CHEMICAL UPDATE
MARCH 2010
McIlvaine Company
The Chemical Industry Analysis and Forecast has been recently updated. A new Plant Database section has been added to the report—U.S. and European Plants. The database is searchable by Facility Name and Location, linked from the top banner of the report.
TABLE OF CONTENTS
Scientists Develop Highly Recyclable Plastic
Huntsman Reports Earnings, Stabilized Demand
Monsanto, Dow Argentina Chemical Sales Soar on Rains
CF Industries and Terra Industries Merge
Dow Chemical, S. Korean partner to invest $294M in Midland Battery Plant
Dow Agrosciences Plans $340M Research Expansion
Dow Chemical to Sell Styron Unit for $1.63 Billion
$1.4b Expansion for Joint Sinopec-BASF Project
BASF Set To Unveil 28 New Products By 2013
Huntsman in Talks to Set Up 2 More China JVs
Solutia Adds Etimex EVA to its Photovoltaic Line-Up
Lyondellbasell Rejects Reliance Industries' Latest Bid
Chemical Manufacturer to Build Facility in Pennsylvania
Researchers have developed a new way to make plastics that can be continuously recycled — a challenge for many plastics currently used in consumer products. Researchers at I.B.M. and Stanford University said Tuesday that they have discovered a new way to make plastics that can be continuously recycled or developed for novel uses in health care and microelectronics, the New York Times reported recently.
In a paper published in Macromolecules, a journal of the American Chemical Society, the California researchers describe how they substituted organic catalysts for the metal oxide or metal hydroxide catalysts most often used to make the polymers that form plastics.
Chandrasekhar Narayan, who leads I.B.M.’s science and technology team at its Almaden Research Center in San Jose, Calif., said the presence of metal catalysts in plastics means that they often can only be recycled once before ending up in a landfill.
“When you try to take a product and recycle it, the metal in the polymer continues to degrade the polymer so it gets increasingly less strong,” said Mr. Narayan. “If you use organic reactants, you can make certain types of new polymers that are quite different and have other properties plastics don’t have.”
That could give new life to the 13 billion plastic bottles that are thrown away each year in the United States.
“Plastic bottles can be converted to higher value plastics like body panels for cars,” said Mr. Narayan.
Organic catalysts could create a new class of biodegradable plastics to replace those that are difficult to recycle, such as polyethylene terephthalate, or PET, used in a variety of consumer products, including plastic beverage bottles.
These new green plastics could also potentially be used by the pharmaceutical industry as drug delivery devices to treat cancer, according to Mr. Narayan. “The pharma industry has a lot of good drugs on the shelf that they can’t use because they are very toxic,” he said. “You could encapsulate drugs in a bioplastic polymer and deliver them directly to the cancer site. The polymer degrades locally at the site and releases the cargo.”
I.B.M. and Stanford scientists have proven that organic catalysts work in the laboratory, according to Mr. Narayan, and the company has teamed with the King Abdulaziz City for Science and Technology in Saudi Arabia to develop recyclable PET plastics.
He said the organic catalysts are “dirt cheap” to make and that I.B.M. is in discussions with pharmaceutical companies and other potential partners about developing a pilot project that could be producing plastics within two years.
“It’s really a new class of polymers,” said Mr. Narayan. “I think it’s going to revolutionize synthetic chemistry.”
BASF SE, the world's biggest chemicals company by sales, recently forecast revenue and profit growth in 2010 a better-than-expected net profit in the fourth quarter on cost-cutting and improved volumes.
Chief Executive Jürgen Hambrecht said 2010 would be a transitional year, with uneven development from region to region.
Net profit for the quarter to end-December was €455 million ($615.8 million), after a net loss of €313 million a year ago. But sales slipped 7.9% to €13.17 billion from €14.31 billion a year earlier, falling short of analysts' estimates of €13.25 billion.
