North American polypropylene prices have seen a 3 cent per pound increase since May 1, Plastics News reports. Buyers contacted by Plastics News said the increase was tied in to price hikes for propylene monomer feedstock, which has climbed as oil prices have neared $60 per barrel in recent weeks. Oil prices peaked at $147 per barrel in July 2008, but had been under $60 since November.

Regional polypropylene prices had jumped a total of 9 cents per pound in January and February, but had been flat since then. Prices now have climbed 21 percent in 2009 after falling 35 percent in the second half of 2008.

Propylene monomer also may be under pressure from the gasoline market, where it’s sometimes used as a fuel additive. Higher gasoline prices and increased warm-weather driving can move propylene supplies away from the polypropylene market.

In North America, polypropylene makers have eliminated more than 2 billion pounds of capacity — about 15 percent of the region’s total — since early 2007.

GM Shutdowns Affect US Plastics Makers

General Motors’ (GM) shutdown of 13 US and Mexican plants for up to 10 weeks is the latest blow to a plastics industry that should already be accustomed to the economic downturn, ICIS news reports.

GM said in a statement that the shutdowns will help control high dealer inventories and bring production in line with sales. The company said it will cut production by 190,000 vehicles this year.

Each US-made automobile uses 331 lb (150 kg) of plastics, according to Kevin Swift, chief economist of the American Chemistry Council (ACC).

Moreover, the ACC estimates that each vehicle contains nearly $2,700 (€2,079) worth of chemical products or chemical processing value.

During the shutdowns, auto parts suppliers would not be able to ship parts to GM, losing revenue in the process.

In addition, due to overall economic weakness, the suppliers will likely have a hard time finding outside demand to compensate for the losses from GM.

While the entire industry is dealing with the recession's effects, this era has the potential to benefit the plastics industry long-term because of an emphasis on energy efficiency, according to Rob Krebs, ACC communications director. He states that plastic composites are being looked at with more interest because of their lightweight, energy absorbing and high-strength characteristics.

China’s New Consumption Booster to Spur Petchems Demand

China’s latest effort to boost domestic consumption through the automotive and home appliance sectors should help drive up demand for petrochemicals, analysts said recently.

The State Council, the country’s economic policy-making body, announced recently a new yuan (CNY)7bn ($1.02bn) subsidy to push for the replacement of old automobiles and home appliances with new ones that are more energy efficient.

“Many plastics and rubbers are used in vehicles, their demand will be boosted,” said Lu Zhen, an analyst from brokerage firm Guosen Securities.

The automobile sector is an important chemical end market as car parts including rubber hoses, plastic dashboards, catalysts, fibres, adhesives and coatings entailed application of various types of petrochemicals.

Each vehicle uses chemicals worth an average $2,200 according to the American Chemistry Council (ACC).

COMPANY NEWS

Dow Chemical Forms New Coating Unit

The Dow Chemical Co. recently formed Dow Coating Materials, a new business unit focused on the coatings market, following its $16.5 billion buyout of Rohm & Haas Co. in April.

The new unit merges Dow Coating Solutions and Rohm & Haas Paint and Coating Materials. The company said this combination will create the world's largest supplier of raw materials for architectural and industrial coatings.

BASF Reports Steep Fall in 1Q Net Profit; Puts Funds into Agriculture

German chemical company BASF SE reported first-quarter net profit fell 68 percent as sales sank because of the recession and said it would cut at least 2,000 jobs this year.

Net profit for the January-March period was down to euro375 million ($499 million) from euro1.2 billion in the first quarter of 2008.

Sales fell 23 percent to euro12.2 billion from last year's euro16 billion.

BASF said it faces enormous challenges, and expects "a decline in sales ... and an even greater decline in income from operations" in 2009. The effect of integrating Swiss chemical company Ciba Holding AG is also expected to hit BASF's results this year.

BASF also said that integrating Norwegian energy exploration company Revus Energy, acquired late last year, will also have a negative impact this year.

