Chemical Update

CHEMICAL UPDATE

AUGUST 2008

TABLE OF CONTENTS

INTERNATIONAL

India's South Asian Petrochem Plans 130,000-Ton Polycarbonate Plant with Asahi Kasei's Green Technology
Teijin to Acquire GH Craft

LyondellBasell to Boost Polypropylene Capabilities by More Than 30 Percent

Asia's Demand for High Density Polyethylene Slows Down While Production Increases

Teva to Buy Barr Pharma

UNITED STATES

American Chemistry Council July 2008 Chemical Production Regional Index

Westlake Chemical to Construct Chlor Alkali Plant in Geismar, Louisiana

PCS Phosphate Plans More Than $370 Million of Projects in the U.S.

Ashland to Acquire Hercules

INTERNATIONAL

India's South Asian Petrochem Plans 130,000-Ton Polycarbonate Plant with
India's South Asian Petrochem Plans 130,000-Ton Polycarbonate Plant with Asahi Kasei's Green Technology

South Asian Petrochem Limited (Kolkata, West Bengal), a manufacturer of polyethylene terephthalate (PET) resins, has announced plans to enter into a technology transfer license agreement with Asahi Kasei Chemicals Corporation (Tokyo, Japan) to set up a polycarbonate manufacturing unit using the latter's eco-friendly technology. According to the agreement, South Asian Petrochem will have exclusive rights over Asahi Kasei's green technology for a period of seven years during which Asahi Kasei will not award the license to any other company in India. South Asian Petrochem proposes to set up its manufacturing facility with a production capacity of 130,000 tons per year.

South Asian Petrochem, a 100% export-oriented unit promoted by the Dhunseri Group, manufactures and exports PET resin primarily to Africa, Europe, the Middle East and the U.S. The firm's PET resin manufacturing plant in Haldia was set up with an investment of $125 million. It began commercial production in 2003 with an initial capacity of 140,000 tons per year that was later ramped up to 200,000 tons per year in 2007. In an interview with The Economic Times in February, R. K. Dhanuka, Chairman of South Asian Petrochem, said the firm was planning to invest more than $500 million in next few years in two major projects in Haldia, West Bengal.

The Asia-Pacific region is currently the largest polycarbonate market in the world, representing more than 50% of the global market. China is expected to register an annual growth rate of 10% to 15% in this sector and is likely to account for more than 40% of the global market in the next two years.

Teijin to Acquire GH Craft

Teijin Ltd. (Tokyo, Japan) the holding company for Teijin Group announced recently that it will acquire a majority interest in Japan-based advanced composite materials manufacturer GH Craft Ltd. (Shizuoka, Japan). As part of the deal, Teijin also announced the formation of the Teijin Composites Innovation Center (TCIC) on GH Craft’s premises.

The new center will consolidate principal research and development (R&D) and marketing functions for advanced composites within the Teijin Group. The center also will allow Teijin to collaborate with automotive producers to develop lightweight, crash-resistant carbon-fiber-reinforced plastics.

Under the agreement, Teijin will merge its materials, carbon fiber, aramid fiber and polymers and similar technologies with GH Craft’s design, modeling, prototyping and fabrication skills. Teijin anticipates the integration will enable the company to strengthen its response to customer needs and advance its development and commercialization of carbon-fiber-reinforced products.

GH Craft is located near the Mishima Factory of Toho Tenax Co. Ltd., a manufacturer of carbon staple fiber and part of the Teijin Group. Teijin will merge advanced composites-related facilities, employees and RandD activities in the Teijin Group including those of Toho Tenax at GH Craft. The TCIC will work to encourage cooperation with both international companies and academic institutions. Teijin also plans to supply composite material solutions that integrate the company’s increasing technological assets.