BASF said it expects sales to grow ahead of the world-wide chemicals industry this year, and forecasts a "significant" rise in earnings before interest and taxes on higher volumes and cost savings from the integration of Ciba, the Swiss chemicals maker it bought in April 2009.
Mr. Hambrecht told a press conference recently that its customers are still careful about reordering and have not yet returned to normal inventory patterns. The company said it narrowly missed its goal of earning its cost of capital back in 2009 due to costs related to the integration of Ciba. As a result, it's proposing a lower dividend for 2009 of €1.70 per share compared with €1.95 per share a year earlier.
Mr. Hambrecht said the company still sees unused capacity across all of its business segments except for Oil & Gas, and that the company's capacity utilization rate remains below the 2008 level, when the downturn began. He said jobs world-wide will be reduced as restructuring continues, but new hires will be made in growth markets such as China.
Hambrecht said Ciba has already begun to contribute to the company's bottom line, despite integration costs of €785 million in 2009, including €150 million in cash costs. By the end of 2012, the company expects combined synergies to contribute €450 million per year. By the end of 2010, the annual cost savings should already be about €350 million.
He also said the company will make investments of about €2.5 billion in 2010. Mr. Hambrecht said research and development spending will probably be on par with the 2009 level, and won't decline.
Demand for chemicals has stabilized in North America and Europe, and a “double dip” recession is unlikely, Huntsman Corp.’s chief executive officer Peter Huntsman said recently, reported by Bloomberg.
Huntsman, the world’s biggest maker of epoxy adhesives, said fourth-quarter revenue rose 2.3 percent to $2.1 billion. Net income fell to $66 million from $598 million a year earlier, when one-time payments from an Apollo Management LP unit boosted earnings by $815 million.
Further signs of economic growth may allow the company to raise prices for several products, Peter Huntsman said in the interview. The company is already planning to raise prices for some types of polyurethanes, he said.
“If you see strength in the economy in Western Europe and the U.S. over and above what we are at right now, there will be an opportunity to raise prices because there is just not much inventory out there,” he said.
European Sales
Signs of a recovery in Europe, where the company gets 30 percent of sales, have yet to materialize, the executive said. European clients in most industries stopped buying chemicals starting in November 2008, a trend that lasted until the first half of 2009, he said.
“Relative to 2006 or 2007, everything in Europe is just a little softer, whether it’s furniture, footwear, coatings, appliances, textiles or carpets,” Peter Huntsman said. “We just are not seeing western Europe come back very fast. Things are very slow.”
Monsanto, Dow Argentina Chemical Sales Soar on Rains
Monsanto Co., Dow Chemical Co. and BASF SE said pesticide sales in Argentina are booming as farmers fight to save a record soy crop from insect and fungi attacks.
Dow’s AgroSciences unit expects record pesticide sales this year after warm winter temperatures favored the multiplication of insects going into the southern hemisphere’s summer, Juan Carlos Lissarrague, the company’s manager of insecticide marketing, said in a recent telephone interview from Buenos Aires. He declined to give specific financial details.
Farmers in Argentina, the world’s third-largest producer and exporter of soybeans, planted 19 million hectares (47 million acres), the country’s largest crop on record, with a forecast of about 53 million metric tons. In 2009, the worst drought in a century reduced the crop to 32 million tons.
Monsanto expects sales of its Roundup weedkiller to equal the record of the 2007-2008 season, Juan Farineti, head of crop protection for Monsanto in Argentina, said in a Feb. 5 phone interview. He declined to give financial details. Sales fell in the 2008-2009 season when crops suffered from prolonged drought.
“The difference between the current season and 2007-2008 is that back then farmers at this same stage were already buying herbicide to store for the following year, while this year they are buying mainly to use in the current season,” said Farineti.
Crops in Argentina and Brazil are benefiting from torrential rains created by El Nino, a weather system that forms in the Pacific Ocean and influences climate worldwide. The rains, combined with hot weather, have also increased the presence of fungi and weeds that attack the soybeans.
