This week's world news

30 August 2010 00:00  [Source: ICB]

GERMAN CHEMS WELCOME TAX BREAK PROPOSAL
Germany's chemical producers welcome a proposal by a high-ranking politician to allow energy-intensive producers such as chemical companies to retain an important break on eco-energy taxes, a trade group said. Cutting that break was part of an €80bn ($101bn) savings plan by Chancellor Angela Merkel's coalition government. However, Michael Fuchs, a leading economics expert in Merkel's CDU/CSU party, said last week that rather than hurting energy-intensive producers, the government should - in order to achieve its savings target - reverse a planned reduction of sales taxes in the hotel sector. "Germany must remain an industrial producer. We cannot chase plants that need a lot of energy out of the country with an eco-energy tax," said Fuchs.

LYONDELLBASELL SEES NO IMPACT FROM IRAN
Netherlands-based chemical major LyondellBasell Industries does not expect its withdrawal from business with Iran, Syria and Sudan to have any material financial impact on the company, spokesman David Harpole said. The withdrawal primarily affects the licensing of technologies to produce plastics. That business was conducted by non-US LyondellBasell subsidiaries. LyondellBasell began to cut business ties with Iran, Syria and Sudan almost a year ago, Harpole said.

US NEW HOME SALES DROP IN JULY TO ALL-TIME LOW
US sales of new single-family homes fell by 12.4% in July from June, the Commerce Department said, marking the lowest level of activity on record since 1963 and fully 32% below sales recorded in July 2009. The department said that sales of new single-family homes last month were at a seasonally adjusted annual rate of 276,000 units compared with the downwardly revised figure of 315,000 reported for June.

SANCTIONS TO HIT IRAN PETCHEM GROWTH
Sanctions on Iran could cut operating rates in the country's petrochemicals and plastics industry, as well as hamper plans to expand polyethylene (PE) and polypropylene (PP) capacities, said Hassan Ahmed, analyst at US-based research firm Alembic Global Advisors. With western majors such as Netherlands-based LyondellBasell Industries exiting Iran, the country would be cut off from much-needed chemical technologies, as well as large amounts of catalysts, additives and specialty polymers not produced in the country, he said.

SHELL, COSAN SIGN $12BN JV AGREEMENT
Anglo-Dutch major Shell has signed binding agreements with Brazilian ethanol group Cosan for a proposed $12.0bn (€9.5bn) joint venture (JV) to produce ethanol, sugar and power, as well as the supply, distribution and retail sales of transportation fuels in Brazil. The JV, which still requires regulatory approval, would also explore business opportunities to produce and sell ethanol and sugar globally. Shell said the JV would be one of the world's largest ethanol producers, with a production capacity of more than 2bn liters/year.

US DURABLE GOODS ORDERS GAIN IN JULY
New orders for US durable goods increased by 0.3% to $193bn (€153m) in July from June, the Commerce Department said, but the gain was solely a result of civilian aircraft sales, while orders other than transportation equipment fell by nearly 4%. July's mixed results in this key area of US manufacturing followed two successive months of declines in durable goods orders.

KEYUAN TO BUILD 70,000 TONNE SBS FACILITY
China's Keyuan Petrochemicals intends to erect a 70,000 tonne styrene-butadiene-styrene (SBS) facility on land adjacent to its manufacturing facility in Ningbo, Zhejiang province. "We see tremendous opportunity to gain market share in the SBS market, given the value-added nature of the product and the supply-demand imbalance that exists today," said CEO Chungfeng Tao. SBS is used in shoe soles, tire treads and other products that require a hard, durable rubber. Construction of the SBS facility, which will cost about $17.5m (€13.7m), will begin during the third quarter, and is expected to be completed by the second half of 2011. Keyuan expects the SBS facility to generate about $110m in annual sales once it reaches full capacity.

