This week's world news

21 February 2011 00:00  [Source: ICB]

CLARIANT TO ACQUIRE SUD-CHEMIE FOR €2BN
Swiss specialty chemicals producer Clariant has agreed to acquire a majority stake in German specialty and catalysts firm Sud-Chemie for €2bn ($2.7bn). Clariant will acquire slightly more than 95% of Sud-Chemie, 50.4% of which would be bought from One Equity Partners at €121/share. The rest of the shares will be acquired from family shareholders through a share swap. These shareholders control around 46% of Sud-Chemie. "We are convinced that Sud-Chemie is the right strategic fit for Clariant," said Clariant CEO Hariolf Kottmann (see News Focus, page 10).

TOTAL SELLS STAKE IN CEPSA TO ABU DHABI'S IPIC
French oil and chemical major Total will sell its 48.83% stake in Spanish oil and petrochemical producer Cepsa to Abu Dhabi's International Petroleum Investment Company (IPIC) which currently holds a 47.06% stake in Cepsa. Following a public take-over bid, the UAE-based company plans to offer €28/share ($38/ share) and a dividend of €0.50/share will be paid. Total will receive €3.7bn. The transaction will be subject to all relevant government approvals. Total said the deal will reduce its exposure to European refining.

SIBUR INVESTOR GETS APPROVAL TO BOOST STAKE
Russia's monopoly authorities have given permission for entrepreneur Leonid Mikhelson to boost his stake in petrochemical major Sibur from 25% to 50%, an executive involved in the investment said last week. Pavel Malyi, president of Miracle, which was created as a holding company for Mikhelson's Sibur investment, said the stake was expected to be acquired from owner Gazprombank within the next couple of weeks. Mikhelson is building his stake towards 100% and an eventual initial public offering. "Late on [February 11] we got approval to close the next leg of the acquisition," said Malyi.

BP TO EXPAND ZHUHAI PTA, PLANS WORLDSCALE PLANT
BP plans to expand the purified terephthalic acid (PTA) capacity at its BP Zhuhai joint venture in southern China's Guangdong province, and also plans to build a new PTA plant at the same site. Through debottlenecking, BP will increase the Zhuhai unit's capacity by more than 200,000 tonnes/year at the site's second unit, raising total PTA production capacity at Zhuhai to around 1.7m tonnes/year. BP said it expects the expansion to be fully operational in the first quarter of 2012. BP is also at pre-engineering planning stage for a new 1.25m tonnes/year PTA plant at Zhuhai.

CHEMICAL M&A MARKET CONDUCIVE FOR SELLERS
The chemical mergers and acquisitions (M&A) market is offering a good opportunity for sellers to exit, a leading investment banker said last week. "While M&A activity has been somewhat quiet early in 2011, we fully expect things to pick up, given the favorable market conditions featuring available financing and relatively high valuations," said Leland Harrs, managing director at US-based investment bank Prince-Ridge Group. "Market conditions are very supportive of being a seller in this environment," he said. Transaction valuations have been driven up buy the availability of debt financing, the banker noted.

BRENNTAG PROFIT SOARS ON CAPITAL STRUCTURE
German chemical distributor Brenntag posted a record profit after tax of €146.6m ($198m) in 2010, up from €500,000 in 2009, because its costs structure became more efficient. Profit before tax increased nearly fourfold to €231.8m in 2010 from €47.1m in the previous year, as interest costs markedly declined after an improvement in its capital structure. This followed Brenntag's initial public offering in March 2010. Last year, sales grew by 20.2% to €7.65bn. "With the background of a growing world economy and the continuation of the positive trends in the chemical distribution industry, Brenntag expects a continued positive earnings development in 2011," the company said.

NATGAS A GAME-CHANGER FOR US PETCHEMS: KIRBY
The surge in US waterborne chemical shipments on inland waterways stems directly from the nation's low natural gas prices, the top executive of the country's largest barge operator said last week. Low prices have given the industry and chemical shipping on the US Gulf coast a boost globally, said Joe Pyne, the chairman and chief executive of Kirby. "That's a game-changer," Pyne said at an investment conference in Florida. "The US petrochemical industry is competitive all over the globe now and it's all because of feedstock costs." US natural gas prices fell to $3.92/MMBtu last week and remain below prices for the commodity in Europe (see chart page 24).

