The Week in Brief

News from the week

09 October 2008 18:49  [Source: ICB]

CHEMICAL VALUES SLIDING ON GLOOM
Most chemical prices were being dragged lower by the plunge in global financial markets and the deteriorating economic outlook, despite lingering supply tightness in the US after Hurricane Ike, market participants say. “As fear overtakes greed as the motivator of choice, and people believe the self-fulfilling prophecies of the pundits that we are in an extended global recession, we will see downstream product demand drop off,” a US acrylates buyer said, predicting lower prices in that market. Global aromatics and olefins markets had begun slipping last week, and the downtrend has built further momentum as desperate efforts by global governments and central banks have failed to arrest the collapse of investor confidence in financial markets.

2009 0% US GDP MAY BE OPTIMISTIC – DEUTSCHE
Analysts at global investment bank Deutsche Bank fear they are too optimistic even though they slashed their projections for the US, to show the world’s biggest economy at a complete standstill in 2009. “Despite these significant changes, we are worried that we have not gone far enough in reducing our growth outlook, because financial conditions are deteriorating at an ever faster pace,” the analysts said. The bank’s analysts also cut their 2009 earnings forecasts for American chemicals producers, forecasting a mild recession in the US and Europe that will continue to squeeze the industry.

GAZPROM PLANS BIG GAS-CHEMICAL HUBS
Russia's gas giant, Gazprom, plans to build major gas and chemical hubs in the country’s far east, the Energy Ministry says. The country’s gas sector development blueprint up to 2030, drafted by Gazprom, stipulates the construction of four major gas-processing centers in the Amur, Khabarovsk, Krasnoyarsk and Irkutsk regions. The Amur gas-chemical complex, due to be built in 2016–2024, will have capacities to process 40bn–50bn cubic meters/year of gas and produce up to 4m tonnes/year of polyolefins, according to the blueprint.

EUROPEAN CHEMICALS REMAIN STRONG
The European chemical industry remains in a relatively strong position, even though market conditions have become more difficult, BASF executive board member Hans-Ulrich Engel said last week. Current financial market uncertainties have to be monitored carefully, he suggested, but added that 2008 should still prove to be relatively good for the sector. BASF had continued to see volume growth in the first half and in August, he and other BASF executives said at a press event, although September data were not yet available.

VOTE OFFERS EU CHEMS UNCERTAIN FUTURE
The European Parliament’s vote on the shape of the EU’s emissions trading plan beyond 2012 fails to offer the certainty needed to preserve jobs, Cefic – The European Chemical Industry Council – says. Cefic said the decision to increase the costs of emissions rights through auctioning was not an effective way to tackle climate change. “Without a truly international agreement with the same rules across the board, the auctioning system will place a unilateral and costly burden on the European chemical industry,” it said in a statement.

BASF WARNS IT WILL INVEST ELSEWHERE
Germany-headquartered chemical giant BASF will consider shifting investment away from Europe if the EU fails to make a swift decision on protecting the Continent’s chemical industry from cap-and-trade tariffs. The company wants the EU to make its position clear within three months or face the possibility of BASF taking its investments elsewhere, said Hans-Ulrich Engel, board member with responsibility for Europe. Western Europe’s chemical sector could face €5bn ($6.8bn) in extra costs at a time when Middle East production is coming on stream with an advantaged feedstock position, Engel said.

MOODY’S DOWNGRADES LUCITE ON WEAKNESS
Global ratings company Moody’s has downgraded its outlook for UK-based methyl methacrylate (MMA) producer Lucite, reflecting sustained weakness in its operating performance. Moody’s said the group’s margins and cash flow generation had been affected by high input costs and lower volumes, leading to restricted financial flexibility. Lucite has raised debt to prefund a multiyear investment in its new cost-advantaged Singapore MMA plant, raising concerns over near term prospects where the company is faced by weakened cash flow. In September, private equity-owned Lucite hired global investment bank Deutsche Bank and global financial advisor Merrill Lynch to examine options of a possible sale or initial public offering.

PHOTOVOLTAICS FIRM SCHOTT CANCELS IPO
German photovoltaics company Schott Solar has canceled plans for an initial public offering (IPO) because of the deterioration and turmoil of capital markets. “The renewed drastic deterioration of conditions on international capital markets in past days has prompted us to make this decision,” the company said. The sudden decline had been unforeseeable, it said. Schott Solar did not say if or when it may go ahead with an offer. Meanwhile, the company had backing from its parent, glass maker Schott AG, to fund plans to expand capacities in the US and Europe, it said.

RUSSIA APPROVES $5BN TANEKO PETCHEMS
Russia’s Tatneft subsidiary Taneko has received regulatory approval from the government to build a roubles 130bn ($5bn, €3.7bn) petrochemical complex in Nizhnekamsk, Russia. The project will include the construction of a 7m tonne/year refinery, a 600,000 tonne/year ethylene facility, a 200,000 tonne/year polyethylene plant and other units. The complex is expected to come on stream by 2011.