UNIVAR DISTRIBUTION CENTER UP IN EGYPT
US-based chemical distributor Univar's new distribution center in Cairo, Egypt, is now fully operational. Univar Egypt, which includes a new office and warehouse space, will enable the company to strengthen existing relationships with local customers and suppliers, while partners would benefit from the local stocking of products in Egypt, it said. Univar has been distributing products into the region from the UK for more than 15 years.

BASF HAS STYRENE PRODUCTION ISSUES
German chemical major BASF has technical issues with styrene production at its site at Ludwigshafen, Germany. "It was an unavoidable situation and we hope to be back up soon," said the source, adding that the company is looking to cover prompt volumes. The source would not comment on how long the technical problem, which took place last Wednesday, was expected to last. BASF's styrene production at the site totals 550,000 tonnes/year, according to the ICIS plants and projects database.

IMCD TO BUY WARWICK DISTRIBUTION ASSETS
Netherlands-based specialty chemical company IMCD Group has reached a binding agreement to acquire the specialty chemical distribution companies of the UK's Warwick International Group as part of its bid to expand in the Asia-Pacific region. The value of the transaction, which is due for completion at the end of August, was not disclosed. IMCD will acquire GME Chemicals - the leading chemical distributor in Malaysia - from Warwick, along with Warwick Technology (Slovenia) and Warwick's distribution companies in France, Italy, Spain and Portugal. The targeted units generate about €80m/year ($101m) in sales.

CFC RESTRICTS PVC DUTIES FOR MEXICHEM DEAL
Mexico's Federal Competition Commission (CFC) will prohibit domestic chemical company Mexichem from requesting any duties on polyvinyl chloride (PVC) for 10 years as one of the conditions that must be met for Mexichem to complete its acquisition of two subsidiaries of rival Cydsa. Mexichem has 30 days to respond. Under the deal, Mexichem would acquire PVC producer Policyd and pipe-maker Plasticos Rex. In return, Cydsa would receive an undisclosed amount of cash and Mexichem's Santa Clara facility, which makes caustic soda, sodium hypochlorite and hydrochloric acid.

ARCH CHEMICALS TO CLOSE TWO R&D CENTERS
US biocides producer Arch Chemicals plans to close two research and development (R&D) centers as part of a plan to consolidate those sites' operations to Alpharetta, Georgia, US. Arch will close the R&D centers in Cheshire, Connecticut, and New Castle, Delaware. The consolidation will also affect seven employees at a third site in Conley, Georgia. Arch should complete the consolidation, which will cost $6m-8m (€5m-6m) by the end of 2011. The moves are part of a larger plan to improve its operating margins, the details of which will be revealed later in the year, said Arch.

CHEMTURA TO PAY $26M FOR CLEAN-UPS
US specialty chemical firm Chemtura has agreed to pay $26m (€21m) to cover clean-up costs at 17 sites across the US, the Environmental Protection Agency (EPA) said. The EPA said Chemtura would make the payment as part of its bankruptcy reorganization. In a joint statement with the US Justice Department, the EPA said that the $26m in remediation funding will be used at 17 facilities or former sites in 15 states, including New York, California, Texas and New Jersey.

SHELL RAISES PETCHEM CAPACITY AT NANHAI JV
Global major Shell Chemicals has completed the turnaround and debottlenecking of an ethylene cracker at its Nanhai petrochemicals joint venture (JV) in Guangdong, China. Ethylene capacity has now increased to 950,000 tonnes/year from 800,000 tonnes/year, with total petrochemical production at the plant rising to 2.7m tonnes from 2.3m tonnes. The Nanhai site is a JV with China National Offshore Oil Corp.

CEREPLAST WINS BIO-RESIN SUPPLY DEAL FROM RI.ME
US-based bioplastics firm Cereplast will supply bioplastic resins to Italy-based RI.ME Masterbatch, where they will be used to add color to bulk, uncolored resin. In the agreement, Cereplast will supply its Compostable 3000 film-grade bio-resin for use in RI.ME's masterbatching processes for the production of items such as carry-out bags and compostable trash bags. Cereplast will begin shipping its bio-resins in September 2010, with the contract running through December 2011.