“Last year, about 20 percent of all Argentine soy crops were sprayed with fungicide, but this year it has gone up to about 40 percent,” Marcos Lafuente, head of soy crops for BASF in Argentina, said in a Feb. 4 telephone interview from Buenos Aires. “Two years ago, Frogeye Leaf Spot was basically a non- existent fungus in Argentina and now it’s almost an epidemic.”
BASF is one of Argentina’s two largest fungicide sellers, together with Syngenta AG. BASF Global Agricultural Solutions division is responsible for 5 percent of the company’s global sales, according to the latest annual earnings report.
In the early weeks of December, wheat farmers in Argentina rushed to spray crops to protect them from the biggest plague of locusts in 30 years. The plague was mostly centered in southern Buenos Aires province, where about 40 percent of the country’s wheat is produced and which was one of the region’s most affected by the drought in recent years. Locusts thrive in dry weather.
“Sales of insecticide have grown as much as 50 percent market-wide,” Dow’s Lissarrague said. “This doesn’t mean that our sales have necessarily grown this much, since there are other companies too, but it is a record year for us.”
In Argentina’s main soybean producing area, located in northern Buenos Aires province and Santa Fe province, farmers are fighting to control fungi, such as Frogeye Leaf Spot, which thrive in humid weather. The fungus can lower yields by as much as 15 percent, according to Tomas Parenti, a specialist with the Rosario Cereals Exchange. About 33 percent of Argentina’s oilseed is planted in the area.
CF Industries landed Terra Industries for $4.7 billion in a deal that will create one of the world's largest fertilizer companies, reports the Associated Press. The announcement came just hours after Norway's Yara International, which had been vying for Terra as well, said it would not top the latest bid by CF Industries. The deal was approved by the boards of both companies after one of the longest running takeover fights in recent years.
Terra and CF have combined annual
revenue of $4.2 billion. CF and Terra say the tie up will save them around $135
million each year because they will be able to cut overlapping transportation
and corporate costs.
Terra Industries Inc., based in Sioux City, Iowa, said it has ended negotiations
with Yara, the world's largest fertilizer company, which had offered $4.1
billion. Terra notified both companies that it favored the bid from CF, which
amounts to $37.15 in cash per share and nearly one-tenth of a share of common
stock for each Terra share. The transaction has a total value of approximately
$4.7 billion. Under the terms of the merger agreement, following completion of
CF Industries’ exchange offer, a subsidiary of CF Industries will merge into
Terra and any Terra stockholders that did not tender their shares into CF
Industries’ exchange offer will receive in the merger the same consideration
paid in the CF Industries exchange offer. Upon completion of the merger, Terra
will become an indirect wholly owned subsidiary of CF Industries, and Terra
common stock will cease to be traded on the NYSE.
In addition to landing Terra, CF Industries also shook free of Canadian fertilizer company Agrium Inc. Agrium had been pursuing CF in prevent its buyout of Terra, but dropped its $5.5-billion takeover bid for CF. Terra clients are largely industrial, while CF Industries focuses on agricultural customers.
A pair of green initiatives by Dow Chemical Co. and its partners will bring hundreds of jobs and hundreds of millions of investment dollars to the state, the Michigan Economic Development Corp. confirmed recently, the Detroit News reports.
Dow Kokam MI LLC, a joint venture formed last year between Dow Chemical Co. and South Korean partner TK Advanced Battery LLC, will construct a manufacturing facility in Midland for its lithium-polymer batteries for electric vehicles. The project will operate for at least the next 15 years.
The facility entails a $294 million investment from Dow Kokam MI over the next three years and will create at least 320 full-time jobs by February 2014. The average weekly wage will be $730, with an additional $85 in weekly health care benefits.
Construction on the 400,000-square-foot structure is expected to begin in May.
The project's second phase will construct an identical facility, allowing the venture to power 60,000 electric vehicles.
The Michigan Economic Development Corp. has awarded the project an estimated $3.4 million in annual Michigan Business Tax abatements. Dow Kokam MI also will receive an estimated $4.3 million in annual property tax breaks.
