December 2004 SF-Chem Gets New CEO As of October 1, 2004, Ueli Roost began serving as CEO for SF-Chem. Roost has held leadership positions with several companies including Ciba Geigy, Rohner Ltd. and the CeramTec business of Dynamit Nobel. Outside of the chemical industry, Roost has headed up sanitary ware and tiles company Keramik Laufen and medical technology company Sulzer AG.   Famous Quotes of the Month - Only a fool tests the depth of the water with both feet. (African Proverb) - If you buy cheap meat, when it boils you smell what you have saved. (Arabian Proverb) - A throne is only a bench covered with velvet. (French Proverb) - A new broom sweeps clean, but the old brush knows all the corners. (Irish Proverb) - The rain does not fall on one roof alone. (Cameroonian Proverb) Why Do All the Armed Forces Start Marching with the Left Foot? While we don't have a definitive answer to this, we do have an explanation that is sensible and interesting. When warfare was institutionalized in prebiblical times so that trained armies could fight one another on a battlefield, the evolution of infantry tactics in close formation required regimented marching in order to effectively move bodies of heavy and light infantry into contact with an enemy. A soldier probably discovered by accident that advancing at close quarters into an enemy sword or spear line could, by stepping off on his foot in unison with his fellows, maintain better balance and sword contact to his front, assuming always that the thrusting or cutting weapon was wielded from the right hand and the shield from the left. The shield would also protect the left leg forward in close-quarter fighting. This explanation is consistent with why we mount horses from the left. The horse itself couldn't care less from which side the rider mounts. But in ancient times, when riders wore swords slung along the left side of the body (so that they could be unsheathed by the right hand), riders found it easier to retain their groin if they mounted on the left. Akzo Launches Japanese Paint Business Marine supplies subsidiary International Paint Japan was launched by Akzo Nobel to supply a full range of newbuilding, drydocking, and seastores products and services to local customers. The company will also be able to deliver seastores products to vessels at 82 locations throughout Japan. AstraZeneca to Invest in Egypt The General Authority of Foreign Investment in Egypt has given its approval for AstraZeneca to build a $35 million pharmaceutical plant in the 6th October City outside of Cairo. The plant, which is expected to startup in January 2007, will have an initial capacity of 150 million tablets per year, which will be increased to 250 million tablets/year. Bankruptcy Reorganization Plan Announced by Grace W.R. Grace is waiting for approval by its creditors of the bankruptcy reorganization plan it recently filed. The plan places a cap of $1.6 billion on asbestos liabilities and would establish a trust to settle current and future asbestos claims. The company presently faces approximately 325,000 claims. Analysts believe the limit is on the low end of what Grace can expect for liabilities, and it is possible that the bankruptcy court judge could decide they are too low. Creditors, with whom Grace has not yet achieved consensus, could also oppose the plan. BASF Experiencing Strong Positive Performance For BASF, the third quarter of 2004 was very positive, with sales up 20 percent and earnings nearly doubled as compared to the same period in 2003. It also marked the 13th consecutive quarter of year-over-year volume gains for the company. Petrochemicals made the greatest contribution to sales and earnings growth, according to BASF. Ethylene and Isocyanates facilities coming on stream in 2005 will help alleviate pressure on existing plants, which are running at full capacity. BASF will continue restructuring in the Nafta region and expects to realize annualized cost savings of greater than $250 million by 2006. Cognis Considering Strategic Options The process chemicals and oleochemicals business units within Cognis may be offered for sale, according to the company. Various "strategic options" for the businesses are being considered. Owners Capital Partners, Permira, and Schroder Ventures also plan to launch an initial public offering for Cognis, but may wait until after 2005 to see if stock market conditions improve. Danisco Reorganizes in Europe Danisco will restructure operations in France that were part of the former Rhodia food ingredients business the company acquired in May 2004. The company will stop production of dairy media at its Vinay facility and concentrate all European media production in Denmark. Oversupply in the Xanthan gum market has led the company to implement cost reductions at its plant in Melle. Outside of France, the restructuring will also impact operations at Danisco's facilities in Brabrand, Denmark; Niebuell, Germany; and Zaandam, the Netherlands. DSM on Target with Vision 2005 Goals; Continues Restructuring of Vitamins Acquisition DSM reported that it has "made great strides" in