CHEMICAL UPDATE
JANUARY 2012
McIlvaine Company
TABLE OF CONTENTS
ACC Releases November 2011 Chemical Production Regional Index
BASF Will Join Venture to Make Sugars for Plastic
Coca-Cola Investing Millions to Accelerate Development of Plant-Based Plastics
GM And Teijin to Expand Use of Carbon Fiber Composites
Firms Develop Spray Foam Based on Sugar
Eastman Chemical to Buy Solutia
Momentive Expanding Manufacturing Capacity in China
According to the American Chemistry Council (ACC), the U.S. Chemical Production Regional Index (U.S. CPRI) was flat in November, following a revised 0.3 percent gain in October. Results were mixed within the different regions, with the Gulf Coast gaining while production slipped or was flat everywhere else.
Using a three month moving average, comparable to the U.S. CPRI, output of the nation’s overall manufacturing sector rose by 0.2 percent in November, following a 0.4 percent gain during October. Output in several key chemistry end-use markets rose, including structural panels, paper, rubber products, appliances, motor vehicles, aerospace, machinery, and construction supplies.
Also measured on a three month moving average basis, there were gains in production of organic chemicals, industrial gases, synthetic rubber, pesticides, coatings, adhesives, and other specialties. These gains were offset by declines in the production of consumer products, manmade fibers, fertilizers, and inorganic chemicals. Pharmaceutical output was flat.
Compared to November 2010, total chemical production in all regions was up 2.7 percent and remained ahead year-over-year in all regions. Compared to several months ago, year-over-year comparisons improved in several regions, including the Gulf Coast, Ohio Valley, and Southeast.
The chemistry industry is one of the largest industries in the United States, a $720 billion enterprise. The manufacturing sector is the largest consumer of chemical products, and 96 percent of manufactured goods are touched by chemistry.
The U.S. CPRI was developed by Moore Economics to track chemical production activity in seven regions of the United States. It is comparable to the U.S. industrial production index for chemicals published by the Federal Reserve. The U.S. CPRI is based on information from the Federal Reserve. To smooth month-to-month fluctuations, the U.S. CPRI is measured using a three-month moving average (3MMA). Thus, the reading in November reflects production activity during September, October and November.
Following a 0.4 percent gain in October, chemical production in the Gulf Coast region rose by 0.2 percent in November. Compared to a year ago, production was up 3.4 percent, but remained up 2.2 percent on a year-to-date basis. The Gulf Coast region is dominated by the production of key building block materials, such as petrochemicals, inorganics, and synthetic materials.
In the Midwest region, which is influenced by production of agricultural chemicals, plastics, paints, and other chemical products, chemical production was flat in November, following a 0.2 percent gain during October. Compared to November 2010, Midwest chemical production was up 1.5 percent year-over-year, and up 1.6 percent on a year-to-date basis.
In the Ohio Valley region, which is largely influenced by production of basic chemicals, plastics and synthetic rubber, coatings, and consumer products, chemical production slipped by 0.2 percent in November, following a revised 0.3 percent gain in October. Compared to November 2010, production in the region was up by 4.9 percent, and up 3.5 percent on a year-to-date basis.
In the Mid-Atlantic region, where pharmaceutical manufacturing is prominent, chemical production slipped by 0.1 percent in November, following a revised 0.3 percent decline in October. Mid-Atlantic chemical production was up 1.1 percent compared to November 2010, and up 1.4 percent on a year-to-date basis.
In the Southeast region, which is influenced heavily by production of basic chemicals, fibers, agricultural and other chemical products, chemical production was flat in November, following a revised 0.4 percent gain in October. Southeast region chemical production was up 3.7 percent year-over-year, and up 2.7 percent on a year-to-date basis.
In the Northeast region, which is influenced by pharmaceutical manufacturing and other specialty chemical manufacturing, chemical production slipped 0.2 percent in November, following a 0.3 percent gain during October. Compared to November 2010, Northeast region chemical production was up 2.6 percent, and up 2.5 percent on a year-to-date basis.
In the West Coast region, chemical production fell 0.1 percent in November, following a revised 0.2 percent gain in October. Chemical production in the West Coast region was up 0.7 percent from last year, and up 1.1 percent on a year-to-date basis.
German chemical giant BASF is investing $30 million in a U.S. start-up that says it can use plant cellulose to produce large quantities of low-cost sugar used in plastics.
Renmatix, based in King of Prussia, Pa., is one of several start-ups that have been pursuing a cost-effective replacement for fossil fuels from non-edible crops, amid mounting concerns about high oil prices and global warming over the past decade.
The financial crisis dried up much of the interest in and funding for those efforts. Experts say the U.S. is unlikely to meet a government mandate to produce at least 16 billion gallons a year of so-called cellulose fuel, made from vegetable waste, by a 2022 target date. But the chemical sector, which turns large amounts of increasingly expensive commodities such as oil, natural gas and sugar into plastics, paint and other products, is taking a close look at these fledgling technologies.
