This week's world news

20 June 2011 00:00  [Source: ICB]

TESSENDERLO SELLS PVC, CHLOR-ALKALI TO INEOS
Belgium-based chemical company Tessenderlo is to sell its polyvinyl chloride (PVC) and chlor-alkali businesses to INEOS ChlorVinyls for €110m ($159m) on a cash-free, debt-free basis. INEOS ChlorVinyls is part of UK-based Kerling, a manufacturer of PVC and caustic soda in Europe. The company has signed a sale-and-purchase agreement with Tessenderlo to buy its chlor-alkali and vinyls-organic-chlorine-derivatives assets at sites in Belgium, PVC sites in France and the Netherlands and a benzyl alcohol plant there. Global investment bank The Valence Group advised Tessenderlo.

LOTTE PAKISTAN PTA MULLS 1M TONNES NEW CAPACITY
Lotte Pakistan PTA (Lotte PPTA) plans to triple its purified terephthalic acid (PTA) nameplate capacity to 1.5m tonnes/year by late 2014 to meet the growing domestic and regional demand. The company has a 500,000 tonne/year plant located at Port Qasim, 50 km (31 miles) outside the industrial port city of Karachi. "The cost of expansion will be between $450m (€320m) to $500m," said Asif Saad, CEO of Lotte PPTA, the only PTA manufacturer there.

POSSIBLE CARCINOGEN TAG WILL NOT DENT US STYRENE
Demand for styrene faces little risk from its new designation by US authorities as a possible carcinogen, an analyst said last week. The new designation will likely have muted effect, according to Laurence Alexander from Jefferies & Co. Already, many North American customers have replaced polystyrene (PS) with other plastics because of pricing, properties and environmental concerns. For the most part, customers who could switch plastics have already done so, he added.

SOLVAY LAUNCHES CASH OFFER FOR RHODIA SHARES
Belgium-based Solvay has launched a cash offer for the shares of French chemicals maker Rhodia at €31.60/share ($43.92/share). The offer represents a 50% premium over the closing Rhodia share price on April 1. Solvay said the offer values Rhodia's market capitalization at €3.4bn with an enterprise value of €6.6bn. "This transaction will give the two companies the resources they require to pursue their track record of innovation and to meet their future challenges," said Christian Jourquin, Solvay CEO.

IADITYA BIRLA CLEARED TO ACQUIRE COLUMBIAN

The European Commission has cleared India's Aditya Birla's acquisition of US-based carbon black producer Columbian Chemicals. On January 31, Aditya Birla said it entered into an agreement to buy Atlanta-based Columbian Chemicals from One Equity Partners, an investment-banking group held by JP Morgan Chase. Media reports say the deal is valued at $875m (€621m). Columbian Chemicals has facilities in Hungary, Italy, Spain and Germany.

JILIN AUTHORITIES SIGN LICENSE WITH EVONIK
German specialty chemicals producer Evonik and representatives of the delegation of Jilin province have signed a non-exclusive license agreement to build and operate a hydrogen peroxide-to-propylene oxide (HPPO) plant at Jilin in northeast China. Jilin Shenhua and Jilin North Chemical Company will enter into a proposed joint venture to build a 300,000 tonne/year HPPO production facility. The plant will produce PO using a process developed by Evonik and German engineering company Uhde.

IRAN'S BIPC TO SUSPEND AROMATICS PRODUCTION
Iran's Bandar Imam Petrochemical Co (BIPC) will suspend its production of aromatics indefinitely because its feedstock reformate will be channelled for gasoline production, a source close to the company said. BIPC's aromatics unit, which is owned by Iran's National Petrochemical Co (NPC), was taken off line for maintenance one or two weeks ago and the shutdown is expected to last about a month. There will be no aromatics supply from the plant after it is restarted.