The MEDC's decision "is a very critical milestone," said Dow Kokam MI spokeswoman Kristina Schnepf. "This puts us a step closer to being the first advanced battery facility to break ground in the state."
Dow Chemical will partner with Oak Ridge National Laboratory, which is involved in producing carbon fibers, in a separate venture to develop a facility focused on low-cost carbon fiber for wind turbine blades and other projects.
The project, valued at $20 million, will receive $10 million from Dow and $5 million from the Department of Energy. Dow has requested an additional $5 million from the Center of Energy Excellence, a statewide program to join companies, educational institutions and the state in developing alternative energy technology.
Dow AgroSciences is planning a $340 million expansion of its research operations in Indianapolis and potentially add more than 550 workers in the coming years.
The company announced recently it expected to open a new 14,000 square-foot greenhouse this year, followed by a 175,000 square-foot research facility in early 2012.
The subsidiary of Midland, Mich.-based Dow Chemical Co. produces agricultural products such as seeds and pesticides. It has moved heavily in recent years into biotechnology research to develop new products.
Dow AgroSciences currently has about 1,200 workers at its Indianapolis headquarters.
Dow Chemical to Sell Styron Unit for $1.63 Billion
Dow Chemical Co. reached a $1.63 billion cash deal to sell its Styron plastics business to private-equity firm Bain Capital Partners, as the chemical giant continues to rid itself of debt.
Styron will become a standalone chemicals and plastics company that serves customers in automotive, appliances and packaging industries. The business has 40 manufacturing plants world-wide, about 1,900 employees and reported sales of $3.5 billion last year, Dow said.
As part of the transaction, Dow has the option to take up to a 15% stake in Styron as payment, which could be beneficial if Bain decides to publicly offer Styron. Dow and Styron also signed several long-term supply, service and purchase agreements valued at up to $400 million.
"We are committed to further focusing our portfolio by shedding nonstrategic assets that can no longer compete for growth resources inside the company, and in the process generating funds for further debt reduction and liberating resources for Dow's higher growth," Chairman and Chief Executive Andrew N. Liveris said.
In the past year, Dow has rid itself of billions of dollars in debt taken on to finance its $16.3 billion acquisition of Rohm & Haas in April.
The Midland, Mich.-based company has committed to selling at least $2 billion of assets in 2010. At the end of 2009, the company had $19.5 billion in debt.
Through the acquisition and deleveraging, Dow aims to concentrate on higher margin products while lessening its exposure to the basic chemical sector, which is prone to volatile energy prices and has been hit by a lack of demand in the recession.
The transaction is expected to close by August.
A joint project between China's largest refiner Sinopec and German chemical company BASF is undergoing a new round of expansion on the outskirts of Nanjing, capital of Jiangsu province, China Daily recently reported.
A total of $1.4 billion has been budgeted for the expansion, making it the leading chemical production site in China.
The move conforms with China's stimulus plan for the petrochemical industry, said Johnny Kwan, board chairman of BASF Greater China. "It underscores our strong belief in the growth opportunities of the Chinese market and is another milestone in cooperative development."
After the expansion the joint venture, BASF-YPC Co Ltd (BYC), will be able to produce specialty chemicals serving multiple industries such as construction, electronics, pharmaceuticals and automotive, said Kwan. "We will be able to help our customers in China make their industries, businesses and homes more energy efficient."
BASF and Sinopec started their expansion at BYC last September. BYC, a 50-50 joint venture founded in 2000, had a total investment of $2.9 billion in its first phase. It is also BASF's largest single investment overseas.
The development will facilitate BASF to better serve Chinese customers, said Kwan. Paying close attention to domestic customers is one important strategy the company has used to face the tough economic situation last year, he added.
Last year sales of BASF worldwide declined by 19 percent to 50.7 billion euros ($68.88 billion). All segments posted lower sales with the exception of performance products and agricultural solutions, the company said in a statement in February.