SUMITOMO CHEMICAL EYES HIKE IN EVA CAPACITY
Japan's Sumitomo Chemical is considering raising its ethylene vinyl acetate (EVA) capacity in Chiba and in Singapore to cater for increased demand for solar cell panels. Once the plan is finalized, the company aims to remodel its existing plant in Chiba, which produces EVA and low-density polyethylene (LDPE), to produce 10,000 tonnes/year more LDPE, said a spokesman. The source added that the start-up of the units will probably be in 2014 at the earliest.

GERMAN CHEMICALS TO SEE LOWER GROWTH IN H2
Chemie Baden-Wurttemberg - an umbrella organization for four regional chemical and pharmaceutical trade groups in Germany - suggests the Baden-Wurttemberg state is likely to see a "significant weakening" in growth in the second half of 2010, relative to the first six months of the year. This would mean the state's chemical sales would be unlikely to return to precrisis levels before the end of the year. The end of government stimulus measures, as well as fiscal budget tightening among EU member states is to blame, the group said. Government measures that would increase the industry's energy taxes, as well as a health care reform that could dampen consumer sentiment, will also weigh on growth.

YIZHENG CHEMICAL FIBRE POSTS H1 NET PROFIT
China's largest polyester producer, Sinopec Yizheng Chemical Fibre, posted a 39.2% year-on-year profit growth in the first half of the year - mainly by deferring a significant tax payment for the period. The company achieved a net profit of yuan (CNY) 431m ($63m), compared with CNY310m for the corresponding period of 2009, benefiting from a delayed tax expense of CNY190m, according to a disclosure to the Hong Kong Stock Exchange. Its pretax profit was down by 22.2% year on year, at CNY242m, while the company's turnover in the first half rose to CNY7.6bn from CNY6.1bn. Yizheng said a reduction in costs and expenses, and increasing contribution from other products, helped to partially offset a decline in polyester profit margins.

SAMSUNG PETROCHEMICAL SHUTS ITS NO. 3 PTA UNIT
Mechanical issues forced the closure of the 450,000 tonne/year No. 3 purified terephthalic acid (PTA) unit of South Korea's Samsung Petrochemical in Ulsan on the weekend of August 21-22. A trader told ICIS that an outage had occurred at the unit's air compressor. A source from the company declined to comment but said the shutdown was expected to last for five days.

SHELL SELLS GERMAN REFINERY TO KLESCH
The Anglo-Dutch major Shell has sold its 4.5m tonne/year German refinery at Heide, near Hamburg, to international investment firm Klesch. Included in the deal was associated chemical and bitumen production at Heide, as well as distribution facilities. No financial terms were disclosed. The disposal is part of Shell's strategy to shed about 15% of its global refining capacity to focus on its larger refining sites, it said. Shell plans to sell a refinery at Hamburg-Harbug and its Stanlow, UK, refinery. The company is also closing its refinery in Montreal, Canada.

INDIA'S ORISSA STATE GETS THE GO AHEAD FOR HUB
A proposal to set up a petrochemical hub in Paradip, Orissa state in India, has been approved by the government. The Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) project is expected to attract multibillion dollar investments. Orissa is the fourth state after Andhra Pradesh, Gujarat and West Bengal to have obtained approval to set up a PCPIR. The first phase is expected to be complete by 2015, while the entire PCPIR will be commissioned by 2030, said a source at the Ministry of Chemicals and Fertilizers. Indian Oil Corp. (IndianOil) has already been confirmed as an anchor tenant of the hub. The company plans to set up a 15m tonne/year refinery and petrochemical complex in Paradip.

