13 August 2011 13:54 [Source: ICB]
CHEMS FALL, US DOW JONES INDUSTRIAL DROPS
North American chemical stocks tumbled late last week as the Dow Jones Industrial Average plummeted by nearly 520 points, wiping out gains made earlier in the week when the US pledged to keep interest rates at historic lows for two years. The Dow Jones Industrial Average closed on Wednesday at 10,719.94, down 4.62%. The decline followed a huge 430-point gain on Tuesday, during which several chemical stocks outperformed the Dow Jones Industrial Average. As on Tuesday, many chemical stocks on Wednesday performed better than the Dow Jones Industrial Average, with stocks of base-oils producer Calumet actually rising.
ACC RAISES PROSPECT OF US FALL INTO RECESSION
The American Chemistry Council (ACC) has increased the chance of the US slipping back into a recession to one in three, up from one in four in July. Softness in the manufacturing industry, the weakening of export markets and the Purchasing Managers' Index growing at a slower rate are all signs that a recession may be on the horizon, ACC economist Martha Moore said. "[Harvard economist Martin] Feldstein gave us a one in two chance," Moore said. "So there is a lot of concern out there." Regardless, Moore said the ACC's forecast for the chemicals industry is for continued growth, albeit at a slower pace, fueled by cheap ethane feedstocks. "Export markets are softening," she said. "But it's nothing too dramatic."
OBAMA SAYS US CREDIT IS STILL TRIPLE-A, PLANS CUTS
Last Monday, President Barack Obama declared US government credit is still triple-A quality despite the downgrade by Standard & Poor's (S&P). He said he would make recommendations soon to reduce the nation's deficits and debt. Speaking in the White House, Obama referred to the ratings downgrade from AAA to AA+ by S&P but said markets worldwide still show confidence in US credit worthiness. "Markets will rise and fall, but we have always been and we will always be a triple-A country," he said.
CHEAP FEEDSTOCK TO SAVE US CHEMS FROM TURMOIL
The feedstock advantage from shale-gas ethane the US chemical industry holds over much of the world should help it overcome the recent turmoil in the stock market, a US-based consultant says. Robert Bauman, of Polymer Consulting International, said the downgrade and subsequent sell-off should have minimal impact on revenues. "Even though we will have a domestic sales loss, the ability to export at a better, more competitive price than plants based on naphtha gives the US a serious advantage," he said.
US TPC APPROVES ON-PURPOSE BUTADIENE
US chemical company TPC Group has approved funding for further engineering work to restart an idled dehydrogenation unit at its Houston, Texas, site which will eventually produce up to 600m lb/year (270,000 tonnes/year) of on-purpose butadiene (BD). The project, which will be coupled with a new TPC Group Oxo-D production unit, will use butane as its primary feedstock from US shale gas. TPC developed the Oxo-D BD technology in the 1960s. The engineering phase is expected to be completed by the end of the first quarter of 2012.
US CB&I WINS WORK FOR CHINA DEHYDROGENATION
US engineering company CB&I has been selected by Chinese petrochemicals firm Ningbo Haiyue New Materials Technology to provide engineering work and technology for a planned grass-roots propane dehydrogenation unit at Ningbo City in Zhejiang province. The project will produce 600,000 tonnes/year of propylene and is expected to start up in 2014, CB&I said.
US ANALYST CUTS '11, '12 HUNTSMAN ESTIMATES
US investment bank Jefferies & Co has cut 2011 and 2012 profit estimates on US-based chemical producer Huntsman, a day after the company announced second-quarter results that fell short of Wall Street expectations. Analyst Laurence Alexander cut his 2011 earnings per share estimate on Huntsman by 15 cents (€0.11), to $1.90, and his 2012 forecast by 55 cents, to $2.15. The company earned 75 cents/share in 2010. On Thursday, Huntsman posted second-quarter earnings per share of 48 cents, a penny shy of Wall Street estimates. The shares plunged $5.49, or 30.5%, to $12.50 that day.
US EASTMAN COMPLETES STERLING PURCHASE
Eastman Chemical has completed the purchase of Sterling Chemical for $100m (€70m). When the deal was announced in June, US-based Eastman said the main attraction to Sterling was the company's plasticiser facility at its Texas City, Texas, plant. Eastman CEO Jim Rogers said in late July that Sterling's acetic acid business generated annual revenues of $100m, which is the price Eastman is paying for the company. Eastman is also acquiring Sterling's 1.3bn lb/year (590,000 tonnes/year) acetic acid plant at Texas City, plus an agreement to supply BP Amoco Chemical with acetic acid until 2031.
US PROPYLENE STEADY, REFINERY RATES RISE
US propylene inventories were steady in the first week of August, while operating rates at US refineries increased, data supplied by the Energy Information Administration revealed last week. Refinery-sourced propylene inventories stood at 2.452m bbl in the week ended 5 August, up by a slight 0.4% from 2.442m bbl a week earlier. US refineries operated at 90% of capacity last week, up from 89% in the week ended 29 July.
