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Restructuring
Details Unveiled by Lanxess
In order to reduce yearly operating costs by
as much as $122.8 million (Euro 100 million),
Lanxess will eliminate 960 jobs in Germany
through attrition, retirement, part-time
working arrangements, and voluntary
departures. About 200 jobs will be cut this
year, and an additional 400 in each of 2006
and 2007. Fine chemicals will account for 500
positions, the styrenic resins business 300,
and the remaining 160 will come from various
other areas. Lanxess will reduce operations in
its Dormagen, Germany Acrylonitirile butadiene
styrene (ABS) plant by 66 percent, and
concentrate specialty styrenics operations in
Tarragona, Spain. The fine chemical unit will
become a stand-alone business, and several
plants will be closed. The work week for
German employees will be reduced from 37.5 to
35 hours along with a reduction in pay of 6.7
percent.
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China
Follows Up on Free Trade Agreement With Asean
Nations
China announced that it will reduce tariffs on
many petrochemicals and other industrial goods
(over 7000 total) as part of the China Asean
Free trade Agreement (CAFTA). The Association
of Southeast Asian Nations (Asean), includes
Thailand, Brunei, Indonesia, Malaysia, the
Philippines, Singapore, Cambodia, Laos,
Myanmar and Vietnam. A free trade zone will be
formed between China and the first six nations
by January 1, 2010, and with the remaining
four by January 1, 2015. Some chemicals to
receive tariff reductions include Naphtha,
Kerosene, Acrylic acid esters, Terephthalic
acid, Polypropylene (PP), Polystyrene (PS),
Acrylonitrile butadiene styrene (ABS),
Polyvinyl chloride (PVC), Propane, Butanes,
Chloromethane. Each Asean nation has a
different import list. The free trade
agreement is expected to benefit both China
and the Asean member states, with Asean
petrochemical exports to China becoming more
competitive, and Chinese producers receiving
higher margins on goods sold to the trading
group.
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Biocides
Experiencing Strong Growth in China
The Chinese market for specialty biocides is
growing at twice the rate of the U.S., Western
Europe and Japan, and growth rates are in the
double-digits for many products. About 50% of
specialty biocides in China are used for
industrial preservation, which includes
biocides for all types of paints and coatings,
adhesives and sealants, plastics and polymers,
metalworking fluids, and mineral slurries.
Water treatment applications account for 35
percent, and miscellaneous applications make
up the remaining 10 percent. Organosulfur
preservatives are the leading category of
specialty biocides in China based on revenue,
but only account for a small percentage of the
volume. However, these products are expected
to experience the greatest growth as they
replace older biocide technologies. Inorganic
specialty biocides are the second largest
category of biocides based on value, and they
account for about one-third of the total
market volume. Unlike in Europe and the U.S.,
there is no government regulation of biocides
in China, although regulations that apply to
the end-use applications do play a significant
role in determining which preservative
technologies will be successful.
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Oleochemicals
as the Natural Alternative
Interest in vegetable and tallow-derived
oleochemicals as alternatives to
petrochemical-based products is peaking as the
price of crude oil continues to climb.
Oleochemicals and their derivatives can
provide price, value, performance, and
environmental advantages. Glycerine, for
example, can provide enhanced performance and
has a more attractive environmental profile,
according to Uniqema, a leading producer of
oleochemicals and derivatives. Glycerin demand
has increased 5 percent during the first half
of 2005, selling at about half of the price
for many petrochemical based glycols. Uniquema
is investigating the potential of
oleochemicals as replacements for specialty
petrochemicals under regulatory pressure and
mainstream products with rising prices.
Potential application areas include personal
care, oilfield chemicals, household,
industrial and institutional cleaning, water
treatment, and automotive and industrial
lubricants.
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For two days in Dusseldorf, over 400 exhibitors met
with several thousand visitors to discuss fine and
specialty chemicals business. More than 100 countries
were represented at this very international show.
Attendees from the pharmaceutical, agrochemical, dyes
and pigments, electronics, catalysts, flavors and
fragrances, and many other industries met with
exhibitors offering a broad array of proprietary
products and custom services. ChemSpec Europe 2006
will take place in Geneva on June 14-15.