ARKEMA DEVELOPS CANADA FLUORSPAR MINING PROJECT
French chemicals producer Arkema has agreed with Canada Fluorspar to invest Canadian dollar (C$) 100m ($102m) to jointly develop a fluorspar mine in Canada's eastern Newfoundland province. The project will secure fluorspar supplies for Arkema's North American fluorochemicals operations. Arkema and Canada Fluorspar will be equal partners in the mine, which is expected to start up in early 2013. "The investment of C$100m will provide Arkema with long-term competitive access to strategic feedstock for its fluorochemicals operations in North America," Arkema said.

US HOME BUILDERS ARE INCREASINGLY PESSIMISTIC
US home builders are increasingly pessimistic about prospects for a housing recovery, their national trade group said last week, with contractors' confidence levels falling to a low point not seen since September last year. The National Association of Home Builders said that its June index of contractors fell this month.

TOTAL ACQUIRES 60% OF US SUNPOWER IN $1.3BN DEAL
French energy and petrochemicals major Total has succeeded in a $1.3bn (€90m) cash tender to secure a 60% stake in US solar panels firm SunPower. In April, Total and SunPower announced plans for a strategic partnership under which Total would acquire a 60% stake in SunPower and provide up to $1bn in credit to the US firm. Total said SunPower will be the centrepiece of its solar activities. The viability of solar energy requires globally-integrated firms that are financially strong and committed to advancing the technology, Total said.

GERMAN CHEMS WORRY ABOUT FORCED CLOSURES
Germany's chemicals industry is worried about government-ordered chemical-plant shutdowns amid looming power shortages in the wake of the country's exit from nuclear power. Utz Tillmann, general manager of trade group VCI, said producers are concerned about recent remarks by Matthias Kurth, the head of federal agency Bundesnetzagentur who raised the idea of forced plant shutdowns.

MOODY'S UPGRADES BRENNTAG ON GROWTH
Moody's has raised the credit rating for Germany-based chemical distributor Brenntag as a result of its positive operating performance and expected robust growth for the rest of 2011. "The upgrade of the rating was prompted by Brenntag's positive operating performance in 2010 and the early part of 2011, and the robust growth anticipated for the rest of the year," said Gianmarco Migliavacca, a vice president at Moody's and senior analyst for Brenntag.

SERBIA'S NIS PLANS SHALE GAS SEARCH IN HUNGARY
Serbian oil major Naftna Industrija Srbije (NIS) is investigating unconventional gas exploration in Hungary that may prepare its engineers for an attempt to find shale gas deposits in Serbia. NIS, Canada's Falcon Oil & Gas and the latter's subsidiary TXM Oil and Gas Exploration have signed a letter of intent for the acquisition by NIS of an interest in drilling for gas in sandstone formations in the Algyo Play section of the Mako Trough, a basin in southeastern Hungary in which Falcon holds exploration rights.

SABIC BUILDS CARBON FIBER PLANT IN SAUDI ARABIA
SABIC plans to build a new carbon fiber plant in Saudi Arabia after signing a global technology licensing agreement with Italian fibers maker Montefibre. SABIC and Montefibre also signed a memorandum of understanding (MoU) to study the feasibility of a new carbon fiber production plant in Burgos, Spain, to be integrated into Montefibre's existing acrylic fiber production site. This will supply more than 3,000 tonnes of industrial-grade carbon fiber to serve emerging markets in the Middle East, as well as international markets, it said.

CHINACOAL ORDOS ENERGY CHEMICAL TO BUILD PLANTS
ChinaCoal Ordos Energy Chemical plans to start building in July a 2m tonne/year synthetic ammonia plant and a 3.5m tonne/year urea plant at Ordos in the northern province of Inner Mongolia. The two plants are expected to be started up in the first half of 2013, with the ammonia and urea units having an initial capacity of 1m tonnes/year and 1.75m tonnes/year respectively, a company source said. The company is a subsidiary of China Coal Energy, which is the second-largest coal producer in the country.

