November 2005 Nicholas Piramal Acquires Avecia Business Nicholas Piramal agreed to purchase the pharmaceutical custom synthesis business of Avecia for $16.3 million (Euro 14.0 million, GBP 9.5 million). The sale includes all operations and assets of Avecia Pharmaceuticals in the U.K, plus Torcan Chemicals, which is located in Canada. Avecia, which will be left with its electronic materials and biotech businesses, will apply the proceeds to its pension fund. This transaction follows on the heels of the sale of Avecia's fine chemicals business to KemFine in September, 2005.   Famous Quotes of the Month - The man who does not make any mistakes does not usually make anything. (William Connor Magee) - The success of most things depends upon knowing how long it will take to succeed. (Baron de Montesquieu) - We seldom attribute common sense except to those who agree with us. (Francois La Rochefoucauld) - Ability will never catch up with the demand for it. (Malcolm Forbes) - All progress requires change. But not all change is progress. (John Wooden) Why Do Scabs Itch So Much? Actually, scabs don't itch. Scabs are just crusts of dried blood and fiber that cover a wound. It is the wound that itches. In the healing process, some of the nerve fibers that mediate both pain and itch become irritated and inflamed. This process leads to the itch we encounter. This "itch" is actually a small pain. If the wound were deeper, we would then experience frank pain. So what happens during the recovery period to irritate nerve fibers? Well, wounds repair themselves and shrink in size, partly because of the elasticity of the skin but partly because the scab pulls on the wound. Itching can also be caused by infections or small cracks in the scab as it dries. That is why some dermatologists treat wounds with moist dressings, allowing the wound to heal without scabbing. Arkema to be Independent in May 2006 In May 2006, Arkema will be spun-off from parent company Total and listed as a separate entity. Arkema, which includes Total's industrial and performance chemicals and vinyls businesses, was created as a subsidiary in 2004. Total will assume responsibility for the pensions of current retirees and retain ownership of all non-operational industrial sites. Arkema's first goal will be to establish its profitability, and the company is considering small acquisitions to build its position in a few niche businesses. Arkema will also make investments around the globe, with improvements and expansions of facilities in the U.S., Europe, and Asia. President and CEO Thierry Le Henaff would like to see Europe's registration, evaluation and authorization of chemicals (Reach) legislation adopted globally so that European companies do not become less competitive with those located in other regions of the world. Degussa Struggles in Fine Chemicals In response to significantly reduced earnings by its fine chemicals business, Degussa will take a $1 billion (Euro 830 million) write-off and accelerate its restructuring efforts. The acquisition of Laporte in 2001 for $1.77 billion accounts for a large part of the write-off, which has affected the building blocks, exclusive synthesis & catalysts, and peroxygen chemicals businesses. The company sites overcapacity and increased low-cost Asian competition as contributing to its poor financial performance. Plant closures, job cuts, and the sale of the Laporte business are all under consideration as part of the restructuring plan. DSM Lays Out Growth Strategy DSM will look to grow is business through restructuring, acquisitions, development of innovative products, and expansion in the Chinese market. DSM's Vision 2010 strategy involves increasing expected earning levels for all business units. The company will be comprised of four new business sectors - Pharmaceuticals, Nutrition (from DSM Nutritional Products and DSM Food Additives), Performance Materials, and Chemicals. Acquisitions will be focused on performance materials, while the pharma business will undergo further restructuring. The company plans to increase sales of innovative products to $1.2 billion (Euro 1 billion) by 2010 through R&D investment and acquisitions. The goal is to achieve 50-60 percent of sales from specialty chemicals by 2010. Areas of R&D focus include white (industrial) biotechnology, personalised nutrition, biomedical materials and specialty packaging. DSM also plans to double its annual sales in China to $1 billion by 2010. The overall strategy will be to grow production closer to end markets. PolyOne Loses CEO Citing the need for new leadership for the next phase of PolyOne's evolution, president, CEO, and director Thomas Waltermire resigned, effective immediately. PolyOne appointed non-executive chairman of the board William Patient to take Waltermire's place until a permanent replacement can be found. Economic Impact of Hurricanes Less Than Predicted While hurricanes Katrina and Rita have decreased oil and gas supplies, their negative impact on the U.S. economy appears