European chemical makers are seeing a limited recovery in demand, led by consumer products and emerging markets, said Christian Jourquin, president of the biggest industry association.

Companies are using more of their capacity, although some prices are still falling, said Jourquin, who’s also chief executive officer of Solvay SA, the Belgian producer of chemicals and plastics that announced on Sept. 28 that it agreed to sell its drug unit to Abbott Laboratories.

“We are leaving the depression mode to come more to a recession mode,” Jourquin told reporters in Lisbon today after a conference of the European Chemical Industry Council, or Cefic.

European chemical producers such as Rhodia SA, Lanxess AG and Givaudan SA have said since the end of the second quarter that their customers had completed inventory reductions. German chemical company BASF SE, the world’s biggest, said in July that it still faced slumping demand from automotive, construction and oil-and-gas clients.

“You have some segments doing better than others,” Jourquin said. “The closer you are to the end-market, the better it is. Consumer products, for example, are resisting much better.”

European companies are relying on emerging markets to pace their recovery, while demand in their home countries remains “stop-and-go,” he said.

U.S. Conditions to Improve in 2010

U.S. chemical producers have struggled amid the recession. The American Chemistry Council states that 2008 output is down 4.7 percent and output for 2009 is projected at -7.2 percent. The council is projecting an increase of 1.7 percent for 2010 output.

The U.S. economy is rebounding more slowly than in some international markets, say industry leaders and analysts, “I continue to see a very robust market in Asia. I see some very slim signs of recovery in Europe. I don't see anything coming in North America,” said Peter Huntsman, CEO of specialty chemical maker Huntsman Corp, the Houston Chronicle recently reported.

Improving economic conditions outside the U.S. are part of the reason why Wall Street predicts major chemical companies this month will report better financial results for the third quarter than had been expected.

The companies are also benefiting from lower costs after closing plants and cutting jobs over the past year, and because of low prices for natural gas, a key raw material used to make chemical products,

And their customers, after going through inventories to conserve cash, started placing orders again late in the summer, boosting activity at chemical plants, said Tim Hanley, vice chairman and U.S. process and industrial products leader at consulting firm Deloitte.

But companies that still are tied heavily to the housing and automotive sectors, which bore the brunt of the downturn, are likely to continue to struggle, as are those with most of their business in the U.S., analysts said.

U.S. chemical plants were running at 71 percent of capacity in August, the most recent month for which data is available, according to the American Chemistry Council. While still off from the 90-plus percent range the industry prefers, the figure is up from a low of about 67 percent last December.

Since December 2007, when the recession officially began, the U.S. chemical industry has cut 55,700 jobs and now employs just over 800,000 people nationwide, the chemistry council said.

INDUSTRY NEWS

Chemical Plant Security Bill Advances in House

A key House committee voted mostly along party lines recently to approve a bill supporters say would better protect communities from terrorist attacks on chemical facilities, the Times-Picayune reported.

Approved 29-18 by the House Energy and Commerce Committee, with most Democrats voting yes and Republicans no, the bill now goes to the full House of Representatives.

It would require the Department of Homeland Security to compile a list of chemical plants that contain sufficient quantities of "substances of concern" to pose a serious security risk.

The department would be given the authority by the bill to reduce security concerns at high-risk plants by ordering, when appropriate, a substitution of less-volatile chemicals or changes in processes.

Leaders of the chemical industry said manufacturers already are moving to upgrade security at the plants and that it would be a mistake to grant the federal government authority to order substitutions of chemicals or processes when the consequences could lead to ineffective products or hamper production.

COMPANY NEWS

DuPont Profit up in 3^rd Quarter

DuPont Co. posted an 11 percent increase in third-quarter profit due to cost cutting and lower material, energy and freight expenses.

The company reported earnings of $409 million up from $367 million a year earlier. Net sales fell 18 percent to $5.96 billion.

"We see overall sequential improvement in our industrial businesses as market conditions begin to firm," said Chief Executive Ellen Kullman.

Chemical companies have scrambled to cut costs as demand during the recession has fallen dramatically while major customers in the construction, automotive and textile industries have seen sales decline.

DuPont has seen an improved sales volume in titanium dioxide, which is used in creating coatings, plastics and paper, company executives said recently on a call with analysts.

"DuPont titanium dioxide is approaching a sold-out position," Ms. Kullman said. "Our coatings and polymer products experienced strong demand in response to increases in motor-vehicle production. Engineering polymer products experienced restocking demands across their automotive-supply chains in the quarter."

DuPont remained cautious about fourth-quarter results. In the call with reporters, Ms. Kullman said she expects most of the company's segments to improve year-over-year but could be flat from the third to the fourth quarter.

Gross margin grew to 23.5 percent from 18.9 percent amid the cost savings. DuPont said its cost-cutting measures boosted third-quarter pretax earnings by about $300 million and have cut about $900 million so far this year. The company expects to cut $1 billion total by the end of 2009.

