The pace of recovery in Germany’s chemical industry is increasing as customers in Asia and South America are ordering more base and specialty chemicals, industry association VCI said.

Production rose 4 percent in the third quarter from the second, with sales rising 5.5 percent, VCI said in a statement recently. Production rose 2.5 percent in the second quarter from the first. Compared with a year earlier, production fell 12 percent and sales dropped 15 percent.

“It’s encouraging that more and more industrialized nations are freeing themselves from the grip of the economic crisis,” VCI president Ulrich Lehner said in the statement, adding that the overall state of the industry remains difficult.

Many idled factories have been revamped and companies have cut back earlier than planned on shorter working weeks as demand from foreign customers increased, VCI said. While capacity utilization recovered to 76.8 percent, it still remained “way below” its usual average, VCI said.

Full-year chemical production will drop about 10 percent from 2008, the biggest year-on-year decline since 1975, said VCI, whose members include BASF SE, the world’s biggest chemical maker, and Lanxess AG, the country’s largest publicly traded specialty chemical maker. Full-year industry sales are set to fall 12 percent, VCI estimates.

BASF and peers are facing falling earnings as the global recession hurts demand for everything from car tires to plastic packaging and crop chemicals. The six German chemical companies that have reported third-quarter results so far have on average posted a decline in net profit of 13 percent, Bloomberg data shows.

German chemicals companies employed about 432,900 people in the third quarter of 2009, a decline of 2 percent compared with last year. The chemical industry is the country’s fourth- largest, after the automotive, machinery, and electronics industries.

INDUSTRY NEWS

House Passes Chemical Security Measure Over Industry Objections

The U.S. House recently passed legislation opposed by DuPont Co. and other firms that would give the government the authority to force companies to replace chemicals that terrorists could use in attacks with safer alternatives, Bloomberg reports.

The measure, approved 230-193, would make permanent the homeland security secretary’s power to oversee security practices at chemical plants. The legislation also proposes that Congress approve $900 million from 2011 to 2013 to fund chemical-plant security.

Congress in 2006 passed a law giving this oversight to the homeland security secretary in response to post-Sept. 11 fears that terrorists could steal dangerous chemicals or target the plants themselves. Lawmakers made the secretary’s power temporary because they couldn’t reach a compromise on permanent standards.

Chemical-industry lobbyists say that letting the secretary mandate substitutions in chemicals and manufacturing processes, as the House measure would do, could cause shortages of some products.

“A particular chemical could be singled out because it’s viewed as bad in one application” although it’s safe when used in other ways, said Marty Durbin, vice president of federal affairs for the American Chemistry Council.

The Senate isn’t expected to begin debating its version of the legislation until early next year, Durbin said.

The House measure would require businesses to assess their plants’ vulnerability to attack. The legislation also would require the Environmental Protection Agency to oversee security standards for community water systems and wastewater-treatment plants.

Financing for Renewable Chemicals

A new generation of entrepreneurs seeking alternatives for common chemicals are finding favor with venture capitalists, Reuters reports.

The most recent company to connect with financing is DNP Green Technology, which recently that it raised $12 million in Series A financing from Sofinnova Partners, Mitsui & Co. Venture Partners, Samsung Ventures Investment Corp., the Clifton Group and AquaRIMCO.

The Princeton, N.J.-based company has developed a substance called succinic acid - a non-petroleum chemical used to make plastics, paint, pharmaceuticals and other products.

DNP has already signed a joint venture agreement with French research and development company Agro Industrie Recherches et Développements (ARD) to build a production plant to produce its biochemicals. ARD is footing an estimated $27 million for the plant, which is expected to go online this year. Ultimately, DNP is looking to license its succinic acid-making technology to large chemical companies.

Government agencies are bullish on the use of renewable resources for chemicals. The Department of Energy has asked U.S. chemical producers to make 25 percent of their products from renewable resources by 2030, a more than five-fold increase over current levels.