to be less than initially expected. The American Gas Association reported that as much as 1-2 billion cubic feet per day of gas production in the Gulf Coast area may remain shut down through the winter, resulting in further price increases. A full recovery is expected, though, by the end of March 2006, according to U.S. energy officials. Many chemical plants shut down in preparation for Hurricane Rita are now back online, but production is limited due to feedstock and energy shortages. Several companies have declared force majeuere at their Gulf Coast facilities and announced expected lower earnings as a result of the hurricanes. On the positive side, the health of the U.S. economy before the hurricanes has enabled it to absorb much of the financial impact. The global manufacturing sector remains strong and will assist with economic recovery in the U.S. In addition, while the short term effects of the storms have been negative, the chemical industry is expected to benefit from increasing sales generated by reconstruction efforts in the long term. German Chemical Companies Face New Pension Rules Changes in accounting principles are leading German chemical companies to restructure their pensions with the goal of optimizing their balance sheets. Many are transferring money into standalone contractual trust arrangements (CTAs) in order to externally fund their pension obligations. The move is designed to improve certain financial ratios and reduce some of the risk associated with pensions. BASF, German fertilizer, pesticides and salt producer K+S, and energy group E.On are all establishing CSAs for this purpose. Other companies such as Degussa and Bayer are also considering such a restructuring. Spanish Chemical Industry Faced with Striking Truckers More than 130,000 trucks were off the road in Spain as the Confederacion Espanola de Transporte de Mercancias (CETM), the country's biggest national truck federation, went on strike. Some plants were forced to shut down operations and stop delivery of products, while others used armed guards to ensure the safety of their goods as they were routed to their destinations. According to the Spanish Chemicals Federation (FEIQUE), many chemical producers in Spain do not have their own truck fleets, and therefore must wait until the strike is over. The CETM is demanding removal of a Euro 2 per liter healthcare tax on fuel. The Spanish government has met with the federation, but no date has yet been set for the end of the strike. Altana Pharmaceuticals May be for Sale Despite announcements earlier in 2005 that Altana would spin off its chemicals business and expand its pharma operations, the company recently hired Goldman Sachs to explore options with regard to its pharmaceuticals business. The options include the sale of the pharma operations for a potential $7 billion. Neither Altana nor Goldman Sachs provided any comments. BASF Unloads Its Ceramic Decoration Color Business BASF sold its glassware, ceramics and porcelain decoration color business to WC Heraeus for an undisclosed amount. The acquisition does not include facilities or employees. Heraeus sees the purchase as complementary to its existing product line. The company will manufacture the BASF products in Vienna. PolyCarbon Acquires Borregaard Synthesis PolyCarbon Industries (PCI) has acquired the Newburyport, MA facility of Borregaard Synthesis Inc. and will change its name to PCI Synthesis Inc. by the end of 2005. The move follows PCI's loss of its main manufacturing facility to fire. PCI will merge the custom synthesis businesses of the two companies and create two units - PCI Pharma Products and PCI Custom Synthesis. Prior to the incident that damaged PCI's manufacturing facility in Leominster, MA, the company was considering alternative expansion scenarios in order to produce a new line of active ingredients and also meet the demand for its existing line of laboratory products and custom synthesis services. The Borregaard facility in Newburyport, MA, has many more and much larger volume reactors and a much greater total capacity (18,000 gallons vs. 1,200). The R&D efforts of the two companies will be combined at PCI's Devens, MA facility. The immediate focus of PCI is to get the new facility inspected by the FDA and approved for GMP production of APIs. Price Hikes for Paper Chemicals Flat or slightly declining demand and rising raw material and energy prices are leading paper chemical manufacturers to raise prices of their products. Fine and coated paper is experiencing the strongest growth, and chemicals targeted at this application are experiencing the greatest price increases. Typically prices hikes range from 5-20 percent. Some companies are also adding energy surcharges, while others are dropping price breaks for certain customers due to rising freight costs. European Demand for Biopolymers Increasing Biopolymers are moving from a niche market to the mainstream. Consumption in Europe has increased 2.5 times between 2001 and 2004 and is expected