DuPont also said recently that it will invest more than $120 million to boost its capacity to produce solar panels as the company branches out from its traditional business to try its hand at tapping the fast-growing renewable-energy market.

Dow Chemical Begins Work at Michigan Battery Factory Site

The Dow Chemical Co. is starting preliminary construction in Midland County, MI for a factory that will develop and manufacture advanced batteries for the automobile industry.

The 800,000-square-foot factory is planned for a location in Midland, MI at the corner of Saginaw Street and Bay City Road.

The estimated $665 million project is a joint venture between Dow and a battery maker named Townsend Kokam.

Johnston Contracting of Midland and Alloy Construction Service Inc., 401 Balsam in Carrollton were awarded work for the utility relocation. Dow expects to award further construction contracts in spring 2010.

The Dow Kokam venture has not begun hiring the estimated 800 people it needs to run the factory.

LyondellBasell Launches New PE Resin for Film

Netherlands-based chemical firm LyondellBasell has launched a new Lupolen resin grade for blown film which it claims offers significant downgauging potential for flexible packaging applications.

The firm says Lupolen GX 4081 resin exhibits a melt flow rate of 1.4 g/10min and a density of 0.935 g/cm³. Tests have shown that films produced with the new grade can achieve a dart drop impact of 330 grams, measured on 50µm film, says the firm.

“This high level of toughness represents a new benchmark in performance for medium density PE used in film applications,” says Roland Andernach, technical service and application development manager at LyondellBasell, in a press release.

Manufacturers can blend Lupolen GX with LPDE for film applications in agricultural, industrial and food products.

Andernach says in-house tests also show that Lupolen GX 4081 resin has enhanced optical characteristics.

“Our customers can take further advantage of improved optical properties,” he says. “According to our tests of film made on our blown film extrusion line, the haze value could be reduced by about half compared to conventional MDPE film resins.”

Lupolen GX 4081 resins will be produced on a commercial scale at LyondellBasell’s European Spherilene processing plants.

LyondellBasell Planning for Public Offering in 2010

LyondellBasell Industries, the world’s largest polyolefins maker, plans to exit bankruptcy in December or January.

After exiting bankruptcy, the Rotterdam, Netherlands-based firm plans to have an equity offering and become a publicly traded firm, spokesman David Harpole said in an Oct. 6 phone interview, and reported in Plastics News. That offering is expected to take place sometime in 2010.

LyondellBasell also has accomplished about 40 percent of its job reduction goal, but plans to cut another 1,800 positions worldwide by the end of 2010. Most recently, the firm cut 14 jobs at a plant in Corpus Christi, Texas, that makes plastic feedstocks ethylene, propylene, butadiene and benzene. Closing a low density polyethylene plant in Carrington, England by the end of the year will eliminate 50 jobs.

The firm also had planned to close a high density PE plant in Alvin, Texas, but reversed its decision after the plant’s finance improved and HDPE demand bounced back somewhat.

Harpole declined to provide site-by-site details, but he said the overall goal of 3,000 reductions announced in November 2008 represented about 17 percent of LyondellBasell’s global work force at the time.

In an Oct. 6 teleconference, officials with the firm said that earnings for its polymers segment through August — before interest, taxes, depreciation amortization and restructuring costs — were $528 million. That’s 75 percent higher than what the firm expected the polymers unit to produce at this point at the start of the year. Through August, polymers was the most productive of LyondellBasell’s four segments, based on pre-charge earnings.

In the first half of 2009, LyondellBasell’s sales fell 53 percent to $13.2 billion vs. the year-ago period. The firm posted a first-half loss of $1.4 billion after showing a $5 million profit in the same period a year ago. In 2008, LyondellBasell posted a loss of $7.3 billion on sales of $50.7 billion.

Ownership of LyondellBasell is split 50-50 between investment firms Access Industries of New York and ProChemie Holding Ltd. of Oberndorf, Germany. Access bought Basell from BASF AG and Royal Dutch/Shell Group for $6 billion in 2005, and then acquired Lyondell Chemical Co. For $19 billion in 2007 In bankruptcy court filings in New York, LyondellBasell officials have said that the acquisition of Lyondell was done with 100 percent debt financing.

LyondellBasell ranks as the largest maker of polypropylene in both North America and the world. In North America, the firm also ranks second in markets for HDPE and LDPE.

Cytec Reports Q3 Earnings

U.S. specialty chemical maker Cytec Industries Inc (CYT.N) reported third-quarter earnings that beat analysts' estimates, helped partly by cost cuts at its coating resins segment, and raised its forecast for the year.

Cytec CEO Shane Fleming, however, said the company will take a cautious approach for the rest of the year, if restocking activity across the specialty chemicals market was not replaced by growth in demand.

For the quarter, Cytec reported net income of $12.5 million compared with $46.3 million a year earlier.