EUROPE CHEMICAL STOCKS YET TO RECOUP LOSSES
European chemical company share prices showed slight gains towards the end of last week as global markets steadied after a week of sell-offs, while oil and chemical commodity prices also rose slightly. Falling prices in markets across the world were halted by the US central bank's decision to keep interest rates in the world's biggest economy at historic lows. However shares are yet to recoup the losses seen in a week that marked the biggest sell-off since the financial crisis of 2008-2009. The Euro Stoxx Chemicals index was down by 9.5% week on week and has lost 12.9% since 10 August2010.
EU, US DEBT CRISES MAY HURT GERMAN CHEMICALS
The EU and US government debt crises have dampened growth prospects in Germany's chemical industry, a trade group said last week. Chemical producers are following the debt crises with "growing concern" as the situations in the EU and the US contain considerable risks that could spill over into Germany's chemicals industry in the second half of the year, BAVC said. Expectations for the second half of the year have weakened, the group added, citing an industry survey. Producers are worried about soaring raw material costs, plus Germany's planned exit from nuclear power generation by 2022.
EUROPEAN AROMATICS MARKETS CONFUSED
The European aromatics market is in a state of confusion in light of the bearish wider economic sentiment, sources said last week, with benzene values going up and down as players try to assess the situation. A plunge in crude futures amid growing fears surrounding the global economy initially pushed benzene values down, although it recovered later. Numerous sources were at a loss to explain the situation. "[The benzene market] must be tighter than we expected, even though we haven't picked up on any production issues," one trader said. Another source said: "It's a difficult market to get your head around. It is on the tight side but with crude falling like it is, that shouldn't really matter."
ROMANIA'S OLTCHIM TO TEMPORARILY CUT OUTPUT
Romania's Oltchim will temporarily cut about 1,025 jobs at its Ramnicu Valcea site until the end of August to reduce costs. The company will also cut output to 30% of installed capacity this month because it cannot finance its working capital. "Sending workers home will be made gradually, starting this week. The employees will get 80% of pay during the break period," Oltchim said. Oltchim produces caustic soda, petrochemicals, agrochemicals, inorganic products and polyvinyl chloride (PVC).
GERMANY'S BRENNTAG POSTS 75% RISE IN Q2
German distributor Brenntag posted a 75% hike in second-quarter profit after tax of €67.6m ($95.7m) because of "internal efficiency" and an expansion of its products and services. Sales in the second quarter rose by 11% to €2.17bn, while operating earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter increased by 9% to €167.1m. "We made further progress in our journey of continuous improvement with increased internal efficiency and an expansion in our products and services," Brenntag CEO Steven Holland said.
OMV PETCHEM PROFIT FALLS ON PLANT TURNAROUND
Austrian oil and chemicals group OMV's operating profit of its petrochemical segment for the second quarter of 2011 has fallen by 70% to €11m ($15.6m). The group's operating profit for the segment declined because of a six-week turnaround at its 500,000 tonne/year ethylene plant and other petrochemical units in Schwechat, Austria. "An improvement in olefin margins was insufficient to offset the impact [of the petrochemical shutdown] at the Schwechat refinery," the company said.
BOREALIS NET PROFIT UP 82% IN SECOND QUARTER
The net profit at Austrian plastics specialist Borealis was up by 82.6% year on year in the second quarter of 2011, driven by its joint-venture polyolefins project in Abu Dhabi. Its net profit for the quarter was €168m ($240m), on the back of sales of €1.9bn. This was an increase from the same period of 2010, when the company recorded a net profit of €92m and sales of €1.6bn. Borealis also managed to reduce its net interest-bearing debt by €12m during the quarter.
CONOCOPHILLIPS AGREES TO SELL GERMAN REFINERY
US group ConocoPhillips has agreed to sell its idled 260,000 bbl/day refinery, along with associated tank farm and terminal assets at Wilhelmshaven, Germany, to Amsterdam-based mid-stream energy company Hestya Energy. Hestya did not say if it plans to resume operations at Germany's second-largest refinery. ConocoPhillips idled the refinery in late 2009 and said it planned to either sell the facility or convert it to an oil products terminal.
EVONIK REMAINS CONFIDENT ON OUTLOOK
Evonik Industries remains confident over the outlook for the remainder of 2011, despite financial market uncertainty, the Germany-based specialty chemicals major said last week. "Our chemicals business is booming," CEO Klaus Engel said. "Our business development gives us every reason for confidence." Following Evonik's best-ever first-half operating result, it predicts continued strong demand and selling prices. It expects "a considerable rise in sales" during the full year, Engel said.
GERMANY'S VERBIO SWINGS TO Q2 NET LOSS
German biofuels producer Verbio recorded a second-quarter net loss of €5.26m ($7.47m) in 2011, compared with a €3.18m gain in the same period last year, partly because of higher production costs of biodiesel. Sales for the three months ending on June 30, 2011 rose 31% year on year to €172.5m. Verbio swung to an operating loss of €3.03m for the quarter, from a €2.65m gain in the same period last year. The company cited higher costs of raw materials in its biodiesel segment and an "unsatisfactory utilisation of production capacities" of 77% in the second quarter among the reasons for the losses.