reaching the goals of its Vision 2005 strategy, which included raising the portion of sales coming from specialty chemicals to 80 percent and attaining annual sales of $12.9 billion (Euro 10 billion). DSM divested its petrochemicals business in 2002 and acquired Roche's vitamins business in 2003. Currently over 50 percent of the company's businesses are in the food, feed and pharma sectors. For the future, DSM is looking to acquire a performance materials business. DSM will continue the restructuring of its vitamins operations and plans to cut 200 jobs at a plant in Dalry, Scotland. Further cost reductions are expected in the U.S. and China. DuPont Files Suit Against Great Lakes DuPont filed a federal lawsuit against Great Lakes Chemical claiming that Great Lakes made a compound using technology patented by DuPont without gaining permission. The suit claims that Great Lakes infringed upon DuPont's patent for azeotropic compositions used in refrigerants, blowing agents, propellants, cleaning agents, heat transfer agents and fire extinguisher formulations. DuPont Invests in TiO2 DuPont plans to grow its DuPont Titanium Technologies Titanium dioxide (TiO2) business through investment in facilities and expansion into new markets. The company will improve production efficiencies and increase capacity for TiO2 by 45,000 metric tonne/year. DuPont expects to increase sales by $50 million in 2005 and by $500 million over the next few years. It will accomplish this by increasing the sale of new products by 2007 and by increasing its investment in R&D by 35% over the next 3 years. DyStar Announces Job Cuts Platinum Equity owned DyStar announced plans to reduce its German workforce by approximately half, cutting nearly 900 jobs over the next three years. Some positions will be moved to Asia. The reorganization is in response to strong competition from low priced Asian producers and the movement of the textile industry to the East. The first 450 jobs will be cut in 2005 and are expected to fall evenly over the three German facilities. DyStar is also reorganizing its central and eastern European operations, which will include the closure of its Vienna office in February 2005. Grace Faces Law Suit Filed by Employees In a lawsuit filed in U.S. District Court in Covington, Kentucky, employees of WR Grace claim that the company lost close to $40 million that should have been placed into the personal retirement accounts of the employees. The suit states that shortly after employees were forced to sell their Grace stock at a very low price, the stock tripled in value and the money was used by the plan's investment advisor, State Street Bank & Trust of Boston, for other purposes. Grace offered no comment on the suit. Henkel Restructures Henkel announced that it will reduce its global workforce by 3000 jobs in order to consolidate its market position and thereby improve efficiency and cut costs. The reductions will take place by 2006 and are expected to result in annual savings of approximately $160 million (Euro 125 million) beginning in 2007. Restructuring costs are estimated to be $525 million (Euro 400 million). Most of the job cuts will take place in Europe and North America. Huntsman Reorganizes European Business Huntsman plans to reorganize its European surfactants business, eliminating approximately 320 jobs. The largest reductions will take place at facilities in England, but all European plants will be affected to some degree. The cuts are to take place over the next nine to fifteen months. The restructuring of the surfactants business follows on a previous announcement that Huntsman will be cutting about 300 jobs from its titanium dioxide operations. Lanxess Plans Significant Restructuring When Lanxess begins operating on its own in 2005, two-thirds of the businesses will be profitable, and the other third will be undergoing significant restructuring activities to put them in the black. The company is taking "immediate action' that will provide annual savings of Euro 25 million beginning in 2005. These steps include process improvements and the closure of two plants in Germany (man-made fibers at Goch and Butadiene rubber at Marl). Partnerships and divestments will be considered for those businesses that cannot be made profitable by internal actions. Profitable businesses such as Butyl rubber will be expanded. Lanxess Spinoff Approved by Bayer Shareholders Bayer shareholders voted overwhelmingly to approve plans for the spin-off of Lanxess as an independent company. The shareholders will receive one Lanxess share for every 10 held in the parent company. Lanxess includes most of Bayer's chemical operations and about a third of its polymers business. It has been operating independently since July 2004. A small number of shareholders oppose the spin-off of Lanxess and may take legal action in an attempt to block the move. Vioxx Continues to Plague Merck Reports that Merck was aware for many years of the potential dangerous side effects associated with the arthritis drug Vioxx (Rofecoxib) and an FDA study indicating that over 27,000 cardiovascular