CELANESE TO ADD ETHANOL PRODUCTION AT NANJING
US group Celanese plans to modify its Nanjing Chemical Industrial Park facility in China, allowing it to produce 200,000 tonnes/year of coal-based ethanol by mid-2013. "This project acceleration allows us to begin industrial ethanol production significantly earlier than previously anticipated," according to a statement by David Weidman, chief executive. The Nanjing modification could begin producing ethanol six to 12 months earlier than the company's other coal-based ethanol projects in China, Celanese said.

FOOD PRODUCTS BAN AFTER PLASTICIZER IS FOUND
Chinese government authorities have banned the sales of eight food products after they were found to contain the plasticizer di-2-ethylhexyl phthalate. The chemical was found in food products including flavoring and baking ingredients produced by four Chinese companies in the Guangdong and Zhejiang provinces. Xinhua news agency reported that the plasticizer, which is used to make plastic soft and pliable, was used as a substitute for a more expensive emulsifier such as palm oil. The news has prompted the State Food and Drug Administration to call for stricter inspection.

EXXONMOBIL PROPYLENE LEAK UNDER INVESTIGATION
A propylene leak at US major ExxonMobil's Baytown olefins plant in Texas is under investigation by state regulators. ExxonMobil said it discovered and isolated the leak on June 2, but added that the leak could have begun on April 12. The company estimated the propylene leak amounted to 108,000lbs (49 tonnes), according to a filing with the Texas Commission on Environmental Quality.

US STYRENE GROUP TO FIGHT CARCINOGEN RULING
The US styrene industry has declared its intention to vigorously contest a ruling by federal health regulators linking styrene to cancer, charging that the "scientifically bankrupt" decision threatens US jobs and businesses. Jack Snyder, executive director of the Styrene Information and Research Center, said the cancer-related styrene listing by the Department of Human Health and Services (HHS) is "completely unjustified by the latest science and resulted from a flawed process". The HHS had previously issued its long-expected 12th Report on Carcinogens in which styrene was characterized as "reasonably anticipated to be a human carcinogen" (see ICIS Chemical Business, June 6, 2011, page 16).

SASOL COMPLETES ITS $1.08BN SHALE-GAS DEAL
South Africa-based Sasol has completed a Canadian dollar (C$) 1.05bn ($1.08bn) deal for a 50% stake in a shale-gas project in Western Canada. The deal for a stake in Talisman's Cypress A project in the Montney Basin in Canada's Western Alberta and British Columbia provinces was announced in March. The acquisition, and a similar shale-gas deal with Talisman last year, could pave the way for a gas-to-liquids project, Sasol said. Cypress A has an estimated contingent resource of 11,200bn cubic feet.

POLISH GROUP CALLS FOR INTERCONNECTED GAS GRID
Wojciech Lubiewa-Wielezynski, president of the Polish Chamber of Chemical Industry (PIPC), is determined to push ahead with a project to connect the country's gas grids with Germany despite Poland's treasury ministry deciding not to recommend state financial backing for the initiative. "The current non-interconnected gas grid, which means gas users have no access to the European spot price market, has in the past couple of years meant Polish chemical and fertilizer companies paying up to three times as much for gas as foreign competitors. The situation must change," he added. High gas costs that caused uncompetitive fertilizer prices were the key factor in Poland suffering its first ever negative chemical products trade balance in 2009, Lubiewa-Wielezynski noted. PIPC has called for the Polish state to meet 50% of the cost of an interconnector. With government backing, some of this contribution could be sourced from EU funds, it said.

GERMANY'S NUCLEAR EXIT COULD AFFECT PRODUCERS
Germany's planned exit from nuclear power could destroy the competitive position of chemicals major BASF and other industrial producers based in the country, warned Jurgen Grossmann, CEO of utility major RWE. "Companies such as BASF or Thyssen-Krupp will then no longer produce in Germany," Grossmann said in an interview with German daily newspaper Suddeutsche Zeitung. A BASF spokesman declined to comment directly about the remarks, but it was pointed out that German industrial producers depend on secure and environmentally sustainable energy supplies at competitive prices. It was also noted that BASF has its own power plants that supply the company's petrochemical hub in Ludwigshafen, Germany, with both electricity and steam.

