The recession is opening up a big gap in output performance between the chemical industries of the developed and developing worlds, which will continue to widen over the next few years, the

Royal Society of Chemistry (RSC), a European organization for advancing the chemical sciences, recently reported in its Chemistry World publication.

While the chemical sectors of western Europe, North America and Japan struggle to make up the ground they lost after the financial crisis in late 2008, chemical producers in the emerging economies of countries such as China, India and Brazil are using expanding domestic demand to grab a larger share of the global chemicals market. In Europe, chemicals output excluding pharmaceuticals fell by 12 per cent in 2009, according to the European Chemical Industry Council (Cefic). But by the last quarter it was already showing a slight increase, which Cefic believes will gather pace in early 2010 to provide an overall rise in production of around five percent during the year.

The American Chemistry Industry Council (ACC) expects US chemicals production, excluding pharmaceuticals, to grow by 3 per cent in 2010 after falling by 9.4 percent in 2009.

However, the predicted growth in 2010 in both Europe and the US will still leave output levels well below those before the recession. The financial turmoil of 2008 cut US and western European chemicals production by 15-16 per cent. By the end of 2010 Europe's chemicals production will not only be 11 per cent lower than that in the first quarter of 2008 but even over 5 per cent lower than that in early 2005.

Chemicals production in fast growing nations such as Brazil, Russia, India and China (BRIC) actually increased by an average of 12.3 per cent in 2009 after a slowdown to 2.7 per cent in the previous year, according to Oxford Economics, a consultancy in Oxford, UK, which uses a forecasting model covering 70 countries worldwide. In 2010 it is predicting average BRIC's chemical production will rise by 13.4 percent.

The major impetus behind the relatively quick rebound in demand in the developing world is the buoyancy of the economy in China where the government has launched a massive financial stimulus program to counteract the economic downturn. Most forecasters reckon that China will record the highest rise in chemicals output in 2010. Oxford Economics predicts that in 2010 chemical output will increase by 16 percent after a 16.5 percent jump in 2009.

'China is already accounting for 17 percent of the world's chemical output,' says David Thomas, chemicals consultant at Oxford Economics. 'The high growth in chemical production will continue in 2010 because of the large number of new chemical plants due to come on stream in the country during the year. Their output will slow down the big inflow of imports into China.'

One beneficiary of this enlarged stream of imports into China has been basic chemical producers in the US. They have been able to take advantage of the weak dollar and also cheap natural gas, which has driven down the cost of petrochemical feedstocks. US natural gas prices have fallen by 30 percent in the past year.

The surge in exports of US basic chemicals helped the country transform a $2.6 billion chemicals trade deficit in 2008 to a $2.4 billion surplus in 2009, the US industry's best trade performance for nine years. In 2010 it will do even better with a predicted $3.9 billion surplus.

The big expansion in China's chemicals capacity will curb an expected influx of bulk chemical imports from the Middle East where over 50 petrochemical plants and derivatives are due to come on stream by 2012.

Much of Middle East's additional capacity of around 35 million tonnes per year has been destined for China. Instead, a large proportion of it could be diverted to Europe and, to a lesser extent, North America.

Already Middle Eastern players like Saudi Arabia's Saudi Basic Industries Corporation (Sabic), now one of the world's largest petrochemicals producers, has a distribution network in place in Europe. Intensified competition from imports, like those from the Middle East, will put extra pressure in 2010 on European producers whose domestic customers will continue to be cautious.

Nonetheless, European forecasters are not expecting European chemical output to climb back to pre-recession levels until 2012-2013. Similarly, the ACC believes that three years of steady output growth averaging 3 to 4 percent will be needed to make up the lost production.

Meanwhile much of the world's investment in chemical plants is taking place in the developing world, putting its emerging economies in a strong position to become an even more powerful force in the global chemical market.

'Around 80 percent of new chemical capacity is being built in emerging countries, while in Europe and North America plants are being closed which will never be replaced,' says Thomas. 'The emerging economies already account for 40 percent of global chemicals production. They are well on track to providing over half by 2020.'

COMPANY NEWS

Elastogran to Become BASF Polyurethanes

BASF SE is changing the names of its Elastogran companies to bring them under the BASF corporate identity, the company announced Dec. 22. For example, systems business Elastogran GmbH, headquartered in Lemförde, Germany, will be called BASF Polyurethanes GmbH from now on. The name change will not affect the legal form of the companies concerned nor will it affect existing agreements such as employment contracts or customer contracts.