The company "will restructure and, where necessary, close or sell plants and sites that cannot ensure the company's long-term competitiveness," BASF said in its outlook. "The company will cut at least 2,000 positions by the end of 2009."

BASF said it was reviewing where in Germany it will introduce shorter work hours starting June 1, and has indicated that a production facility at its Ludwigshafen headquarters will see hours cut. German staff has already been shuffled to different production sites to keep them working.

More than 4,000 people now work on shorter shifts at eight sites in Europe. Another 3,000 are expected to join them.

The company said it was pushing through other ways to reduce costs and speed up business processes, in hopes it will be able to improve earnings by more than euro1 billion per year starting in 2012.

BASF, which also explores for and refines oil and natural gas products, said its oil and gas segment sales improved 4 percent to nearly euro 4 billion, but the division's earnings declined 26 percent to euro725 million, due to factors including falling oil prices and lower exploration prices.

The company said the chemicals division's sales decreased 45 percent to euro1.4 billion because of lower volumes and prices, but the unit still made an operating profit of euro74 million.

The company's plastics division saw sales decline 39 percent to euro1.5 billion and reported a euro30 million operating loss - partly blamed on idle capacity at its polymers division, and dramatic overall sales declines.

Company Puts Funds into Agriculture

BASF will give crop protection a bigger share of its research budget as agriculture withstands an economic slump that’s hurting demand for its other products.

Kixor, a herbicide targeted for U.S. introduction in 2010, may well exceed its predicted peak of 100 million euros ($136 million) in annual sales, Stefan Marcinowski, the BASF board member who manages its Agricultural Solutions business. said in an interview at a May 11 trade show in Frankfurt.

Agriculture has been one of the bright spots for chemicals makers amid slumping orders for plastics, coatings and catalysts. Agricultural Solutions was Ludwigshafen, Germany-based BASF’s only unit to report a profit increase and double-digit sales growth in the first quarter, with a 21 percent gain to euro1.1 billion. The agriculture division's operating profit improved 31 percent to euro340 million.

Last year, 35 percent of BASF’s research and development budget went into Agricultural Solutions, which accounts for only 5.5 percent of sales, and the company plans to spend more again in 2009, Marcinowski said. Total research spending will decline to 1.35 billion euros this year from

Next year, BASF will add production facilities for its F 500 fungicide in Schwarzheide and expand Kixor production in Hannibal, Missouri, he said. The company targets more than 250 million euros of annual sales for fungicide Boscalid, put on the market in 2003, he said.

Eastman Chemical Posts $2 million 1Q Profit

Chemical, fiber, and plastic maker Eastman Chemical Co. said recently it recorded a $2 million profit even as results declined in most of its segments.

The company's profit of 3 cents per share for the period that ended March 31 compared with a profit of $133 million, or $1.68 per share, during the same period last year. Revenue fell 34.6 percent to $1.13 billion, from $1.73 billion a year ago.

Not counting special items, the company said it would have earned 25 cents per share from continuing operations.

NOVA Chemicals Sees a Q1 $123m Loss

NOVA Chemicals saw a first-quarter net loss of $123m (€95m), versus a profit of $52m a year ago, as sales revenues dropped 57 percent, the Canadian petrochemicals producer said recently.

Margins shrank as selling prices fell more than feedstock costs and sales volumes were lower, the company said.

Revenues for the three months ended 31 March were $818m, down from $1.9bn in the 2008 first quarter.

NOVA’s operating loss for the quarter was $120m, compared with an operating profit of $110m in the 2008 first quarter.

However, first-quarter results improved from the 2008 fourth quarter when NOVA recorded a net loss of $212m and an operating loss of $315m, the company said.

In the first quarter, business conditions were relatively stable as feedstock costs and selling prices were much less volatile than in the fourth quarter of 2008, when they fell dramatically, NOVA said.

“Market conditions and the ‘Alberta Advantage’ improved month-to-month, leading to a solid March,” CEO Jeff Lipton said.