DNP Green Technology isn't the only clean chemical company to raise capital from VCs lately.

Ithaca, N.Y.-based Novomer raised $14 million in a Series B round this summer from OVP Venture Partners, Physic Venture Partners, Flagship Venture Partners and DSM Venturing. The company, which also uses carbon dioxide to produce chemicals, has now raised $21 million from investors.

In the spring, Okemos, Mich.-based Draths Corp. raised $21.7 million in a Series C round from Khosla Ventures, TPG Ventures and CMEA Ventures, records showed. The startup has bioengineered bacteria to convert corn into various chemical intermediaries used in the production of numerous materials, including plastics, paints, nylons and resins.

Recently, Khosla also invested $15 million in Golden Valley, Minn.-based Segetis, a startup working to pull petroleum out of the chemicals business. Last year, the company hired Jim Stoppert to be its CEO. Stoppert, a former executive at Dow Chemical, ran that company's collaboration with Cargill to create corn-based bioplastics.

Also, this fall, early-stage chemical development company Rennovia raised $6 million from 5AM Ventures and Versant Ventures. The funding is the first infusion of a proposed $12.3 million Series A round the company is seeking. The stealth Menlo Park, Calif.-based startup is working to make specialty chemicals from renewable feedstock. The company has not disclosed what chemicals it will make.

COMPANY NEWS

Dow Chemical, Shenhua Revive $10 billion China Project

Dow Chemical and Shenhua Group, China's largest coal miner, will reportedly move ahead with their planned $10 billion coal-to-chemical project in Shaanxi province after a delay of at least one year, Reuters reports.

Top executives from the companies, senior officials in Shaanxi province and representatives from the U.S. Embassy in China attended a cornerstone laying ceremony on November 3, the China Chemical Industry News reported recently.

The Yulin project in northern Shaanxi aimed to install 23 units that include a 3.32 million tonne-per-year methanol facility for ethylene and propylene, which are used for making various plastics and chemical products.

"The feasibility study of the project has entered the stage of applying for an approval from the central government," the newspaper said, citing an unnamed local government official.

The feasibility study was previously planned to be completed in 2008.

An assistant president with Shenhua who is based in Beijing declined any knowledge of the project, and officials at Dow Chemical in China could not immediately be reached.

Dow sold off $3.4 billion in assets this year to boost its bottom line and reduce debt. The chemical firm also cut costs by laying off thousands of workers and shutting several plants.

Shenhua is the parent of Hong Kong-listed China Shenhua Energy.

Clorox to Stop Using, Transporting Chlorine in US

Household products maker The Clorox Co. said recently it is changing how it makes its namesake bleach so it can stop transporting chlorine to U.S. factories by rail amid growing safety concerns and regulatory scrutiny.

Starting at its Fairfield, Calif., factory north of San Francisco, Clorox said it plans to switch to high-strength bleach with a higher concentration of sodium hypochlorite instead of buying chlorine and making bleach onsite.

Clorox expects to finish the transition in Fairfield in six months. Its six other factories around the United States will be changed over the following few years.

"Our goal is ultimately to eliminate the transportation of chlorine from our U.S. supply chain," spokesman Dan Staublin said.

Staublin said the company will eventually make the changes at all seven of its U.S. bleach manufacturing facilities. Clorox would not disclose how much it would cost to make the changes, which will affect the products in its namesake Clorox bleach line.

While the bleach-making process will change, the end products will not, and consumers won't notice a difference in quality, smell or color, Staublin said.

Staublin said transporting certain chemicals including chlorine, especially by rail, could get harder as regulators scrutinize the issue. Laws already bar transporting toxic materials, including substances that can vaporize, such as chlorine, through large cities.

Staublin said the change also enhances security because Clorox won't be maintaining chlorine at its facilities.