The company expects to see a significant rise in earnings in 2010, as the fourth quarter of 2009 was encouraging and offers grounds for confidence, said the statement.
Kwan said he was generally optimistic about this year, although uncertainties still exist. The company would pursue its strategies this year, he said. It would also take advantage of synergies brought by the acquisition of Ciba to achieve further growth.
Commenting on the petrochemical stimulus plan China approved last year, Kwan reiterated the importance of technology upgrades, saying it would be a growth engine for the industry in the future.
China is now developing its chemical industry fully in the right direction, said Kwan, adding that what he was longing to see was more depth in some areas.
BASF will be churning out 28 new agricultural products from now until 2013. The firm gave crop consultants, media, and other agricultural professionals a glimpse at what it has coming down the pike at its 2010 Innovations Symposium in Grapevine, Texas.
Highlights include:
• Nine new active ingredients from now into 2013. From these will come 28 new products.
• Three new active ingredients will be coming in herbicides and will be used in 11 new products and product extensions. These will include a new soil-applied herbicide for crops including corn and soybeans by 2012. BASF also plans to unveil a new postemergence herbicide that can be use on corn in 2012. A new postmergence herbicide that can be used on wheat is also on tap for 2011.
• Three new active ingredients and 11 new products in the fungicide area. Of these, a "big blockbuster" fungicide is planned for crops including corn and soybeans in 2012.
• Dicamba-tolerant soybeans around the mid-2010s that's part of a joint-licensing agreement with Monsanto and the University of Nebraska.
• A new insecticide for use on multiple crops in 2013.
• A new miticide for use on multiple crops by 2013.
The expected dates are all pending regulatory approval.
BASF officials also discussed Headline AMP, its new fungicide product for 2010. This fungicide combines Headline's active ingredient -- pyraclostrobin -- with metconazole, the active ingredient in BASF's Caramba fungicide.
It will give row crop farmers a new option for a preventative and curative fungicide. BASF officials say this combination will give maximum disease protection and also give plant physiological benefits that it terms Plant Health.
U.S. chemical maker Huntsman Corp is in talks to set up two additional joint ventures in China, its chief executive said recently, banking on the country's strong economy to drive demand for its products, Reuters reports.
After coming through a tough recession, many chemical companies are increasingly turning to emerging markets, especially China, where the economy is rebounding.
Peter Huntsman said he expected the company's sales volume to grow 8 to 9 percent this year in China, its largest market in Asia, similar to the pace in 2009, helped in part by Beijing's economic stimulus plans and rising consumer confidence.
The company, which already operates five manufacturing facilities in China, of which four are wholly owned, is seeking to expand its foothold in the country, Huntsman told Reuters in an interview.
"We are negotiating two additional joint ventures. We are still in the process of negotiating value and prices," Huntsman said, adding that he hoped to strike deals in the next two to three months.
China generates about half of the company's sales in Asia, which makes up 23 percent of its global sales, compared with about 30 percent in the United States and 32 percent in Europe, he said.
US-based Solutia has agreed to buy German specialty polymer materials company Etimex Solar, which is controlled by private equity group Alpha Gruppe.
Etimex Solar is a supplier of ethylene vinyl acetate (EVA) encapsulants to the solar photovoltaics market. Its VistaSolar products, which are manufactured in Dietenheim in Germany, include ultra fast curing EVA films and a newer range of thermoplastic polyurethane (TPU) films.
Solutia is to pay €240m for the business, which reported 2009 net income of $31m (€23m) and EBITDA of approximately $34m (€25m).
The US company said combining Etimex’s EVA capabilities with its existing Saflex polyvinyl butyral (PVB) encapsulants will position it as a one-stop source for solar encapsulant solutions.
"This acquisition is a solid step forward that strengthens our core competencies, expands our end markets and supports Solutia's growth strategy," said Jeffry N Quinn, chairman, president and CEO of Solutia.