LyondellBasell to Boost Polypropylene Capabilities by More Than 30

LyondellBasell to Boost Polypropylene Capabilities by More Than 30 Percent

LyondellBasell Industries has announced plans to expand its global polypropylene (PP) compounding capacity to 1.2 million tonnes per year by the end of 2009, which represents a growth rate of more than 30 percent.

To address rapidly expanding needs in the Asian region, LyondellBasell's Advanced Polyolefins (APO) business has recently relocated its global headquarters to Hong Kong.

"In the coming months, a new 15 KT plant in Guangzhou, China will come on stream," said Paul Yeates, Senior Vice President of LyondellBasell's APO business. "In addition, our Saudi Polyolefins Company joint venture is currently constructing a new compounding plant in Damman, Saudi Arabia. We are also considering additional plant investment options for Russia and India."

Further expansion of the company's existing sites in Suzhou, China; Rayong, Thailand; and Ensenada, Argentina is planned. Yeates added, "By 2010, we aim to operate a global network of 18 PP compounding plants on four continents that delivers 1.2 million tonnes per year of high quality PP compounds to the automotive and appliance industries."

LyondellBasell recently achieved a major milestone in its growth plans by completing the acquisition of Solvay Engineered Polymers, Inc., which consolidated LyondellBasell's PP compounding position in North America.

Asia's Demand for High Density Polyethylene Slows Down While Production Increases

Asian markets continue to be seen as one of the main drivers for the future high density polyethylene market (HDPE), but prices are currently dropping as Chinese demand is slow. Offers are going $20 to $50 lower than the $1,750-per-ton plateau in the region. Cuts in production by Chinese producers helped prices in China's domestic market, but did nothing to revive process in Asia generally. Prices for linear low density polyethylene have experienced similar price drops to HPDE.

The Asia-Pacific region's consumption of HDPE rose from 31 percent of global consumption in 2000 to over 35 percent in 2007, driven by market growth and export potential to North America and Western Europe. Improved living standards and aspirations make China the fastest growing market for rigid HDPE products.

A study of 100 HDPE manufacturers worldwide conducted by Ceresena Research (Konstanz, Germany) reported that the Asian Pacific region leads global growth even though North America and Western Europe represented 44 percent of global consumption in 2007. With manufacturers moving to the more cost-effective areas of Asia, Western producers will have to invest in innovative products and efficient production technologies to remain competitive in the market.

Middle Eastern countries with oil revenues to invest in development are seeing increased demand for plastic products and for production facilities. HDPE production has increased 20 percent per year in the region since 2000, and production projects with a total capacity of 6.7 million tons per year are planned in the Middle East through 2013.

Teva to Buy Barr Pharma

Teva Pharmaceutical said recently it will buy rival generic drugmaker Barr Pharmaceuticals for nearly $7.5 billion in a move that will boost Teva's dominance as the world's biggest generic drugmaker.

The deal continues consolidation of the generic-drug sector, driven by growth prospects as governments and other payers turn to the lower-priced medications and by the impending expiration of brand-name drug patents worth billions of dollars a year.

Israel-based Teva Pharmaceutical Industries Ltd. said acquiring Montvale, N.J.-based Barr Pharmaceuticals Inc., the world's No. 4 generic drug maker, will also expand its presence in U.S. and other key markets, from Russia to Eastern and Central Europe.

Barr shareholders will receive $39.90 in cash and 0.6272 of a Teva American Depositary Receipt for each share they own, a total of $66.50 per share. Teva also is offering to assume $1.5 billion of Barr's debt.

The deal is expected to close at the end of this year. Teva said it should bring $300 million in annual savings within three years and add to profits within a year.

Goldman Sachs analyst Randall Stanicky noted Barr would give Teva about 1,400 salespeople in Europe and a leading position in both generic and branded women's health products.

Last year, Teva reported $9.4 billion in sales, while Barr posted $2.5 billion. Together, the two companies have more than 500 products on the market, and more than 200 applications pending in the U.S. to sell generic versions of brand-name drugs with $120 billion in annual sales. The combined company will have about 37,000 employees in more than 60 countries.