Celanese Announces Emulsions Expansion in China

Celanese Corporation (NYSE: CE) recently announced it is expanding its vinyl acetate/ethylene (VAE) manufacturing facility at its Nanjing, China, integrated chemical complex. The investment will support continued growth plans for the Celanese Emulsion Polymers business throughout Asia, including China, India and Southeast Asia and Australia. The expanded facility will double the company’s VAE capacity in the region and is expected to be operational the first half of 2011.

“This expansion anticipates continuing strong growth for high performing VAE emulsions in the region,” said Doug Madden, Celanese corporate executive vice president. “Celanese is committed to growth within China and across Asia, and this expansion is a solid example of our ongoing investment in the region. We recognize the importance of planning for the future growth of our Emulsions business and are preparing for growth by building upon our past success at our Nanjing facility.”

The emulsions expansion is the latest in a number of investments by Celanese in China. Nanjing is currently the largest integrated site in the Celanese global manufacturing network with six production units including acetic acid and vinyl acetate monomer (VAM), several units from Celanese’s Ticona business and the existing emulsions plant.

“Since our first manufacturing activities in China just over three years ago, Celanese Emulsion Polymers has grown into a thriving organization in China and is presently expanding across Asia, into India and surrounding countries, Southeast Asia, and Australia,” said Phil McDivitt, general manager, Celanese Emulsion Polymers. “As a global leader in vinyl-based chemistries, Celanese Emulsion Polymers brings innovation to our customers and we will continue to introduce cutting-edge products such as our EcoVAE® emulsions,” said McDivitt.

EcoVAE® emulsions, introduced in 2008, are high-performing binders used in low odor, low VOC, environmentally-friendly paints and coatings. In addition, the emulsions expansion will support many industries including adhesives, waterproofing, building and construction.

The new VAE emulsions plant will yield manufacturing and supply chain synergies with the company’s current facilities that manufacture vinyl-based homo- and copolymers, pure acrylic and VAE emulsions. The expanded facility will be built utilizing best-in-class technologies drawn from the company’s global manufacturing footprint including Europe and the Americas.

Eastman to Temporarily Close S.C. PET Plant

Eastman Chemical Co. temporarily will close a major PET plant in South Carolina during the fourth quarter. Eastman President and CEO Jim Rogers confirmed the move during an Oct. 23 conference call with investors.

During the call, Rogers said that third quarter operating result in Eastman’s performance polymers unit — including PET — declined because of lower selling prices and “continuing operational challenges with our Integrex-based PET manufacturing facility” in Columbia, S.C.

“Looking forward to the fourth quarter, while we have made progress identifying and resolving operational issues with our IntegRex asset, we have more work to do,” he said. “As a result, we will have a shutdown in the fourth quarter to make additional improvements that we expect will get this asset operating like we know it can.”

Eastman opened the Columbia plant in 2006. It was the first major plant to use the firm’s Integrex-brand technology, which has lower energy inputs than standard PET production methods.

The plant opened with almost 800 million pounds of annual capacity. A 400 million-pound expansion was set to be in place by the end of 2008, but it is not clear if that project ever was completed.

Small Chemical Maker Equinox Plans $5 million Expansion

Equinox Chemicals, Albany, Georgia, is about to start a $5 million expansion. Even during these tough economic times, the company is seeing greater demand for its services. They plan to add dozens of new employees in the next year. Equinox Chemicals is a custom chemical company that does research and manufacturing for companies across the world. With 33 employees, the company designs and prepares chemicals and organic molecules for things like fragrances and flavors.

Equinox Chemical Owner and President Mark Grimaldi says they need significant increases to meet new orders, so they are buying neighboring land on West Oakridge, and will hire at least 15 new people by early 2010. By the end of 2010 they expect to add 40 high paying jobs like Ph.D. chemists and engineers, sales, and marketing professionals.

Grimaldi says some U.S. customers, who have been having their chemicals manufactured overseas, are now choosing to have them made in America, and that is a big part of Equinox's business growth.