Octel named acting CEO Paul Jennings as
president and CEO effective immediately.
Jennings was also appointed to serve as an
executive director on the board. The CEO
position became vacant in April when Dennis
Kerrison resigned following an investigation
into questionable money transfers. Jennings
joined Octel in 2002 as executive vice
president and CFO. He served in many finance
positions with a number of chemical companies
prior to joining Octel.
The rate of job losses in the French chemical
industry has risen from a typical 1 percent
per year to 1.5 percent recently.
Restructuring, reduced investment, and plant
closures are all contributing factors. With
the expected shift to production of higher
value-added products, many fear the rate of
job losses will increase further in the
petrochemical industry. The French government
is focusing on reducing the country's
unemployment rate, but trade unions are
rejecting changes to the Labor Code.
The slowing European and global economy are
impacting the European chemical industry,
which is expected to experience a growth rate
in 2005 that is two-thirds of what it was in
2004. High energy prices, the high value of
the Euro, and rising unemployment are all
affecting the growth rate, according to the
European Chemical Industry Council (Cefic).
Fine and specialty chemicals will be hit
hardest, according to the trade group. The
pharmaceutical sector is the one area that
will experience an increase in output. Recent
depreciation of the Euro will not affect the
industry this year, but may result in
improvements in 2006 after enough time has
passed to allow for an impact of the currency
changes. An inquiry by the European Commission
into the lack of competition in the European
Union's gas and electricity markets may also
help chemical companies in the future.
Leading Japanese chemical companies achieved
record sales and net profits for the latest
fiscal year (ending March 31). Prices
increases offset hikes in raw material costs,
and growing exports to China boosted volumes.
Mitsubishi achieved sales of $18.4 billion and
growth in operating profits in all divisions
except healthcare. Net profits at Asahi
increased by more than two-fold, while sales
were up 10 percent. All of Sumitomo's
businesses experienced earnings gains. The
company reported strong operating profits in
comparison to a loss in the previous year.
Sales increased 13 percent and net profits
more than doubled for Mitsui. Tosoh reported a
greater than four-fold increase in group net
profits and an increase in sales of 21
percent.
BASF announced that it plans to acquire
Orgamol for an undisclosed amount. The company
has received approval from both private and
employee shareowners. BASF expects to close
the transaction by the end of the third
quarter of 2005, assuming regulatory approvals
are received. Orgamol had 2004 sales of $135
million (Euro 100 million) based on a
proprietary product line and cGMP custom
manufacturing capabilities. The purchase is
part of BASF's recently announced plan to
expand its fine chemicals business through
targeted acquisitions and new product
development.
The Finnish Forest Industries Federation (FFIF)
reached settlements with both the Union of
Salaried Employees, which represents
supervisors and office employees working at
Finnish pulp and paper mills and
Pappersfoerbundet, the Finnish paper workers'
union. Salaried employees will receive a 6
percent pay hike over three years.
Pappersfoerbundet also signed a three year
deal that includes work during midsummer and
Christmas holidays in exchange for fewer
working hours.
According to industry experts, demand for
water-based paints in India is expected to
increase by 20-25 percent in 2005 as compared
with 2004. Asian Paints, one of the largest
paint manufacturers in the country, came on
stream with a new waterborne coatings facility
in Sriperumbudur, Tamil Nadu, India in
January, 2005. Ultimate capacity at the plant
will be 100,000 tonne/year.
Demand for plastics in Russia is expected to
grow rapidly, but investments in new
facilities must be made if the country is
going to be able to supply its needs. For
example, Russia's domestic Polystyrene demand
is expected to triple by 2010. In general,
demand in Russia will most likely outweigh
supplies of commodity plastics as early as
2006-2007.
For the third month in a row, prices for U.S.
bulk flexible slabstock Polyether polyol
remained at historic levels. Prices passed the
80 cents/pound mark back in March. The
previous high for Polyether polyol was 10-20
cents lower and was reached in the summer of
2003. Current prices are almost 38 percent
higher than they were one year ago. Tight
supply and stronger than anticipated demand
are responsible for the peak prices.