K+S Q2 EARNINGS RISE 48%, REVENUES UP 10.7%
Kali and Salz (K+S) announced that its adjusted second-quarter earnings from continued operations rose by 47.6% to €126.8m ($179.9m), on the back of strong demand in its fertilizer business, the Germany-based producer said. The group's revenues for the second quarter rose by 11% to €1.05bn, after achieving sales increases in its potash and magnesium, salt and nitrogen fertilizers business segments. K+S said the high level of agricultural prices favored income prospects for the agricultural sector and offered a significant incentive to raise yields per hectare through the increased use of fertilizers.
UK-headquartered specialty chemical distributor Melrob was omitted from the ICIS Top 100 distributors listing, published on July 18, 2011. Melrob achieved 2010 sales of £31.4m ($50.8m), putting it at number 36 in the European listing.
ASIA PETROCHEMICAL SHARES RALLY ON US FED
Asian petrochemical shares rose last week, in line with Wall Street's rebound from sharp sell-offs in previous sessions, after the US Federal Reserve pledged to keep interest rates to near-zero levels for two years. However, another severe downturn in the US economy is likely to take a heavy toll on Asian exports, the region's main engine of growth. In China, there are concerns that the government will continue tightening monetary policy as inflation remains on an uptrend despite recent hikes in policy rates and in banks' reserve-requirement ratio. Economic expansion in the world's second-biggest economy is expected to continue slowing as credit access gets tighter.
TYPHOON MUIFA DAMAGES DAM AT DALIAN AROMATICS
Typhoon Muifa crashed into a dam at China's Fujia Dahua Petrochemical's aromatics complex last week, according to state-owned Xinhua News Agency. The rescue team is repairing the dam to avoid water flowing into the tank area that contains petrochemical materials. The dam is being built to control flooding in the area.
STOCK MARKET TURMOIL STALLS ASIA PET TRADES
The turmoil that swept through global stock markets and the resulting slump in crude futures stalled trades in the Asian polyethylene terephthalate (PET) bottle-chip markets last week, industry sources have said. Several northeast Asian producers maintained price ideas at around $1,700/tonne (€1,190/tonne) FOB (free on board) Asia last Wednesday. These figures were similar to the previous Friday's levels, with market players at a loss on where prices are headed.
INDORAMA PLANS THREE NEW FIBER PLANTS
Bangkok-listed Indorama Ventures plans to build three fiber plants in Thailand and Indonesia by the end of 2012. Indorama will build a 28,000 tonne/year recycled polyethylene terephthalate (PET) plant and a 16,000 tonne/year bi-component fiber plant in Thailand, while it also plans to build a 16,000 tonne/year bi-component fiber plant in Indonesia. The first facility will be built in Nakhon Pathom province, near Bangkok.
SOLVENT TRADE IN MIDEAST, INDIA AT STANDSTILL
Trade activity for the solvents market in India and the Middle East came to a standstill last week amid volatile crude futures. "We have not received any enquiries since last week. Buyers have retreated to the sidelines to observe a clearer trend in solvent prices," a Singapore-based trader said. "Moreover, we are not in a hurry to offload inventory to India as we can easily export to China for a more attractive price," the trader added. Offers for isopropanol (IPA) were not heard.
TAIWAN'S CGPC TO BEGIN COMMERCIAL PRODUCTION
Taiwan's China General Plastics Corp. (CGPC) plans to start commercial production at its new 170,000 tonne/year polyvinyl chloride (PVC) plant at Linyuan district in Kaohsiung in early September, a company source said last week. The company is scheduled to begin test runs next week, the source added. The new facility was initially scheduled to come on stream in July 2011. CGPC operates a 180,000 tonne/year PVC plant at Toufen in Taiwan's Miaoli County. The company obtains its feedstock vinyl chloride (monomer) (VCM) from its subsidiary Taiwan VCM.
MIDDLE EAST & AFRICA
BUY-SELL STAND-OFF IN MIDDLE EAST PET MARKET
A stand-off in the Middle East polyethylene terephthalate (PET) market following a week of chaos in the world's commodity and stock markets is expected to cause prices to fall in the near term, industry sources said last Thursday. Buying ideas dropped by $50/tonne (€35/tonne) last week, from a high of $1,700-1,720/tonne DEL (delivered) GCC (Gulf Corporation Council) for the week ended August 5. There were few deals heard being done at those levels, the sources added. Buyers dropped their bids in the wake of the uncertainty in upstream feedstock prices after a sharp decline in crude oil futures in early August.
AFRICA POLYOLEFIN TRADE SLOW ON SEASONALITY
Trade has almost ground to a halt in the African polyolefin markets this week because of seasonal factors and reduced supply. Unfavorable exchange rates and high offers have also limited sales in the market for polyethylene (PE) and polypropylene (PP), which mainly rely on imports, market sources said. Seasonal factors impacting demand include Ramadan - the Islamic month of fasting which began on August 1 and is observed across much of northern and western Africa - and seasonal rainfall in western Africa.
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