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New
Sasol CEO Takes Helm In Difficult Times
Executive Director Pat Davies has been
appointed CEO of Sasol effective July 1, 2005,
replacing Pieter Cox, who will succeed Paul
Kruger as chairman of the board beginning
January 1, 2006. Sasol also appointed Trevor
Munday to the new position of deputy chief
executive. His job will be to provide Davies
with support in the management of the
company's significantly expanded global
interests.
Davies will immediately manage several major
projects, including the commissioning of
Sasol's polymer facilities in Iran, startup of
gas-to-liquids (GTL) plants in Qatar and
Nigeria, and completion of feasibility studies
for a coal-to-liquids (CTL) facility in China.
In South Africa, Davies must address Sasol's
poor safety record and rebuild its
relationship with the government and trade
union. It also must secure a partner for its
chemicals operations that meets the
requirements of the black economic empowerment
(BEE) legislation. The company has also been
rebuked for not having enough black managers.
Sasol has responded by noting that it has
appointed former high-ranking officials from
the ruling African National Congress (ANC)
government as senior advisers on BEE policy.
Recently there has been speculation that a
U.S. petrochemicals company may make a bid for
Sasol. According to the company it is only a
rumor. The company has also had to respond to
suggestions that it may sell its Condea
olefins, surfactants and solvents (O&S)
operations in Germany due to its poor
performance. As a key shareholder, the South
African government said it will oppose any
foreign bid for Sasol.
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Russian
Chemical Industry Attractive to Foreign
Investment
In 2004, Russian petrochemicals output rose 7
percent by volume as compared to 2003, while
export revenues increased and domestically
produced chemicals began to replace previously
imported products. In 2003, foreign
investments totaled approximately $500
million, with companies such as Procter &
Gamble and Henkel investing in local
production through acquisitions or
construction of new facilities. In 2005,
Russia's lower house of parliament, the State
Duma, is expected to approve a five-year plan
to improve growth of the chemicals industry in
the country. Compared to the Middle East,
Russia may be an attractive alternative for
business operations.
The challenges are significant, though, for
those foreign investors considering the
opportunities in Russia. Much of the chemical
industry infrastructure is old and in poor
condition following many years without any
capital investment. Some Russian businesses
are buying petrochemical companies and
improving the assets so they can competitively
export the materials they are producing. A
growing domestic market and a sense of
political stability are resulting in more of
this type of activity. The need for expansion
and modernization of the logistics
infrastructure is also great. Overcoming the
large distances between feedstock sources,
processing plants, and consumer markets is a
significant challenge. Cultural differences
may also be a factor.
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Innovene
Begins Operating April 1, 2005
Beginning April 4th, the olefins and
derivatives (O&D) business of BP began
operating independently under the name
Innovene. BP plans to divest the $15 billion
business before the end of 2005, possibly
through an initial public offering. Innovene
has been separated from BP in order to
increase flexibility in its operations,
decision making, and customer service. Ralph
Alexander will serve as CEO, while the former
business unit leader for Olefins Americas at
BP Janet Roemer will take the chief of staff
position.
Corporate headquarters will be located in
Chicago, while North American operations will
originate in Houston. Asia-Pacific
headquarters will be in Shanghai, China.
Innovene will assume BP's 50 percent share of
Secco Petrochemical Co (Secco), which began
operation of a 900,000 tonne/year cracker in
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C6 Solutions placed its manufacturing plant
and equipment up for sale and plans to phase
out operations over the summer, citing the
weak dollar, competition from Asia, and excess
capacity in customer markets. Approximately
300 people are employed by the company.
The South African Competition Tribunal charged
Sasol with unlawful price discrimination in
the pricing of Creosote. The company was found
guilty of failing to give similar price
discounts to a small, privately owned business
as it did to bulk producers. Sasol, which had
no comment on the ruling, has the right to
appeal.
According to Cefic, the European Chemical
Industry Council, excluding pharmaceuticals,
European Union (EU) chemicals production
increased 2.9 percent in 2004, the largest
gain in four years. Strongest growing segments
included petrochemicals, plastics, and fine
and specialty chemicals. Modest increases were
seen for basic inorganics, while consumer
chemicals and man-made fibers experienced only
minor expansion. The growth rate of
pharmaceuticals decreased greatly as compared
to recent years. Cefic expects 2005 to be a
strong year as well, although growth rates may
be slightly dampened.
Prices of chemical stocks have fallen recently
in response to weaker demand and lower
margins, a trend also experienced in other
cyclical industries such as steel, paper, and
construction. Despite these declines, most
analysts expect the market to continue its
overall upward movement for the remainder of
the year, with increasing demand and rising
prices. According to the Federal Reserve
Board, domestic demand for chemicals in the
U.S. remains "extremely strong." The
Fed indicated that "significant capital
expansion" on the Gulf Coast will be
required to meet the growing demand.
With the acquisition of Juelich Fine
Chemicals, Codexis gained its first facility
in Europe. Operating as a wholly owned
subsidiary of Codexis, Jeulich will add its
catalog of specialty enzymes and chiral
intermediates in addition to its custom
services to the company's portfolio as well as
provide a channel of distribution for Codexis'
proprietary enzymes. The purchase was made for
an undisclosed amount.
In April, the Pharmaceutical Affairs Law (PAL)
will make it possible for Japanese-based
pharmaceutical firms to outsource all steps in
the drug making process. Increasing demand for
custom manufacturing services of U.S. and
European providers is expected from these
companies as a result of the new legislation.
Drug firms will be required to separate their
marketing and manufacturing activities.
Responsibility for production will be given to
a qualified individual known as the marketing
authorization holder (MAH), who will oversee
quality control, inspections, and outsourcing.
The PAL legislation also brings Japanese rules
more closely in alignment with the U.S. FDA
regulations, making it easier for Japanese
pharmaceutical companies to export their
products.
Solvay announced that it has reached an
agreement to purchase Fournier Pharma for $1.7
billion (Euro 1.3 billion) in cash. The deal
is expected to close in the summer of 2005
following receipt of regulatory approvals. The
acquisition will increase Solvay's pharma
sales by over one third and add significantly
to the company's pipeline.
With a goal of creating a major agrochemical
firm that can compete in the international
marketplace, China National Chemical Corp. (CNCC)
plans to acquire a number of smaller
agrochemical producers and R&D sites with
funding from the China Development Bank (CDB).
Approximately 2000 different agrochemical
companies in China account for only 5% of the
global agchem market, according to CNCC. Both
CNCC, which was formed in 2004 through the
merger of China National Bluestar Corp. and
China Haohua Chemical Industrial Corp., and
CDB, are state owned entities.
Serono plans to increase its biologics
capacity at Corsier-sur-Vevey, Switzerland by
eight times, investing a total of $275 million
in 12 new mammalian cell fermentation process
reactors. A further $50 - $60 million will be
invested in additional capacity at Martillac,
France. By 2010 the company expects to have
total biologics capacity of 220,000 - 230,000
liters. Serono also announced plans to begin
sourcing intermediates from various Indian
companies in 2005.