EU CHEMICAL PRODUCTION RISES BY 4.3% IN MARCH
European chemical trade group Cefic said that EU chemical production in March increased by 4.3% year on year amid a robust first quarter for the sector. Production in March increased by 1% from February, while prices rose by 10.5% year on year. Production expanded by 5.3% during the first three months of 2011. "The March data confirms that the overall situation in the EU chemicals sector is still showing signs of improvement, but at a somewhat weaker pace than in the first two months of the year," said Cefic chief economist Moncef Hadhri.

EU CLEARS INDORAMA ACQUISITION OF TREVIRA
The European Commission said that it has cleared the planned acquisition of German polyester producer Trevira by a consortium between Thailand's Indorama and Italy's Sinterama. The Commission said the combined Indorama-Sinterama-Trevira entity will continue to face significant competition in European markets. Under the deal, Indorama will take 75% of Trevira with Sinterama holding the 25% balance.

WORLD OIL DEMAND TO GROW BY 1.4M BBL/DAY
OPEC has said that world oil demand is forecast to grow by 1.4m bbl/day in 2011, compared with the growth of 2.1m bbl/day in 2010. Its monthly oil market report said several factors continue to impact oil demand worldwide, including the Japanese earthquake, which caused the country's oil demand to plunge by 250,000 bbl/day in March, and the latest monthly US oil data showing much weaker oil consumption than anticipated. Lower oil demand in the US and Japan has been offset slightly by the continued strong growth of China's economy which has resulted in increased oil usage.

PETROBRAS TO SPEND $3.5BN ON BIOFUELS
Brazil-based Petrobras's 2010-2014 business plan calls for spending a total of $3.5bn (€2.4bn) on biodiesel and ethanol - a figure that includes production, logistics as well as research and development (R&D). Some $1.9bn will go toward ethanol, the company said. The goal is to reach 2.6bn liters of ethanol in 2014. Petrobras had already announced a $400m investment program for research and development in biofuels.

BRENNTAG SIGNS DEAL WITH CHINA DISTRIBUTOR
Germany-based chemical distributor Brenntag has agreed to enter into a joint venture and subsequently acquire China-based chemical distributor Zhong Yung. Zhong Yung distributes solvents and is expected to generate sales of €255m ($370m) in 2011. Brenntag will acquire a 51% stake in a joint venture in the first part of the deal, which is expected to close in the third quarter of this year. Its agreement is to hold this stake for five years and to finally acquire 100% of the Chinese distributor in 2016.

CHINA BECOMES WORLD'S LARGEST ENERGY USER
UK-based energy major BP has said that China overtook the US as the world's largest energy consumer in 2010, as a rebound in the global economy drove consumption higher at a rate not seen since the aftermath of the 1973 oil price shocks. BP said that demand for all forms of energy and in all regions grew strongly in 2010. It added that increases in fossil fuel consumption suggest that global carbon dioxide (CO2) emissions from energy use rose at their fastest rate since 1969. Chinese energy consumption in 2010 grew by 11.2% from the year before, representing 20.3% share of global energy demand. US energy consumption grew by 3.7% year on year to hold 19.0% of global share. Global energy consumption grew by 5.6% year on year in 2010, the highest rate since 1973.

EMERGING REGIONS TO DOMINATE M&A ACTIVITY
A report from business advisers KPMG has suggested that emerging markets will increasingly dominate merger and acquisition (M&A) activity in the chemical industry, supported by the growth of end markets, government policies and access to funding. The firm said M&A in Brazil, India, China and the Middle East had risen from 5% of deal value and 17% of deal volume in 2007 to 30% and 28% respectively in 2010. Several key Western chemical end-markets in the West are continuing a shift to the East, the report said.


By: Will Beacham
+44 20 8652 3214



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