.8m). Maxam-Chirchik also raised its ammonia capacity, from some 200,000 tonnes/year to 420,000 tonnes/year, at a cost of $24.7m.

PTT TO MERGE AFFILIATES
Thai oil and gas major PTT intends to proceed with the consolidation of its petrochemical affiliates, despite legal problems afflicting its major projects in Mab Ta Phut that may take up to nine months to resolve, analysts said. The merger of PTT Aromatics and Refining, PTT Chemical and Integrated Refinery & Petrochemical Complex - all with operational bases at Mab Ta Phut - should improve finances and enhance growth prospects, they said. Shareholder approval is expected in April, said Lertchai Kochareonrattanakul, a Bangkok analyst at global credit ratings agency Fitch Ratings. "A merger makes financial sense if the company wants to grow regionally," said Suttichai Kumworachai, an analyst with Thailand-based brokerage KGI Securities.

By: Joseph Chang
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