The boards of both companies unanimously approved the deal. Approval is needed from Barr stockholders, the U.S. Federal Trade Commission and other regulators.

UNITED STATES

American Chemistry Council July 2008 Chemical Production Regional Index

According to the American Chemistry Council (ACC), as measured by a three-month moving average, US chemical production rose by 0.1 percent, following a 0.1 percent gain in June. Chemical production grew in the Mid-Atlantic, Gulf Coast and West regions, declined in the Midwest and Northeast regions and was flat in the Ohio Valley and Southeast regions. To smooth month-to-month fluctuations, the chemical production regional index (CPRI) is measured using a three-month moving average.

Compared to July 2007, total US chemical production was off 0.6 percent. Regionally, year-over-year chemical production declined in all regions except the Mid-Atlantic and Northeast. Chemical production in the West Coast region was flat year-over-year. On a year-to-date basis, chemical production was slipped 0.1 percent, and was down in all regions, except the Mid-Atlantic, Northeast and West Coast regions.

Gulf Coast
Following a 0.3 percent decline in June, chemical production in the Gulf Coast region rose by a modest 0.1 percent in July. The Gulf Coast region is dominated by the production of energy-intensive petrochemicals, inorganics, and synthetic materials. The manufacture of these products depends on Gulf Coast energy supplies as raw materials, as well as for fuel and power. On a year-over-year basis, Gulf Coast chemical production was down 2.6 percent, and slipped 0.8 percent on a year-to-date basis.

Midwest
In the Midwest region, which is influenced by production of agricultural chemicals, plastics, paints, and other chemical products, chemical production was down 0.1 percent in July, following flat growth in June. Compared to July 2007, Midwest chemical production in the region was off 0.7 percent year-over-year, and down 0.3 percent on a year-to-date basis.

Ohio Valley
In the Ohio Valley region which is largely influenced by production of basic chemicals, plastics and synthetic rubber, coatings, and consumer products, chemical production was flat in July, following a 0.1 percent gain in June. Compared to July 2007, production in the region was off by 0.7 percent, and was down 0.3 percent on a year-to-date basis.

Mid-Atlantic
In the Mid-Atlantic region, which is dominated by pharmaceutical manufacturing, chemical production rose 0.2 percent in July, following a 0.1 percent decline in June. Mid-Atlantic chemical production was down 2.5 percent compared to July 2007 and was off 1.0 percent on a year-to-date basis.

Southeast
In the Southeast region, which is influenced heavily by production of basic chemicals, fibers, agricultural and other chemical products, chemical production was flat in July, following flat growth in June. Southeast region chemical production was off 0.9 percent on a year-over-year, and was down 0.3 percent on a year-to-date basis.

Northeast
In the Northeast region, also influenced by pharmaceutical manufacturing and other specialty chemical manufacturing, chemical production was down 0.2 percent July, following flat growth during June. Compared to July 2007, Northeast region chemical production gained 0.9 percent, and was up 0.5 percent on a year-to-date basis.

West Coast
In the West Coast region, chemical production slipped 0.1 percent in July, following a 0.1 percent decline during June. Chemical production in the West Coast region was flat on a year-over-year and year-to-date basis.

Westlake Chemical to Construct Chlor Alkali Plant in Geismar, Louisiana

Westlake Chemical Corporation (NYSE: WLK) announced recently it will construct a new chlor alkali plant to be located at its vinyls manufacturing complex in Geismar, Louisiana.

The new chlor alkali unit is estimated to produce 250,000 electro chemical units (ECU's,) annually, bringing the company's total estimated ECU capacity upon completion to 525,000 per year. This new plant is in line with Westlake's vertical integration strategy for its vinyls business and allows the company to achieve chlorine integration.