BASF noted, however, that the Elastogran name lives on in the BASF brand ‘PU Solutions Elastogran,’ which was recently launched throughout Europe. It stands for the polyurethane system and speciality elastomer market leader’s more than 40 years of experience and customer focus.

The name change is an indicator of BASF’s commitment to its European PU business, Jacques Delmoitiez, president BASF Polyurethanes, said in a news release.

“In the past 10 years alone, BASF has invested around 1 billion euros ($1.42 billion) in PU sites and the European PU business,” Delmoitiez said.

The name change in about a dozen European countries will start in January 2010 and is expected to be complete by the middle of the year, BASF said.

Novomer Teams with Kodak for Renewable Polymers

Novomer Inc. will use an $800,000 state grant and facilities provided by Eastman Kodak Co. to commercialize plastics made from renewable carbon dioxide feedstocks.

Pilot-scale production of Novomer’s polypropylene carbonate (PPC) resin began in November on small reactors at Eastman Kodak’s headquarters in Rochester, N.Y. The site also has pilot-scale film extrusion equipment, which will allow Boston-based Novomer to make test products for potential customers, said Mike Slowik, Novomer’s manager of strategic planning and analysis, in a Dec. 15 phone interview with Plastics News.

“We’re talking with several Fortune 500 packaging companies about multi-million-pound applications in beverage bottles, containers and films,” Slowik said.

PPC is produced by combining propylene oxide with carbon dioxide or carbon monoxide. Officials have said PPC uses 50 percent less fossil fuels than standard plastics. Potential PPC markets include coatings, surfactants, flexible packaging and fibers.

"Novomer's ability to reduce petroleum usage by at least 50 percent — while also converting CO2 from pollution into valuable materials — has the potential to transform the plastics and materials landscape on a global scale," Novomer CEO Jim Mahoney said in a Dec. 14 news release.

The $800,000 grant for the project is being provided by the New York State Energy Research and Development Authority. The first phase of the project, based on an earlier $150,000 state grant, was a feasibility study carried out between December 2008 and May 2009 to investigate the financial, marketing, and environmental potential for PPC materials.

The current phase is expected to continue through the end of 2010. At that point, Slowik said Novomer would review its results and make a decision on how to proceed with larger-scale commercial production of PPC.

Novomer was founded in 2004 and currently employs 23. Slowik said that the Kodak project will sustain a dozen jobs, both in Rochester and at Novomer’s research lab in Ithaca, N.Y.

Novomer’s PPC technology was developed by researchers at Cornell University in Ithaca, N.Y. Some of those researchers have invested in the firm. Other investors include OVP Venture Partners — a Kirtland, Wash.-based venture capital firm that put $14 million into Novomer earlier this year — and DSM Venturing, which is a unit of plastics and chemicals maker Royal DSM NV.

Evonik to Focus on Chemicals; Plans Real Estate Sale

Evonik Industries AG will focus on the specialty chemicals business to spur growth by selling shares in the real estate division and seeking a partner for its energy unit, Bloomberg reports.

The company will in the coming years transform from a conglomerate into a “leading global specialty chemicals company,” the company said in a statement recently.

Evonik plans to merge the real-estate unit with THS Wohnen GmbH, a 50-50 joint venture with the German Mining, Chemical and Energy Union, and sell shares in the newly formed real estate business in the “mid-term,” it said. The energy business will remain a part of the group and Evonik is seeking one or more partners to buy a stake or invest in specific projects.

Evonik, which currently generates 75 percent of its sales from chemicals, said it’s looking to the revamp to “pave the way for a new growth phase.” The sale of the real-estate unit could also help to lower debt, analysts said. The company’s residential real-estate assets had a value of 2.7 billion euros ($3.9 billion) at the end of 2008.

BMW Uses Nylon in Transmission Cross Beam

BASF SE and ContiTech AG's vibration control unit have claimed a milestone, with the first use of plastic for an automotive transmission cross beam. The nylon component is standard in the new BMW 5 Series Gran Turismo 550i.

The companies claim using a BASF Ultramid resin instead of aluminum cut the weight of the part by 50 percent.

The cross beam was developed by Hannover-Germany based ContiTech Vibration Control GmbH, in cooperation with BMW and BASF. Just a few days after series production started, the beam landed a first-place Innovation Award conferred by the Federation of Reinforced Plastics (AVK).