PE SUPPLY TIGHTENS ON PROBLEM AT BOROUGE
Borouge's polyethylene (PE) plant in Ruwais, Abu Dhabi, is facing production hiccups, causing the supply of certain PE grades to tighten in the Middle East and Asian markets, market sources said last Thursday. "Production at the PE facility is very unstable, so the company has little export availability for February and March," a source said. The source did not disclose the reasons behind the production problem. Company officials were not available for comment. The supply of high-end grades, such as PE pipe, has tightened in the Middle East and south Asia as a result of the reduced production at the Borouge facility, traders and end-users said.

AKZONOBEL SWINGS TO Q4 NET INCOME OF €162M
Dutch chemical producer AkzoNobel swung to a net income of €162m ($219m) in the fourth quarter of 2010, compared with a loss of €60m a year earlier, on the back of higher demand. Revenue in the fourth quarter jumped by 17% to €3.62bn, while earnings before interest, tax, depreciation and amortization (EBITDA) rose by 3% to €377m. Revenue growth was driven by a 6% increase in sales volume across the firm's business areas as demand recovered, particularly in high-growth markets. "AkzoNobel's revenue in high-growth markets, currently representing around 40% of our total, grew more than 20%, outperforming the market in 2010," company CEO Hans Wijers said.

SHANXI YUFENG INVESTS IN COAL-BASED CHEMICALS
China's Shanxi Yufeng Energy is planning to invest yuan (CNY) 5bn ($759m) to build several coal-based chemical projects in Yuanping city, Shanxi province, a statement from the local government said. The company has signed an agreement with the Yuanping municipal government to construct a 2m tonne/year coal coking facility, a 50,000 tonne/year maleic anhydride (MA) plant, a 50,000 tonne/year butanediol (BDO) plant and a 200,000 tonne/year methanol plant. Construction will begin in May this year and is scheduled for completion in late 2013.

BASF CEO CALLS FOR WAGE-TALKS MODERATION
BASF CEO Jurgen Hambrecht has called for moderation and reason in Germany's 2011 chemical industry wage negotiations. Hambrecht said employers and workers needed to focus on securing jobs and on the industry's competitiveness and wage increases should not outpace productivity improvements. Also, many of Germany's smaller chemical producers have not yet overcome the economic crisis, he said. Hambrecht said the chemical industry workers' representatives had been "reasonable and prudent" in the past.

DSM ACQUIRES MAJORITY OF CHINESE FIBER MAKER
Dutch life and material sciences firm DSM has inked a deal to acquire a majority shareholding in Chinese high-performance-fiber producer Shandong ICD High Performance Fibre. The acquisition of the majority share in Shandong ICD will bring complementary manufacturing and technology assets to DSM and strengthen the company's presence in the key China market, the company said. "Closing of this transaction is expected in the course of 2011," it said.

BELGIUM'S SOLVAY Q4 NET PROFIT SLUMPS BY 92%
Belgian producer Solvay's net profit in the fourth quarter (Q4) slumped by 92% year on year to €16m ($21.6m) as sales fell by 25% to €1.65bn. The company's earnings before interest and tax (EBIT) fell by 77% to €66m in the fourth quarter. The company's 2010 net profit included a €1.7bn divestment gain from the sale of its pharmaceutical business and gains from the sale of Solvay's stake in Inergy Automotive Systems. Chemical sales increased by 11% to €3.01bn in 2010, while plastics rose by 27% to €3.78bn.

CANADIAN FIRMS PLAN $5.1BN OIL SANDS PROJECT
Two Canadian energy firms plan to build a Canadian dollar 5bn ($5.1bn) oil sands upgrading and refining project in Alberta.The project, by Canadian Natural Resources and North West Upgrading, near Edmonton will convert 50,000 bbl/day of bitumen into more than 5.5m liters/day of ultra-low-sulfur diesel.

HUNTSMAN TO ADD POLYETHERAMINE CAPACITY
US-based chemical firm Huntsman plans to expand its polyetheramine facility in Singapore by 40,000 tonnes/year. The expansion will cost $70m (€52m), with planned completion in mid-2013. Stu Monteith, president of Huntsman's performance products division, said the project "is in line with our regional growth projections for the next decade and will optimize our global manufacturing footprint for specialty amines, enabling us to flex and respond more quickly to customer requirements."