events could have been prevented have together caused a further slide in the value of Merck stock. Initial response to the withdrawal resulted in a loss of $27 billion in market capitalization for the company. On a positive note, the FDA also issued an approvable letter for Merck's next generation drug Arcoxia, but required further significant studies before it can be introduced to the marketplace. Many analysts predicted the FDA would reject the application for the new drug. Vopak, Cosco Logistics Team Up Vopak and Cosco Logistics agreed to form a 50-50 joint venture offering chemical logistics services in China. Vopak will contribute its five tank storage terminals on the coast, while Cosco will provide eight main warehouses, 1,300 trucks and 13 barges designed for transport of hazardous materials. All together, the joint venture will have over 1 million cu. meters of capacity and will begin operation in the first quarter of 2005 from offices in Guangzhou, Ningbo, Shanghai, and Tianjin. Services offered will include liquid chemical international freight management, domestic warehousing, and road, rail, and barge delivery management. CEO Transfer Completed at Dow President and Chief Operating Officer Andrew Liveris became CEO of Dow Chemical effective November 1, 2004, replacing William Stavropoulos, who remains chairman. Liveris joined Dow in 1976 and has served in manufacturing, sales, marketing, new business development and management positions. Liveris is recognized for his improvement of Dow's financial performance and is expected to continue to make further gains in the coming years. Great Lakes Needs New CEO Mark Bulriss, chairman and CEO of Great Lakes Chemical, resigned his position for personal reasons. The company has appointed non-executive chairman and CFO John J. Gallagher III as interim CEO until a new CEO is identified. The current vice president for financial planning and investor relations, Jeffrey Potrzebowski, has been appointed acting CFO. Showa Denko Gets New CEO Mitsuo Ohashi resigned as president and CEO of Showa Denko in order to become representative director and chairman. The company has appointed senior managing director Kyohei Takahashi as his replacement, effective January 4, 2005. The management changes are part of Showa Denko's strategic reorganization plan for the company. Growth of U.S. Economy Expected to Continue in Short Term According to the American Chemistry Council (ACC), recent economic indicators point to continued growth in the U.S. economy and the chemical industry sector. Growth in manufacturing is predicted to continue for the next 6 months based on two regional reports from areas with significant chemical industry activity. Overall the output of the chemical industry is up 6.3 percent from a year ago, according to the ACC. However, signs of inflation have also been appearing, largely due to increasing oil and gas prices. Petrochemical Companies in Latin America Investing for the Future To remain competitive in the face of increasing globalization, Latin American petrochemical producers are investing in new projects and modernization. The industry was largely ignored for the past ten years, with production dropping nearly 50 percent during the period. The Mexican state-owned oil and gas company Pemex is developing its petrochemical complex known as Project Phoenix, with an initial investment of approximately $1.9 billion. Another large complex in Brazil, the $1.08 billion Rio Polimeros project, is expected to startup in April 2005. Both countries have readily available natural gas, which provides a cost advantage to them. Profitability Remains High for Petrochemicals According to Chemical Market Associates Inc. (CMAI), global profitability for the chemicals industry will soon be at an all time high and re-investment level earnings should be reached in 2005. Tight supply and increasing demand are leading to higher prices and improved margins. Inventories are down because the industry did not achieve profit levels that enabled investment in capacity expansions over the past several years. Demand is growing throughout the world, with Asia and North America in the lead, and Europe gaining. Third Quarter Brings Positive Results for European Chemical Companies Earnings for European chemical companies increased significantly in the third quarter of 2004. Petrochemical companies such as BP and Shell saw the largest gains, going from $84 million in 2003 to $188 million in 2004, and $30 million to $577 million, respectively. Specialty chemical companies like DSM and Rhodia also achieved improved earnings in the third quarter. Both point to asset sales and restructuring as contributing factors. All companies remain concerned about the impact of high oil prices and feedstock costs on future sales growth. Orgasynth Buys Merck KGaA Manufacturing Facility Fine chemicals company Orgasynth agreed to acquire the Pithiviers, France production facility from Merck KGaA for an undisclosed amount. Orgasynth will continue to produce finished products, intermediates and active pharmaceutical ingredients for Merck.