Albert Chao, Westlake's President and CEO stated, "This new facility is an important strategic investment for Westlake and will further enhance the vertical integration of our vinyls segment and allow us to capture value throughout the entire vinyls chain. This new construction, along with the previously announced expansions of our Calvert City, KY operations and the construction of a new PVC pipe plant in Arizona, will also allow us to offer our customers a wide array of quality products and service on a coast to coast basis."

The project is currently estimated to cost between $250 million and $300 million and is targeted for start-up in the 1st half of 2011 and will be partially funded by the Gulf Opportunity Zone bonds issued in 2007. The plant will utilize state of the art membrane technology and is expected to create approximately 100 permanent positions and 400 to 500 construction jobs. The new unit will be adjacent to the existing vinyl chloride monomer (VCM) and polyvinyl chloride (PVC) facilities at the Geismar complex.

Westlake Chemical Corporation is a manufacturer and supplier of petrochemicals, polymers and fabricated products with headquarters in Houston, Texas. The company's range of products includes: ethylene, polyethylene, styrene, propylene, caustic, VCM, PVC and PVC pipe, windows and fence.

PCS Phosphate Plans More Than $370 Million of Projects in the U.S.

PCS Phosphate Company Incorporated (Saskatoon, Saskatchewan), a subsidiary of Potash Corporation of Saskatchewan (NYSE:POT) (Saskatoon), is in the process of building a seventh sulfuric acid unit at their Aurora, North Carolina, plant site. This $100 million unit will produce an estimated 5,400 tons per day of sulfuric acid when completed, which is expected to happen late next year. This project is one of several major expansions planned in the United States by PCS over the next couple of years.

Ashland to Acquire Hercules

Ashland, Covington, Ky., USA, reported it will acquire all of the outstanding shares of Hercules, Wilmington, Del., for $18.60 per share in cash and 0.093 of a share of Ashland common stock for each share of Hercules common stock.

Total transaction value of the Ashland acquisition is approximately $3.3 billion. The transaction, which would create a major, global specialty chemicals company, is expected to close by the end of this year.

With sales in more than 100 countries, Ashland is a manufacturer of specialty chemicals, a distributor of chemicals and plastics, and a provider of automotive lubricants, car-care products, and quick-lube services. Hercules is a producer of specialty additives and ingredients that modify the physical properties of water-based systems and is one of the world's top suppliers of specialty chemicals to the pulp and paper industry.

After the merger, Ashland will have pro forma combined revenue for the 12 months ended March 31, 2008, of more than $10 billion, including approximately $3.5 billion generated outside North America. For the same period, Ashland generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $365 million excluding certain items, while Hercules reported ongoing EBITDA of $392 million, excluding certain items. Specialty chemicals, which on a pro forma basis represents approximately 75% of total EBITDA, will serve as Ashland's primary platform for future growth.

In specialty additives and ingredients, Hercules' Aqualon business brings Ashland a significant market position in rheology modifiers, which alter the physical properties of water-based systems. These additives are used across a wide range of industries to make everything from adhesives and paints to foods, pharmaceuticals and personal care products.

"We will combine the paper and water businesses of each company to create one global paper and water technologies business with annual revenue of $2 billion," said Ashland Chairman and CEO James O'Brien. "In particular, Hercules' leadership position in pulp and paper technologies bolsters our participation in one of the world's largest water treatment markets. The combined businesses will provide the scale to leverage opportunities in other key water treatment markets including municipal, industrial, and marine.

"The third business within our new core, specialty resins, is one where Ashland has long enjoyed a strong reputation for innovation and service. A broader international footprint will offer the specialty resins business expanded global growth opportunities in key building and construction markets, including infrastructure and wind energy. In addition, our Distribution and Valvoline businesses provide complementary capabilities and share similar markets with the specialty chemical businesses," said O'Brien.

McIlvaine Company

Northfield, IL 60093-2743

Tel: 847-784-0012; Fax: 847-784-0061

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