AIR PRODUCTS WALKS AWAY FROM AIRGAS
US industrial gases producer Air Products will not seek to appeal an adverse US court ruling that effectively ended its year-long $5.9bn (€4.4bn) battle to take over US rival Airgas. Air Products will "move on" to other opportunities, although it does not see any deals on the scale of Airgas, CEO John McGlade and chief financial officer Paul Huck said on a conference call. "We are done [with Airgas]," Huck said, when asked if his company might make a new bid for Airgas at a later time. Air Products withdrew its $70/share offer for Airgas last Tuesday, after the Delaware Chancery Court upheld Airgas's poison pill plan.

CANADA EYES 2% BIODIESEL BLENDING FROM JULY 1
Canada is planning regulations requiring an average 2% renewable content in diesel fuel and heating oil from July 1. The plans for a federal 2% biodiesel rule were announced in 2008. Trade group Canadian Renewable Fuels Association said the biodiesel mandate was a milestone for the industry that "sets the stage for Canada to become a world leader in advanced biofuels."

OXEA RESTARTS PLANTS AFTER BOMB DEFUSED
Germany-based chemical firm Oxea's production plants at Oberhausen have restarted after an unexploded bomb from the Second World War was successfully defused. The bomb was discovered on February 11. "We were able to ensure the safety of all persons on the site and started up the plants as quickly as possible," said Oxea's director for production and technology, Georg Dambkes. Oxea produces 130,000 tonnes/year of butanol, 540,000 tonnes/year of butyraldehyde, 75,000 tonnes/year of dioctyl phthalate (DOP) and 300,000 tonnes/year of ethylhexanol at its Oberhausen site, according to ICIS data.

SHELL SEES HIGH COSTS AND VOLATILITY AHEAD
Oil giant Shell believes that "the world is entering an era of volatile transitions and intensified economic cycles" and has suggested that the supply of easily accessible oil and gas will not be able to match the growth in demand by the end of this decade. Following the release of its updated set of energy scenarios, it added that coal and biofuels will not be able to completely resolve supply/demand tensions. The company sees no "silver bullet" that might provide a solution to the world's energy needs. In addition, China and India's continued material development and a tighter market will put pressure on prices and lead to greater volatility, Shell says.

US MYRIANT AND UK DAVY INK SUCCINIC ACID DEAL
US succinic acid maker Myriant Technologies and UK-based Davy Process Technology will use succinic acid as a bio-derived feedstock for the production of butanediol, tetrahydrofuran and gamma-butyrolactone, the companies said last week. An agreement reached between Myriant and Davy covers the non-exclusive testing and approval of Massachusetts-based Myriant's succinic acid as a feedstock to Davy's production process. The agreement also covers the integration of Myriant's bio-succinic acid technology with Davy's butanediol technology to minimize the cost of recovery and purification of the succinic acid for the production of bio-butanediol. Myriant is constructing the world's first commercial bio-based succinic acid plant in Lake Providence, Louisiana.

BP DECLARES FOURTH FM ON BELGIAN PTA PLANT
BP's attempt to restart its purified terephthalic acid (PTA) plant at Geel, Belgium, forced the company to announce a fourth force majeure (FM) because of a problem with a heat exchanger, it said last Monday. Repairs were expected to take nine to 10 days. BP's PTA 3 unit - part of its 3.3m tonne/year PTA plant - had been on 40% allocation and FM since January because of a mechanical problem.

PKN ORLEN'S PX/PTA PLANT TO RUN AT 60-70%
Poland's PKN Orlen's new paraxylene (PX)/PTA plant, in Wloclawek, Poland, is likely to run at 60-70% of capacity in 2011. The company, which hoped that the facility's two-month technological start-up delay would extend no later than March, said the utilization of full capacity could be achieved only in 2012.

SAN MIGUEL TO BUILD A $600M LNG TANK FARM
Philippine conglomerate San Miguel - the parent firm of energy firm Petron - is considering building a $600m (€438m) liquefied natural gas (LNG) tank farm in Limay, Bataan, as part of a plan to upgrade its power plant at the site. It aims to roughly double the generating capacity of its combined-cycle 620MW power facility at the site to 1.2GW and run it on LNG. San Miguel said it would spend a total of $1bn for the upgrade and conversion of the power plant.

METHANEX RESTARTS TITAN METHANOL UNIT IN TRINIDAD
Canada's Methanex has reported that its 850,000 tonne/year Titan plant in Trinidad has restarted after shutting down at the end of January. No reason was given for the outage. A company executive said the shutdown would last for three weeks, which would have ended around February 11-12.