The transmission cross beam is a structural component designed to cope with high loads. It contributes to the overall rigidity of the vehicle and must withstand the forces and torque generated by the engine-transmission unit, as well as high temperatures resulting from proximity to the exhaust system.

ContiTech produces the component from “exceptionally strong” nylon by injection moulding. With the help of BASF’s Ultrasim development instrument, it was possible to reduce the weight by 2.2 pounds compared to the same component made of metal -- cited as highly significant in lightweight car construction. In addition to weight reduction, development focused on optimizing vehicle acoustics and crash safety.

ACQUISITIONS/ EXPANSIONS

Celanese Buys Long-Fiber Thermoplastics Business from FACT

Celanese Corp. is buying the long-fiber reinforced thermoplastics (LFT) business of FACT GmbH (Future Advanced Composites Technology) of Kaiserslautern, Germany. The change in ownership is effective Dec. 31. Terms were not disclosed.

FACT, a business unit of Ravago Group, said it is a leading producer of long-fiber reinforced thermoplastics used in injection molding, extrusion, compression molding and blow molding applications.

The LFT technology will fit into Ticona Engineering Polymers, part of Celanese's Advanced Engineered Materials unit.

Ticona will pick up a production site in Kaiserslautern as part of the deal. Ticona's existing Celstran production that employs about 25 people in Kelsterbach, Germany, will be relocated to Kaiserslautern by mid-2011.

By consolidating the two existing LFT production facilities at Kaiserslautern, Celanese expects to realize technological and production engineering synergies.

Ticona’s production site in Kelsterbach will be closed in mid-2011 in order to make room for the expansion of Frankfurt Airport. The plant that Ticona is currently building in Frankfurt’s Höchst Industrial Park for the production of the engineering polymer Hostaform POM will be fully operational by mid-2011.

India’s Dorf Ketal Buys DuPont Unit for $40 mn

Mumbai-based specialty chemicals company Dorf Ketal Chemicals has acquired the global specialty catalysts business of DuPont Chemicals and Fluoroproducts for around $40 million, an article in Economic Times states. The acquired unit had revenues of $50 million during 2008.

Dorf Ketal Chemicals, that had consolidated revenues of around $220 million (around Rs 1,100 crore) worldwide for the year ended March 2009, is a privately-held firm founded by Subodh Menon. With the latest acquisition, it expects to achieve revenues of over $300 million this year.

This is the second acquisition by Dorf Ketal in less than a year. In May 2009, it had acquired Intec Polymers from Chennai-based Sanmar Speciality Chemicals to expand its operation in organic titanates. With the latest deal, Dorf Ketal has become the world’s largest player in the organo-metallic titanates space. Ernst & Young India was the financial advisor for the transaction.

Bunge to Acquire Brazilian Sugarcane Company

Bunge, an agribusiness and food company headquartered in New York, has entered into an agreement to acquire Usina Moema Participacoes (Moema Par). Moema Par is a holding company that wholly owns one sugarcane mill in Brazil and has ownership interests in five others.

Together, the cluster of six mills (Moema Group) has an annual crushing capacity of 15.4 million metric tons. With this transaction, Bunge will have a 60% effective share of the total capacity, representing Moema Par's wholly owned mill and its interests in four of the five other mills.

The transaction will be structured as a share exchange, and under the terms of the agreement, shareholders in Moema Par will be entitled to receive approximately 7.3 million common shares of Bunge, which includes a payment of approximately $36m in respect of working capital.

The value of the transaction is approximately $896m, including approximately $480m of net debt and excluding this working capital amount. The final number of shares to be issued will be based on the amount of net indebtedness and working capital of Moema Par at closing.

In the coming weeks, Bunge may enter into agreements to secure some or all of the remaining interests in the mills that constitute the Moema Group. These transactions would be on economic terms consistent with the Moema Par transaction.

Alberto Weisser, Chairman and CEO of Bunge, said: "This transaction fulfills Bunge's strategic goal of building a large-scale, fully integrated business in sugar and bioenergy. It adds significant scale to our current milling operations and enables us to vary production among multiple sugar and ethanol products, according to market conditions.

“The Moema Group cluster is also strategically located near large domestic markets in Brazil and has excellent access to export logistics systems. All of these strengths make it a perfect fit with our global trading and marketing operations."