"Renewable energy is an acknowledged source of long-term growth that fits well with Solutia's businesses, and the combination of EVA and PVB encapsulant manufacturing capabilities will result in access to additional opportunities,” he said.
The transaction is expected to close during the second quarter of 2010.
Solutia reported sales of $1.67bn (€1.23bn) for 2009, down by 21% on its 2008 result of $2.11bn (€1.57bn). EBITDA was down by 2% to $386m (€286m).
The company’s business includes the Saflex PVB glazing interlayer and CP Films automotive and architectural window films product lines, as well as the Flexsys rubber chemicals and Therminol and Skydrol specialty fluids units.
LyondellBasell formally rejected India’s Reliance Industries' latest bid by filing a restructuring plan on March 8, opting instead to utilize private equity firms, including Apollo Management, to emerge from bankruptcy. In effect, Lyondell will have a new management team, less debt and sufficient capital from a rights offering and exit financing, company spokesman David Harpole said. The new plan also adds value, "improves the financial stability of the reorganized company and is a confirmable plan," Harpole added.
Lyondell filed for bankruptcy more than a year ago, hobbled by billions in debt, a sharp increase in oil prices and a decline in demand for its polymers and chemicals due to the global economic crisis.
Since then, LyondellBasell has reached agreement with its creditors to shed billions in debt, issue equity to debtholders and raise about $2 billion to finance its bankruptcy exit.
The company has rejected several offers from Reliance Industries, the most recent of which valued the petrochemicals firm at $14.5 billion, in favor of a plan supported by key creditor groups, said Harpole.
Stakeholders had rejected the Reliance proposals, betting their shares would be worth more in the future than the cash Reliance was offering, said a source familiar with the deal. It is doubtful Reliance will come up with another offer, said the source.
The company in February had reached a $450 million settlement with unsecured creditors over a lawsuit stemming from its 2007 leveraged buyout. The settlement helped clear the way for the company to put the final touches on its reorganization plan.
Private equity firms Apollo Management LP, Ares Management and Access Industries have agreed to back a $2.8 billion rights offering in which Lyondell would sell 263.9 million Class B shares, according to the company's disclosure statement filed early on March 8.
A disclosure statement lays out a comprehensive restructuring plan and would have to be approved by a bankruptcy judge before being sent to creditors and other stakeholders for a vote.
Apollo could invest up to $1.52 billion, while Ares could invest up to $475.7 million and Access can invest up to $805.9 million, the court documents showed.
Investment bank Evercore, which is advising Lyondell, expects the company to emerge from bankruptcy on April 30, according to court documents.
Voltaix LLC, a North Branch, N.J.-based manufacturer of specialty chemicals, plans to open a new facility in Upper Mount Bethel Township, Pa., creating 53 jobs.
The company will move its specialty gas and chemical production operations to Upper Mount Bethel Township, and will construct a production plant, warehouse and office building at the Portland Industrial Park as part of a $22 million project, according to the state.
“This purpose-built facility in the Portland Industrial Park represents a major milestone for Voltaix,” said Mark Wilkinson, executive vice president of Voltaix. “It positions us well to execute on technical and strategic initiatives in several high-growth markets, and to provide our customers with higher capacity and improved redundancy. We look forward to working closely with the local communities as we establish and grow our manufacturing capabilities in Pennsylvania.”
The Lehigh Valley Economic Development Corp. worked with the company and the Governor’s Action Team to secure a $2.76 million funding offer from the Department of Community and Economic Development for the project. The offer includes a $250,000 opportunity grant, a $1.86 million loan from the Pennsylvania Industrial Development Authority, a $500,000 loan from the Machinery and Equipment Loan Fund, $106,000 in job training assistance, and $53,000 in job-creation tax credits, according to the state.
McIlvaine Company
Northfield, IL 60093-2743
Tel: 847-784-0012; Fax: 847-784-0061
E-mail: editor@mcilvainecompany.com
Website: www.mcilvainecompany.com