AMERICAS STYRENICS TO END MAINTENANCE SOON
Americas Styrenics expects maintenance at its St. James styrene complex in Louisiana to be complete by the end of February, having started in early January. The site consists of a 450,000 tonne/year and 500,000 tonne/year styrene unit.

CHINA CUSTOMS REPORTS RISE IN JANUARY EXPORTS
China's foreign trade showed strong growth in January ahead of the one-week Lunar New Year holiday that started on February 2. China Customs said that January exports rose by 37.7% year on year to $150.73bn (€111.54bn), while imports soared by 51% to $144.28bn. Last Monday, it was confirmed that China had overtaken Japan as the world's second-biggest economy.

JIANGSU SHENJIU TO SHUT ITS POLYESTER LINE
China's Jiangsu Shenjiu Chemical Fiber plans to shut down its 250,000 tonne/year polyester line at Taicang in Jiangsu province on February 20 for a 20-day annual maintenance turnaround. The company would continue to sell its inventories during the shutdown as it had built up stocks during the Lunar New Year holidays, the source added.

BRENNTAG OPENS NEW DISTRIBUTION FACILITY
German distributor Brenntag has opened a new distribution facility in Jakarta, Indonesia, to meet growing demand. The new facility has 5,000m2 (54,000 square feet), with 6,600 pallet positions. It adds to Brenntag's seven existing warehouses in Indonesia and its growing network in the Asia-Pacific region, the company said.

LYONDELLBASELL SHUTS DOWN TEXAS CRACKER
Netherlands-based LyondellBasell shut its 789,000 tonne/year La Porte cracker in Texas on February 14 after a loss of steam, according to a filing with the Texas Commission on Environmental Quality. The company has not said when the unit will restart.

CLARIANT SWINGS TO NET PROFIT IN Q4
Solid demand saw Switzerland-based chemical company Clariant swing to a net profit of Swiss francs (Swfr) 47m ($48.5m, €36.2m) in the fourth quarter of 2010, compared with a loss of Swfr67m in the same period a year earlier. Sales in the fourth quarter grew by 8% year on year to Swfr1.7bn. Earnings before interest and tax swung to a gain of Swfr31m, compared with a loss of Swfr23m in the same period of 2009. Clariant announced that its extensive restructuring program, which has taken place over the past two years, had been completed and that it was ready to begin investing again in growth (see page 10).

THAILAND'S IRPC 2010 NET PROFIT UP AND SALES JUMP
Thailand's Integrated Refinery & Petrochemicals Complex (IRPC) has posted a 14% year-on-year increase in its 2010 net profit to baht (Bt) 6.18bn ($201.4m) following robust sales. Sales surged by 33% year on year to Bt221.6bn in 2010, IRPC said in a filing to the Stock Exchange of Thailand.

CHANDRA ASRI EYES CRACKER EXPANSION
Indonesia's Chandra Asri plans to debottleneck its existing 600,000 tonne/year naphtha cracker in Merak, West Java, to 1m tonnes/year within the next few years. No time period was revealed, although a source said the ethylene nameplate capacity will rise by 400,000 tonnes/year. The cost of the expansion project was estimated at around $230m (€170m) and will help to satisfy domestic demand, the company said.

WHITE HOUSE SEEKS IST MANDATE FOR SECURITY
The Obama administration has asked Congress to impose tougher antiterrorism security requirements on US chemical facilities, including authority for regulators to force inherently safer technology (IST) techniques on specific plant sites. Rand Beers, an under secretary at the Department of Homeland Security, told the House Homeland Security Committee that his department "should have the authority to implement IST methods" if necessary to enhance antiterrorist security precautions at chemical plants.

LIAOYANG PETCHEM EYES PX EXPANSION AND PO UNIT
China's Liaoyang Petrochemical plans to expand its paraxylene (PX) capacity in Liaoning province by 900,000 tonnes/year. The company, a subsidiary of PetroChina, has a PX capacity of 700,000 tonnes/year and most of its output is for captive use.

ROCKWOOD Q4 NET PROFIT CLIMBS
US-based specialty chemical firm Rockwood Holdings' 2010 fourth-quarter net income soared to $109.6m (€81.1m), from $10.8m in the 2009 fourth quarter, boosted by a $76.5m tax benefit related to the sale of its AlphaGary plastic compounding business. Rockwood's income from continuing operations before taxes for the three months ending December 31 doubled to $36.7m as sales rose by 8.2% to $798.3m, from $737.7m in the 2009 fourth quarter.


By: Will Beacham
+44 20 8652 3214



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