Albemarle Enters Middle East Venture

Albemarle Corp. will produce chemical refining catalysts in a new Middle East joint venture, the company said recently.

Albemarle’s chief executive, Mark Rohr, said his Baton Rouge company would contribute $80 million to build the catalyst facility with Ibn Hayyan Plastic Co. in the Arabian Gulf industrial city of Al-Jubail. That company is part of the Saudi Basic Industries Corp.

The project will begin this quarter and open in 2012. In conference calls with analysts, Rohr said the deal won’t boost Albemarle’s global production of tri-ethyl aluminum significantly. But it would place 6,000 metric tons a year directly into a region where the chemical infrastructure is expanding rapidly.

In a news release, Mohamed Al-Mady — chief executive of the parent Saudi company — said the facility would provide “strategically needed security for the supply of tri-ethyl aluminum, which is critically required for our multibillion-dollar polyolefins industry.”

Albemarle’s sales of $1.45 billion for the first three quarters of 2009 are about 26 percent off last year’s pace.

Throughout 2009, Albemarle has cut costs in its global operations and hopes to reach $160 million in savings by next year. By the end of the third quarter, the company had achieved $85 million in savings, said Luke Kissam, the Albemarle executive vice president overseeing the restructuring. Part of that savings will come through reorganization of its European operations.

FINANCIALS

Dow Chemical Third Quarter Results

Dow reported sales of $12.0 billion for the third quarter of 2009, down 22 percent from reported sales in the same period last year, and 32 percent lower than the pro forma sales for the same period last year. Sales improved 6 percent from the prior quarter.

Net income from continuing operations for the quarter was $799 million. This compares with net income from continuing operations of $440 million in the third quarter of 2008.

The Company’s global operating rate improved sequentially by 3 percentage points to 78 percent, driven by volume growth in key operating segments in rapidly developing economies such as China, Brazil and IMEA and favorable feedstock and energy costs in North America relative to other geographies which, coupled with Dow’s feedstock flexibility, enabled increased exports.

Chairman and Chief Executive Andrew Liveris said the economic outlook for the rest of year "appears to be stabilizing," with strong growth in Asia Pacific, especially China. The U.S. he added, is "now on firmer footing," and its economy is "beginning a slow and tenuous recovery."

The company is in the midst of reorganizing its business to absorb its $16.3 billion acquisition of Rohm & Haas and manage the heavy debt load it incurred in the purchase. Dow has been selling assets, most recently the $1.68 billion sale of its Morton Salt business. Dow also has been shifting its focus to high-tech, specialized materials from low-margin commodity chemicals.

Gross margin rose to 13.8 percent from 9.3 percent.

Volume fell 9 percent. In the company's three biggest businesses, sales of basic plastics tumbled 31 percent while performance products fell 33 percent and performance systems dropped 30 percent.

Eastman Chemical Q3 Earnings Rise

Eastman Chemical Co (EMN.N) said recently that cost cuts helped it post a modest increase in third-quarter profit as sales fell. The company said it expects fourth quarter earnings per share to decline sequentially.

For the third quarter, the company said net income rose to $101 million, or $1.38 per share, from $100 million, or $1.33 per share, in the year-ago period.

Sales fell 26.5 percent to $1.34 billion. A 33 percent dip in the cost of sales helped offset the revenue drop.

Celanese Corporation Reports Third Quarter Results

Celanese Corporation reported third quarter 2009 net sales of $1,304 million, a 28 percent decrease from the same period last year, with the ongoing global recession continuing to impact year-over-year comparisons. The decrease in net sales was primarily driven by lower pricing for Acetyl Intermediates and Industrial Specialties products, resulting from lower raw material costs and decreased volumes on weak global demand. The third quarter 2008 results also included $74 million of net sales associated with the company’s polyvinyl alcohol (PVOH) business that was divested on July 1, 2009.