The Alberta advantage describes NOVA’s relatively lower feedstock and production costs at its production base in Canada's Alberta province, vis-à-vis US Gulf coast producers.

NOVA is being taken over by Abu Dhabi’s IPIC.

After NOVA shareholders earlier this month voted overwhelmingly in favor of the takeover, closure of the transaction was expected later in the second quarter, Lipton said.

Celanese Posts $20 million 1Q loss

Chemicals maker Celanese Corp. said recently it posted a $20 million first-quarter loss, as its sales plunged on continued weak global demand.

Celanese's loss attributable to the company amounted to 16 cents per share and compared with a profit of $145 million, or 87 cents per share in the 2008 quarter. The latest results included a profit of 1 cent per share in discontinued operations.

Sales dropped 38 percent to $1.15 billion from $1.85 billion.

Among other steps, the company is aligning manufacturing to meet future demand, producing cost savings that go well beyond its prior estimates for $100 million to $120 million.

Celanese plans to invest between $250 million and $270 million in productivity projects to generate these savings, company executives said at an investor conference in New York. Among the efforts is its AOPlus acetic acid technology, which enables the company to increase acetic acid production to 1.5 million tons from 1.2 million tons.

The Dallas-based company also announced plans to double the capacity for acetic acid production by the end of the year in its plant in Nanjing, China. Celanese is also evaluating options for expanding manufacturing of vinyl acetate ethylene in Asia to meet increased demand.

PROJECTS/ EXPANSIONS/ACQUISITIONS

Dow Seeks Federal Funds for Midland, MI Battery Plant

Dow Chemical Co. says it wants to create a $665 million facility to manufacture advanced batteries in Midland, MI.

Dow Chairman and Chief Executive Andrew Liveris announced at the company's annual meeting that KD Advanced Battery Group has listed Midland as its preferred site for the project on an application for federal funding. The group is a partnership of Midland-based Dow, Lee's Summit, Mo.-based Kokam America Inc. and others.

The Midland Daily News reports the facility could create more than 800 jobs.

The Bay City Times reports the project already has received about $145 million in state tax credits and is waiting on additional federal aid. Construction could begin by September and production could begin in mid-2011.

HallStar Buys Two Additives Businesses from Dow

HallStar Co. of Chicago has acquired a pair of plastic additive businesses from Dow Chemical Co. for an undisclosed price.

The product lines acquired are Dioplext-brand polymeric plasticizers and Rezilubet-brand polymer additives. The acquisitions include customer lists and formulations, but no machinery, real estate or other hard assets, a HallStar spokesman said.

Dioplext additives are used in food wrap, self-adhesive and electrical tape and industrial hoses and tubing. Rezilubet additives are used in lubricants to provide valuable properties for formulators of biodegradable lubricant base stocks.

Current customers will be supported and assisted to ensure there are no disruptions in supply, officials with both companies said.

HallStar supplies polymer additives and personal-care ingredients. The firm employs 200 and posted sales of $135 million in 2008.

Celanese to Sell Business Segment

Chemical company Celanese Corp. said recently it has entered into an agreement to sell its polyvinyl alcohol business to Sekisui Chemical Co. Ltd., the Dallas Business Journal reports.

According to the agreement, Osaka, Japan-based Sekisui will acquire Celanese for $173 million.

The transaction is slated to close mid-year.

In 2008, Celanese’s (NYSE: CE) polyvinyl alcohol business saw sales of $300 million.

As part of the purchase, Sekisui will be acquiring Celanese’s facilities in Pasadena, Texas; Calvert City, Ky.; and Tarragona, Spain. The Japanese purchaser also will acquire resources housed at Celanese’s Houston Technology Center.

About 220 employees are working under the polyvinyl alcohol division. These impacted employees will be joining Sekisui, Celanese said.

Polyvinyl alcohol, the substance at the center of the business segment, has been used as an adhesive in latex paints, hair sprays, shampoos and glue.

McIlvaine Company

Northfield, IL 60093-2743

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

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