to grow from 20,000 tonne to 1 million tonne by 2015. Long-term potential for biopolymers in Europe is predicted to be as much as 15 million tonne per year. Bio-based 1,3-Propanediol, developed by DuPont and Tate & Lyle, will be used by DuPont to produce the polyester Poly(trimethylene terephthalate) (tradename Sorona). Proctor & Gamble, along with Kaneka, is working to commercially produce Poly-3-hydroxybutyrate-co-3-hydroxyhexanoate (PHBH) for the packaging industry. Challenges to the industry in Europe include high costs, competition with traditional polymers, and lack of consumer education. BP Finds Buyer for Innovene BP agreed to sell its olefins, derivatives and refining subsidiary Innovene to Ineos for $9 billion (Euro 7.46 billion). Ineos, an employee owned organization, borrowed $10 billion (Euro 8.3 billion) from three banks to make the purchase. The acquisition will make Ineos a $30 billion company and the fourth largest independent petrochemicals firm, according to a spokesperson. It fits with the company's growth strategy and increases upstream integration as well. For BP, the decision to sell Innovene rather than launch an IPO eliminated any market uncertainty. Ineos will likely create at least four companies based on product lines once Innovene has been integrated into the company. To avoid regulatory issues, Innovene's Ethylene oxide assets and business in Europe are not included in the deal. The U.S. Federal Trade Commission declined to comment on whether or not it will investigate the proposed acquisition. The transaction is likely to be reviewed by the Department of Justice. The French chemicals trade union federation CGT is concerned that the $10 billion loan will lead to reduced profits and thus reduced pay for employees. The group's trade unions are considering what action to take will possibly coordinate their activities with trade unions in the U.K. Because the price Ineos has agreed to pay for Innovene is so hefty, some analysts predict that other spin-offs or outright sales of chemical divisions by European oil companies may occur. Some possibilities include Repsol's chemicals business and energy group Eni's Enichem operations. The spin-off of Arkema from Total is already in the works. Chinese Polyester Makers Struggle Rising energy and feedstock costs combined with declining prices have led to significantly reduced margins and ultimately resulted in the closure of 10 Polyester production lines in eastern China. Producers in Jiangsu and Zhejiang provinces together have shut down approximately 2.4 million tonne/year of Polyester capacity. The breakdown in talks between the U.S. and China about textile trade issues and a decline in both domestic and export demand have all contributed to the recent price reductions. Many producers are conducting maintenance operations while the facilities remain closed. Paraffin Wax Prices Rising in Response to Short Supply Tight supplies of paraffin wax have driven prices to record levels in the Americas. Three ExxonMobil facilities are operating on a limited basis as a result of damage caused by hurricanes Katrina and Rita. Citgo Petroleum has experienced reduced production capabilities since early September due to a separate incident. The price for fully refined paraffin waxes has climbed nearly 10 cents/lb. Candle makers are turning to alternatives such as vegetable waxes in response to the high prices. Positive Outlook for Commodity Chemicals Prices for commodity chemicals will continue to climb in the fourth quarter, and margins will rise along with them. Tightness of supply is not expected to be alleviated in the near future, as many plants remain shut down following hurricanes Katrina and Rita. Analysts are predicting that pricing power lost in the first half of the year will be recovered and enable producers to also recover their margins, even though energy and feedstock costs are higher. Looking into 2006, tightness is expected to be the norm even though most facilities will be back on stream, because many plant turnarounds are scheduled to take place in the early part of the year. Price for PVC Spikes Manufacturers of Polyvinyl chloride have introduced price hikes that are more than twice the amount initially announced for October transactions. The dramatic surge in prices is attributed to higher Ethylene and natural gas costs. In addition, inventories of PVC are low and demand is increasing, so operating rates are consequently at high levels. The shut down of Formosa's 1.6-billion lbs/year PVC plant at Point Comfort, TX is also expected to have a major effect on the industry. Akzo Invests in Egypt Akzo Nobel acquired a 60 percent share of Egyptian powder coatings producers Coatech For Chemical Industries for an undisclosed amount. The joint venture will give Akzo a point of entry into the rapidly growing Egyptian market as well as surrounding markets in the Middle East. The company will be renamed Akzo Nobel Powder Coatings and will be headed by Coatech co-founder Hanni Radwan.