Operating profit was $65 million compared with $151 million in the prior year period as lower raw material and energy costs, as well as benefits from the company’s fixed cost reduction efforts, were more than offset by the lower net sales. Third quarter 2009 results included a net $70 million of other charges and other adjustments, primarily associated with the announced closure of the company’s acetic acid and vinyl acetate monomer (VAM) production operations in Pardies, France, which were partially offset by the gain on sale of the PVOH business.

Net earnings were $399 million compared with $158 million in the same period last year. The 2009 results included a benefit of approximately $382 million related to a deferred tax benefit associated with the release of certain income tax valuation allowances.

Air Products and Chemicals 4Q Profit Declines

Air Products and Chemicals Inc., which supplies oxygen and other gases to the industrial and medical sectors, recently said fiscal fourth-quarter earnings declined as sales slipped in all business segments.

Earnings for the quarter ended Sept. 30 declined to $243.9 million, or $1.13 per share, from $261.6 million, or $1.21 per share, last year.

During the most recent quarter, the company recorded 10 cents per share for a bankruptcy charge and costs to write-down assets. Results also included a penny per share in losses from discontinued operations.

Income from continuing operations fell to $246 million, or $1.14 per share, from $273.4 million, or $1.26 per share.

Revenue declined 22 percent to $2.13 billion from a year ago and declined in all business segments, especially in tonnage gases, where sales declined 32 percent.

Clariant 3Q Unexpected Profit

Specialty chemicals company Clariant AG (CLN.VX) recently reported an unexpected third-quarter net profit, driven by restructuring and higher capacity utilization, and confirmed its 2009 sales goal. The Muttenz-based maker of chemical ingredients for products ranging from clothing to cars reported a net profit for the three months to end-September of 20 million Swiss francs ($19.42 million) after CHF75 million a year earlier.

Clariant, which saw demand slump in many of its key markets such as construction and automotive in the past year, said it still expects 2009 sales to be down 16 percent to 20 percent in 2009.

Clariant has undertaken massive restructuring and cost-cutting in recent years to counteract toughening international competition and rising raw material prices and energy costs. It said sales in the third quarter fell 19 percent to CHF1.69 billion, as pricing pressure and weak demand in the company's end-markets continued.

Clariant said its restructuring and job-cutting will continue. It has already cut 1,917 of its staff, employing a total of 18,185 people at end-September. It targets return on invested capital above the industry average in 2010.

It also confirmed it expects to book CHF200 million to CHF300 million in restructuring costs in 2009, with CHF160 million spent so far.

Albemarle Profit Down in 3rd Quarter

Specialty chemicals maker Albemarle Corp (ALB.N) recently reported a 7 percent drop in its quarterly profit, as the recession dampened demand for its products.

Still, the company said the underlying fundamentals of its business are improving while some sectors remain challenged.

For the quarter, the company posted net income of $52 million, or 57 cents a share, compared with $56 million, or 61 cents a share, in the same quarter a year ago.

Revenue was $515 million in the quarter, down 22 percent from a year earlier. Analysts had expected $536.5 million.

Huntsman Sees 3Q Loss

Huntsman Corp.'s (HUN) third-quarter loss was $68 million. Revenue fell 23 percent to $2.11 billion. Gross margin rose to 16 percent from 12.8 percent.

At the polyurethanes business, the biggest by sales, revenue slid 21 percent while core earnings rose 54 percent.

Hunstman said the company saw improved demand across the board in the third quarter from earlier this year and that he is "optimistic that the economic recovery will continue." Despite signs that business is picking up, or at least stabilizing, the chemicals industry--seen as a barometer of economic activity--is still scrambling to cope with demand woes.

Recently U.S. antitrust regulators cleared Huntsman's $415 million purchase of the titanium dioxide and electrolytics businesses of bankrupt chemical company Tronox Inc. (TRXAQ). The deal, announced in August, would make Huntsman the world's second-largest maker of a whitener used in a range of products from food to paint. Huntsman said it expects a bankruptcy court ruling on the sale next month.

McIlvaine Company

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