KEMIRA CUTS 300 FINNISH JOBS, PLANS MORE
Finnish chemical company Kemira has completed negotiations to lay off almost 300 workers there. It also plans to cut a further 700 jobs worldwide. Talks to make 298 workers redundant at Finnish sites in Aetsa, Espoo, Helsinki, Oulu and Vaasa have been concluded as part of a program announced in August to net the firm €50m ($68m) in cost savings. Research-and-development activities will now be based in Helsinki, a plan that had led to walkouts earlier in the year.

ROMANIA’S ROMPETROL TO CUT 2,000 JOBS
Romanian oil refiner Rompetrol plans to further streamline its business with 2,000 jobs cuts by year-end. “All people who will be dismissed will receive redundancy payments,” Rompetrol chairman and CEO Dinu Patriciu said. No further reasons for the decision were given.

AGENCY QUESTIONS ZAK PRIVATIZATION
Consideration should be given to canceling the initial public offering (IPO) of shares in Polish nitrogen fertilizer Zaklady Azotowe Kedzierzyn (ZAK) because of the global stock market turmoil, the Polish Chamber of the Chemical Industry said last week. Noting the Warsaw Stock Exchange had recorded huge losses, Chamber director Jerzy Majchrzak questioned whether ZAK’s upcoming IPO could be a success.

RHODIA TO RESTRUCTURE WEST EUROPE POLYAMIDE
France-based chemical producer Rhodia will restructure its European polyamide production and research operations to improve competitiveness in the face of slowing market growth in Western Europe, the Paris-based specialties maker says. The closure of Rhodia Polyamide’s Ceriano facility in Italy by mid-2009 could affect 219 people. Production at the Lyon Belle-Etoile facility in France and the Gorzow facility in Poland will be increased, and all Rhodia Polyamide European research and development work will be transferred to Lyon. The plan is part of a program to cut Rhodia Polyamide’s costs by about €40m ($55m) by 2010.

GERMAN BIOFUELS MAY IDLE CAPACITY
Germany’s decision to reduce biofuel quotas could force producers to idle 600,000 tonnes of capacity, equivalent to six plants, next year, the country’s biofuel industry group, Verband der Deutschen Biokraftstoffindustrie (VDB) says. Germany’s federal government cabinet decided last week to reduce biofuel quotas to 5.25% from 6.25% for 2009, and to freeze quotas at 6.25% from 2010 onward. The cut came as critics in Germany and elsewhere blamed blending quotas for rising food prices and doubted biofuels’ net benefits for the environment.

PIDILITE GETS NOD FOR $130M PROJECT
India’s Pidilite Industries has been granted environmental clearance for the construction of a rupees 6.2bn ($129m) elastomer facility and 10 megawatt power plant. The project will have the capacity to produce 30,000 tonnes/year of polychloro rubber, and 1,000 tonnes/year each of chlorinated poly-olefins, sulfur chlorinated polyolefins, butenedoils, 1,4 butanediols and tetra hydrofuran.

FORCE MAJEURE STAYS AS UNIT RESTARTS
Germany-based Domo Chemicals said it expected to restart its copolymer polypropylene (PP) plant in the Netherlands early last week, although the company added that its force majeure declaration would remain in place. Mechanical problems at the 180,000 tonne/year plant hampered efforts to restart the copolymer line at the beginning of October, said Wim Coppens, managing director. The block copolymer line was taken offline in September.

CPL CAPACITY BOOST AS INDIA GIVES GO-AHEAD
India has given environmental clearance to India-based Cetex Petrochemicals for the Indian rupees 380m ($8m) expansion of its specialty and fine chemicals complex in Manali, Tamil Nadu. The project enables Cetex to double its methyl ethyl ketone (MEK) capacity to 10,000 tonnes/year and sec-butanol (SBA) capacity to 12,000 tonnes/year, the company said. It will also mean the production of cinnamic alcohol will increase from 180 tonnes/year to 1,080 tonnes/year, anisyl alcohol will rise from 180 tonnes/year to 276 tonnes/year and stryallyl alcohol from 180 tonnes/year to 228 tonnes/year.

PRICING CARTEL FINE FOR SASOL
The operating profits for South African chemicals and fuels producer Sasol for the first half of 2009 will be impacted following the company’s decision to make immediate provisions of rand 3.8bn ($447m) to pay the €318m ($428m) fine imposed by the EU for participating in a paraffin wax cartel. Nine producers were fined a total of €676m for running a cartel from 1992–2005.

PET RECYCLING CEASES
Japan’s Teijin will stop recycling polyethylene terephthalate (PET) bottles indefinitely, as increased demand for used bottles from China has made securing supplies difficult. Teijin subsidiary Teijin Fibers started the project in November 2003 to produce recycled PET bottles at the producer’s Tokuyama factory, which is located in Yamaguchi prefecture.

ICIS Copyright © Reed Business Information 2009

< previous article(VIDEO - ICIS news Asia Lunchtime Bulletin 2 November 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.