ZCHP STRIKES REPAYMENT DEAL WITH SUPPLIER PGNIG
Zaklady Chemiczne Police (ZChP) has agreed to pay Polish gas monopoly PGNiG zlotych (Zl) 14m ($4.5m, €3.5m) per quarter for the next 10 quarters to clear its unpaid gas supply debt. The agreement replaced a previous arrangement that would have seen the debt paid off by the end of this month.

CEE RECORDS ITS HIGHEST MARGINS SINCE DOWNTURN
Netherlands-based bank ING has reported that petrochemical producers in Central and Eastern Europe in July recorded their highest margins since before the financial crisis took hold. "July produced the highest margins so far this year and since 2007/08, and August could be just a tick lower, so the recovery is still going ahead," said Tamas Pletser, a Budapest-based oil, gas and petrochemicals analyst for ING. "Regarding the future, everything depends on the global economic recovery and the new Middle East petchem capacities, which may arrive on the European markets by the end of this year," he added.

NABUCCO CONSORTIUM ABANDONS IRAN PLANS
Plans to link the $7.9bn (€6.2bn) Nabucco natural gas pipeline to a feeder line running from Iran have been shelved because of the country's political situation and international trade sanctions. The Nabucco Gas Pipeline International consortium will instead concentrate on building two smaller supply lines to run from Iraq and Georgia and link to the main pipeline in Turkey. The consortium said its current arrangements would ensure that, from the end of 2014, the "new southern corridor Asia to Europe gas bridge" could carry up to 31bn m3/year of natural gas via Turkey to Western Europe through Romania, Hungary, Bulgaria and Austria. However, some energy security analysts have cautioned that without supplies from Iran, it would not be possible for the EU-backed Nabucco project to achieve a capacity high enough to become a "game changer" in the delivery of gas to Europe.

POTASHCORP DISCUSSES POTENTIAL TAKEOVER BIDS
Canadian fertilizer producer PotashCorp is discussing potential bids for its business with third parties as it fights to prevent a hostile takeover from Australian mining giant BHP Billiton. The group said that since BHP Billiton made a $40bn (€31bn) offer to acquire all issued and outstanding shares of the company on August 12, it had evaluated its strategic options and expected superior offers or alternative paths to emerge. Media reports suggested that PotashCorp had been approached with rival offers from both Chinese state industrial group Sinochem and Brazilian mining company Vale. The board unanimously recommended that PotashCorp shareholders reject BHP Billiton's offer.

BRASKEM SEES EXPORTS RISE 25% IN JULY
July exports by Brazil's Braskem totaled $216m (€170m), up by nearly 25% from the same month last year because of higher international prices, according to the Foreign Commerce Bureau (Secex). That was the second-highest monthly export figure this year for the company. Braskem exported $232m in product in April. In the first six months of 2010, Braskem's exports totaled $1.42bn, up by 56.4% year on year, said Secex.

POLAND'S ZCHP CUTS FIRST-HALF NET LOSS
Poland's Zaklady Chemiczne Police (ZChP) reported a first-half net loss of zlotych (Zl) 22.1m ($7.2m, €5.6m), compared with a loss of Zl228.2m in the same period a year ago. Revenues rose by 6% year on year to Zl922.3m, with fertilizer sales up by 52% at Zl424m and titanium dioxide (TiO2) sales flat at Zl71.0m, but still 8% above the prediction of analysts at Czech-based investment bank Wood & Company. "We believe that the outcome of the entire year will be better than the first half, but talking about a profit would be inappropriate at this time because it is not yet visible," said ZChP board chairman Zbigniew Miklewicz.

BANKRUPT NCHZ TO BE BOUGHT BY YEAR END
A buyer for bankrupt Slovak calcium carbide producer Novacke chemicke zavody (NCHZ) will hopefully be found by the end of this year through a newly-announced international public tender, said the administrator of the company. The firm went into receivership in October 2009 after being fined €19.6m by the European Commission for cartel activities, but it had remained a viable business and important exporter, according to a statement from the Slovak Administration and Restructuring Agency. Applicants have until September 2 to register their interest.