The Moema Group cluster is located on the border of Sao Paulo and Minas Gerais states, the two largest domestic ethanol markets in Brazil. The mills benefit from cost savings due to their cluster configuration, and have favorable road and rail access to three of Brazil's largest export ports (Santos, Paranagua and Vitoria), the company said.

The cluster can produce two types of sugar (raw and crystal) and two types of ethanol (hydrous and anhydrous). It has co-generation facilities, is self-sustaining in terms of energy requirements and sells excess power to the grid.

Nufarm Ends Sinochem Talks, Sumitomo to Buy Stake

Australia farm chemicals maker Nufarm Ltd rejected a lowered takeover offer from China's Sinochem in favor of an equity tie-up with Sumitomo Chemical Corp in a surprise last minute deal.

Japan's Sumitomo would buy a stake of up to 20 percent in Nufarm at A$14.00 a share through a tender offer, a near 33 percent premium from Nufarm's last traded price.

Sinochem had offered a revised A$12.00 per share for the whole of Nufarm, or $2.3 billion, cutting its offer from an original A$13 per share.

"Sumitomo's proposal places an appropriate value on the company and provides all Nufarm shareholders with the opportunity to realize a fair price for the some of their shares," Nufarm Chairman Kerry Hoggard said.

Nufarm also said it would raise A$250 million ($221 million) in equity.

The end of the Sinochem talks marks the second time since 2007 that Nufarm has failed to strike a deal with a Chinese company. Two years ago, Nufarm was approached by China National Chemical Corp, which led a A$3 billion approach with U.S. private equity, but no formal offer emerged.

Dow JV Opens Polyurethane Plant in Russia

Dow Chemical Co.’s Dow Izolan joint venture has opened a polyurethane manufacturing plant in Vladimir, Russia.

The plant will make a broad range of rigid and flexible foam PU systems for construction, automotive, footwear and other applications.

“Despite the challenging global economic environment, we have kept our promise and completed the plant as scheduled,” Dow Formulated Systems general manager Juan Merino said in a Jan. 5 news release.

Dow Izolan is a joint venture between Midland, Mich.-based Dow — one of the world’s largest plastics and chemicals makers — and Izolan Ltd., Russia’s largest producer of PU systems. The JV employs 100 and supplies PU products to more than 700 customers.

Dow Completes Netherlands Polyol Expansion

Dow Chemical Co. has completed its polyol expansion project at the company's plant in Terneuzen, the Netherlands.

In March 2008 Dow said the investment would expand its total polyol capacity at the Terneuzen facility by 180 metric kilotonnes per year.

Guillermo Novo, vice president of Dow Polyurethanes, said in a recent statement that the investment will ensure a “reliable supply of essential products” to meet anticipated increased demand for polyols as the global economy recovers.

“Additional value to our customers comes from our ability to take advantage of production of propylene oxide (PO) -- a raw material for polyols -- at the new hydrogen peroxide to propylene oxide (HPPO) facility in nearby Antwerp, Belgium,” he added.

The Terneuzen site is now the largest and most flexible of Dow's 11 polyol production plants, the statement said.

Prinsco Opening HDPE Pipe Plant in South Dakota

Corrugated high density polyethylene pipe manufacturer Prinsco Inc. is opening a new plant near Sioux Falls, SD, according to an article in Plastics News. This will be the company’s seventh extrusion facility.

Company officials will settle on a specific site shortly after Jan. 1, Jamie Duininck, Prinsco’s vice president of sales said in a Dec. 23 telephone interview.

The Willmar-based company will hire 12-15 people to run the plant. Plant size, number of extrusion lines, and diameter sizes of the pipe coming off the lines have yet been finalized, Duininck said.

While the new plant will also serve commercial and construction markets, Prinsco’s core business — agricultural markets — is the prime focus of the expansion. Duininck said agricultural customers are starting to put a heavier emphasis on subsurface water management.

“It’s becoming more of a priority,” he said. “As land values continue to increase, those communities are looking for opportunities to add more yield to each acre on their field.

“One of the best ways to do that is proper water management.”

Prinsco is the nation’s No. 2 player in corrugated HDPE pipe. The company has continued to grow despite the recession.

In November 2008, the company opened a 40,000-square-foot plant in Fresno, Calif., expanding its operations to the West for the first time. Prinsco’s remaining facilities are in the Midwest — two in Minnesota, one in Illinois, one in Iowa and another in Missouri.

Duininck said he expects the new Sioux Falls location to be open by summer.

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