Renmatix says it can use hardwood to produce mass quantities of sugar, which can in turn be used to produce chemicals such as acrylic acid, a building block for plastics. Mike Hamilton, chief executive of Renmatix, said in an interview that the start-up plans to build a facility by 2014 that will ship sugar that can compete in cost with Brazil's sugar-cane crop, the global benchmark for the commodity.
"This investment reflects our belief in the tremendous growth potential for sustainable products based on renewable materials" said Josef R. Wuensch, managing director of BASF Venture Capital.
Renmatix, which is backed by the Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, has raised $70 million.
Start-ups including Renmatix and Amyris Inc., which is based in Emeryville, Calif., have begun focusing their efforts on chemical companies, which are making considerable investments into what they call "sustainable chemistry." In July, Dow Chemical Co. joined forces with Colorado start-up OPX Biotechnologies Inc. to develop a biological source of acrylic acid that the companies hope will replace its petroleum-based equivalent.
Beverage giant Coca-Cola Co. is making what it said was a multi-million dollar investment in three bio-based companies in an effort to accelerate the development of a PlantBottle made entirely from plants.
The Atlanta-based beverage company said Dec. 15 that it is investing in three companies:
• Virent Inc., based in Madison, Wis., which make a bio-based feedstock, BioForm X, for paraxylene
• Gevo Inc., in Englewood, Colo., which has developed a 100 percent renewable isobutanol, which is a building block for paraxylene.
• Avantium Research and Technology, a Netherlands company whose YXY chemical catalytic technology has led to the company’s development of a new bio-based plastic, PEF, to make 100 percent bio-based bottles that could be a replacement for today’s PET bottles.
Coke’s aim is to advance the technology to make purified terephthalic acid from non-petroleum sources. PTA accounts for 70 percent of the PET bottle formulation by weight and monoethylene glycol the other 30 percent.
Since December 2009, Coke has been marketing a PlantBottle with the 30 percent MEG portion made from non-petroleum-based renewable resources. Coke said it has sold 10 billion PlantBottles since it was introduced, and it now sells the bottles in 20 countries.
Coke did not specify the size of its investment in any of the three companies, or the total amount of its investment.
The world’s other beverage giant, PepsiCo, said in March that it has developed a 100 percent renewable PET bottle, but that it will not go into pilot production until sometime in 2012,. Even then, Pepsi said it would limit quantities to between 100,000 and 500,000 bottles.
Rick Frazier, Coke’s vice president of commercial bottle supply, said the three companies “would work independently, but within the guardrails of our strategy” to develop a 100 percent plant-based PlantBottle beverage container.
Coca-Cola and H.J. Heinz Co. have had a partnership since July for Heinz to use PlantBottle technology for all of its 20-ounce ketchup containers. Heinz said that by the end of 2011, it expects to have sold 120 million PlantBottle ketchup containers.
General Motors LLC is joining the list of carmakers putting development money into carbon fiber, with an agreement to co-develop a thermoplastic carbon fiber composite for potential use in high-volume production.
The agreement, announced recently by Detroit-based GM and Teijin Ltd. of Tokyo, will look at the technologies needed to bring Teijin’s carbon fiber to use in global mainstream auto production, moving the use of the composite beyond high-end, low-volume vehicles, Plastics News reported.
Teijin’s proprietary composite uses a thermoplastic base rather than a thermoset, which opens the possibility for processing cycle times of less than a minute. That would make the material easier to use at standard auto production volumes.
Teijin said it will establish the Teijin Composites Application Center at an unspecified location in the northern U.S. in early 2012 as part of the development agreement.
German automakers BMW AG and Daimler AG, Italy’s Lamborghini SpA and other carmakers have advanced carbon fiber development programs already in the works, while GM, Chrysler and other competitors have been using the composite in some parts for limited production already.
SES Foam and Imperial Sugar Co. are introducing SucraSeal, which they claim is an environmentally friendly, open-cell, Class 1 sucrose-based spray foam insulation, Plastics News reports.
SucraSeal products meet the U.S. Department of Agriculture’s BioPreferred program qualifications and their green content has been determined by ASTM D-6886.
The developers say SucraSeal offers an “energy-efficient and sustainable solution for commercial contractors and residential homeowners seeking a greener alternative to petroleum-based insulation products.”
SucraSeal insulation offers high-yield and an R-value of 3.7 per inch, is VOC and formaldehyde free and virtually odorless, according to SES.
“Sucrose is a renewable resource, making it cost-competitive compared to petroleum-based spray foam, said Imperial Sugar CEO John Sheptor. The developers say that even with its sucrose content, SucraSeal has zero food value for rodents or insects.
Eastman Chemical to Buy Solutia
Eastman Chemical Co. said recently it has agreed to buy specialty-chemical maker Solutia Inc. for about $3.4 billion in a move that executives see paying off as auto, construction and consumer-electronics markets recover.