MEXICAN FIRMS TO RAISE PLASTIC RECYCLING
The head of a Mexican plastics industry association said its businesses would invest $125m (€99m) in 24 recycling plants in the country. Industrialists of the Plastic Market president Juan Antonio Hernandez said 60 of the association's business affiliates would make the investment. The businesses pledged that by the end of the year, every plastic bag they made would be composed of at least 40% recycled plastic, while some plants would make 100% recycled products. Hernandez said the move was made "in order to promote a culture of sustainability among the Mexican population," according to news reports. A law prohibiting businesses from giving away plastic bags in Mexico City was introduced on August 18.

OPEN LETTER OPPOSES GERMANY NUCLEAR TAX
An open letter has been signed by German industry leaders, including BASF's CEO Jurgen Hambrecht, expressing concerns over Chancellor Angela Merkel's plans to tax nuclear power providers. The German government said in June that it would levy €2.3bn/year (€2.9bn/year) from the nuclear industry from 2011 to help cut the budget deficit. Industry heads, utility companies, as well as members of Merkel's Christian Democrats, have suggested the move would hamper future industrial investments in the country. The government, which had planned to finalize the levy in talks with utility companies by September 1, said it had postponed the decision on the tax until the end of September.

PERSTORP'S FRANCE TDI UNIT IS IN RESTART PHASE
Sweden's Perstorp was working on the restart of its 125,000 tonne/year toluene di-isocyanate (TDI) facility at Le Pont-de-Claix, France, last Monday following an unexpected outage caused by insufficient key raw materials from its third-party supplier. The plant had been down for about a week. A strict sales control program was introduced for its TDI volumes, which is expected to last until at least September.

LENZING FIRST-HALF NET PROFIT JUMPS TO €80.4M
A sales surge saw first-half 2010 net profit for Austria's Lenzing leap to €80.4m ($101.9m) from €5.9m during the same period last year. Consolidated sales came in at €847.2m - up by 43.6% from €589.9m during last year's January to June period. This was mainly because of higher fiber volumes, the price dynamics of global markets and the first-time full consolidation of Czech pulp producer Biocel Paskov, which it acquired in April. The firm's first-half operating profit jumped to €108.6m from €15.4m during the same six-month period of 2009. The company warned, however, that during the second half of the year, margins will be negatively affected by weakening fiber demand, new cellulose fiber production capacity in China, and high raw material prices.

PTT OPTIMISTIC ON MAB TA PHUT PROJECTS RESTART
Southeast Asia's oil and gas giant PTT is optimistic that all its frozen petrochemical projects in Mab Ta Phut, except for one, will be released from suspension by the courts. A Thai court ordered that a number of Mab Ta Phut projects be stopped in September 2009 on environmental grounds, invoking Article 67 of the country's constitution. The Thai Central Administrative Court was expected to decide on August 26 which projects would be subjected to environmental and health impact assessments and which would be allowed to start operating. Among those expected to be released from suspension are PTT's sixth gas separation plant, along with the three projects of its affiliate, PTT Chemical, namely the 50,000 tonne/year high density polyethylene (HDPE) expansion, a 250,000 tonne/year HDPE expansion and its 50,000 tonne/year ethanolamine project.

AWB ENDORSES AGRIUM'S TAKEOVER OFFER
Canadian fertilizer major Agrium said last week that the board of directors for Australian wheat exporter AWB had recommended that its shareholders accept an Australian dollars (A$) 1.24bn ($1.11bn) takeover offer. "We anticipate the acquisition of AWB will be significantly accretive to Agrium's earnings in the first year," said Mike Wilson, president and CEO of Agrium. "We believe we will be able to generate synergies of A$40m or more on an annual basis."


By: Joseph Chang
+1 713 525 2653



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