The company, which had cut 60 jobs post the closure of its manufacturing plant in Spain late September, reported net sales of $740 million.

Victrex Sees Improvement

British high-tech plastics company Victrex (VCTX.L) said recently that monthly sales volumes have increased in the second half of the year, but added that it was too early to say if the recovery was sustainable into 2010.

Victrex, whose key PEEK polymer product is used in aircraft components, car parts and surgical instruments, said it expected profit for the full year to be in line with market expectations.

However it said it was too early to judge whether there was now higher sustainable demand for its plastics products which would continue into 2010, or whether customers were replenishing stockpiles which had been left to run down during the recession.

The company's biocompatible polymers unit Invibio, which makes medical products, saw full-year revenue rise 37 percent to about 34.1 million pounds ($54.54 million).

PROJECTS/ EXPANSIONS/ACQUISITIONS

Berry Plastics to Acquire Pliant Films Business

US-based Berry Plastics Corp has announced that it plans to buy Pliant Corp after the company emerges from bankruptcy.

Under a reorganization plan approved by the US Bankruptcy Court earlier this month, Berry was to receive 25 percent of the equity of Pliant. Berry says it now intends to acquire the remaining 75 percent of the common stock in the Pliant film business

Private equity firm Apollo Management LP owns stakes in both packaging film extruder Pliant and Berry, which is a major player in the injection molding, film extrusion and thermoforming sector in North America.

Pliant has 2,900 employees at 18 manufacturing plants around the world. It reported 2008 sales of $1.1 billion. Berry has 13,400 employees and 66 manufacturing plants.

Ira Boots, chairman and CEO of Berry, said in a news release: “Pliant Corp brings to Berry an important group of customers, employees, manufacturing locations and products. Their film product line enhances Berry’s current offering with innovation and broader market appeal.”

Pliant will remain separately capitalized as an unrestricted subsidiary of Berry following completion of the deal, which is scheduled to close by the end of the year.

Clariant Considers Masterbatch Production Plant in Russia

Specialty chemicals group Clariant International is preparing to establish a new plastics masterbatch production plant in the semi-autonomous Russian republic of Tatarstan.

The company based in Muttenz, Switzerland said it is still considering plans to add masterbatch production capacity in Russia to meet increasing regional customer demand. It is understood a decision to establish the facility in Nizhnekamsk, Tatarstan is likely to be taken at the end of this year.

High level discussions between senior executives of Clariant, including its masterbatches division head Dominik von Bertrab, and ministers of the Tatarstan government about a local scheme took place last month, reported the official Tatar-inform news agency.

The agency suggested that the meetings included discussion of initial local investment in the region of €1.5m. A Clariant plant would be well placed in Nizhnekamsk, at the heart of one of Russia's biggest chemical industry centers, where new oil refining and petrochemical facilities are under construction.

Clariant Masterbatches division is a global leader in the manufacture of color and additive concentrates, and technical compounds for the plastics industry. It operates more than 50 full service manufacturing facilities around the world offering a wide range of products.

Landfill Methane Revenue Projected

Louisiana’s East Baton Rouge Parish officials expect to earn up to $33 million during the next 20 years with a new methane collection project at the North Baton Rouge Landfill, according to a city-parish news release.

Construction on a new methane collection project at the North Baton Rouge Landfill is set to begin in November. Actual pipeline construction is set to start in December, the release said.

The pipeline will deliver the methane gas produced by the landfill to ExxonMobil’s Baton Rouge Polyolefins Plant and Novolyte Technologies chemical plant.

The methane gas will be used as a substitute for natural gas in the boilers at both plants, the release said.

In 2007, the city-parish selected Siemens Building Technologies Inc. to develop the project, the release.

Synalloy Sells Chemical Division for $11.2 million

Spartanburg-based Synalloy Corp. said it has agreed to sell its Blackman Uhler specialty chemicals division for $11.2 million to SantoLubes Manufacturing LLC of St. Charles, Mo.

The deal includes the 200,000-square-foot Blackman Uhler plant at 2155 West Croft Circle and equipment, and about 60 employees who formerly worked for Synalloy Corp. will now work for Santolubes.

Greg Bowie, vice president and chief financial officer for Synalloy, said SantoLubes will continue to operate the Blackman Uhler plant and will relocate its headquarters to Spartanburg.

He said the company plans to add capacity and could create some jobs in the future.

He said the sale is part of the company's overall plan to narrow its focus on the metals side of its business in order pursue avenues that will help the company increase its profitability.

SantoLubes' products include its Santovac, Santotrac, ACCL and Santolube lines. They feature synthetic fluids, lubricants and greases that are used in extreme conditions by customers in the aerospace, electronics, aviation and automotive sectors.

Garrison said Blackman Uhler's business was impacted by the decline of the U.S. textile industry.

McIlvaine Company

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