The cash-and-stock deal comes four years after Solutia emerged from bankruptcy-court protection, restructuring to focus on high-margin segments after a spin-off from what is now Monsanto Co., the seed maker.
The planned acquisition would be Eastman's largest.
Jim Rogers, Eastman's chief executive, said the Kingsport, Tenn., company is paying a "full" price for what he called a quality asset that would boost its international exposure.
St. Louis-based Solutia will add $2.1 billion in revenue to Eastman's $7 billion base and reduce its reliance on domestic customers to below 50% of sales.
Both companies, whose offerings include specialized coatings for windows, tires and windscreens, have customers in the auto and construction sectors. New-auto sales are slowing in Europe, but executives said half of their car business is steadier replacement and repair work. Meanwhile, nonresidential construction markets are on the mend, boosting demand for specialized building coatings.
Solutia also provides screen coatings for electronic products such as the iPad and Kindle tablets, and Eastman executives said demand in the segment remains volatile.
Eastman said the deal, which requires shareholder and regulatory approval, would immediately add to earnings; the company raised its 2012 projection to $5 a share, excluding acquisition-related costs, having previously pegged per-share earnings above the $4.56 recorded for 2011.
The company said it has also identified about $100 million in annual costs it expects to eliminate by the end of 2013 through the reduction of corporate expenses, raw-material synergies, and improved manufacturing and supply chain processes.
Bayer Building New Coatings Plant
Bayer MaterialScience has started the construction of a new €35 million multi-purpose plant for the raw materials for polyurethane coating at Chempark Leverkusen in Germany.
Hexamethylene diisocyanate (HDI) and isophorone diisocyanate (IPDI) are used primarily for the production of environmentally friendly automotive and industrial coatings for a wide range of products, including many durable nonwovens.
Growing concern about the environment and the challenges concering VOC legislation in many countries have resulted in a trend to the replacement of many solvent-based systems by water-based or high solid systems, Bayer says.
The company offers a large range of environmentally friendly water-based dispersions for almost all coating applications and notes that their quality and robustness is increasing steadily, to that extent that performance has grown to be as important a growth driver as the environmental aspect. The properties of water-based coatings are now comparable or even better than solvent-based systems in terms of chemical, mechanical and optical stability, it is claimed.
The new Leverkusen plant is scheduled to come on stream in Autumn 2013.
“Our company develops sustainable solutions as answers to global megatrends,” said Bayer CEO Dr Marijn Dekkers. “One example is increasing mobility around the world, resulting in rising demand for high-performance automotive coatings. The new plant is just one element of our investment planning. We intend to invest at least €700 million in capital expenditures in Germany over the next three years.”
Eastman Chemical Company recently broke ground on a new facility to produce acetate tow in Heifei, China. The new plant is owned and will be operated by Eastman Shuangwei Fibers Company Limited (ESFCL), a joint venture with China National Tobacco Corporation, and will produce 30,000 metric tons of acetate tow upon completion. Acetate fiber in the form of tow is used in the production of cigarette filters.
"Eastman has a long-standing relationship with China National Tobacco Corporation that spans more than 20 years," said Michael Chung, senior vice president of International Ventures and chairman of the board of ESFCL. "As partners in this new joint venture, I look forward to further strengthening our relationship and many more successful years together."
Through this joint venture, Eastman is able to expand its presence in China and increase participation in the fastest growing economy in the world. This facility represents the company's first investment in the country for an acetate tow plant. The plant is expected to be operational in mid-2013.
"We are committed to growing our global acetate tow business and this joint venture is another demonstration of that commitment," said Linda Hensley, vice president and general manager of Eastman's Fibers segment. "China plays a key role in our growth strategy and this new facility will help us meet our increasing customer demand."
Columbus-based chemicals producer Momentive Specialty Chemicals Inc. expects to break ground on a manufacturing facility in China early next year now that it has signed an agreement with a specialty chemical company based in Taiwan.
Momentive recently signed the joint venture agreement with UPC Technology Corp., making official an agreement the companies entered into in May to build a joint facility for producing phenolic resins.
The joint venture, dubbed Momentive Union Specialty Chemicals, will build its first Chinese plant next to an existing UPC complex in Zhenjiang, Jiangsu, China, according to a press release. The facility is expected to be completed during the first quarter of 2013.
The companies did not disclose terms of the deal.
Momentive is trying to expand its penetration in Asia, where it said demand is growing. The company is building an acids plant in China’s Shanxi Province and has a chemical facility in South Korea.
UPC Technology produces petrochemicals as part of the holding group MiTac-Synnex Group, which recorded $21.5 billion in 2010 sales.
Momentive’s $4.8 billion in 2010 revenue makes it one of Central Ohio’s largest private companies. It employs about 6,200 workers, including 320 in Central Ohio.
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