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Agrochemicals Looking
Brighter for Near Term, but Future Remains
Uncertain
The restructured and more consolidated
agrochemicals sector is finally experiencing
some sales growth. However, the $33.6
billion worldwide agrochemical market
consisting of herbicides, insecticides,
fungicides, fumigants, nematicides,
acaricides, plant growth regulators and
other minor categories continue to face an
uncertain future. Recent growth has been
attributed to Asian rust disease in soybean
crops, improved weather conditions, positive
pricing pressures and fluctuations in
exchange rates. The requirement for
re-registration of agrochemicals in Europe
and the U.S. has been a driver of
innovation. Approximately 40 percent of
older products have been removed from the
market, leaving room for the introduction of
new active ingredients. Even so, new product
introduction has declined over the past
several years, and much innovation has
shifted away from Western Europe and North
America to Japan. Subsidy reform and the
continued introduction of genetically
modified crops resistant to diseases and
insects are expected to provide challenges
to continued growth.
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Growth in Biofuels in
Asia, but Not Without Risk
International interest in biofuels continues
to grow at a rapid pace. New projects are
springing up across the globe. For example,
the Japanese Bank of International
Cooperation (JBIC) plans to invest $556.5
million (Euro 431 million, Real 1.28
billion) in Ethanol and biodiesel production
and research in Brazil. Many companies have
plans to build in Asia as well, including
Thailand, the Philippines, India, Malaysia
and China. These plants will convert
Methanol and natural feedstocks such as
coconut, palm and jatropha oils into Methyl
esters. However, with the lack of government
mandates to use biofuels, and competing
demand for land to grow higher value crops
such as rubber, many remain concerned about
the viability of biodiesel business in this
region of the world.
Financial investment in biofuels production
in Asia is still limited as a result. Some
activity is beginning to take place, though.
Japan's New National Energy Strategy
contains references to the potential of Asia
to serve as a future source of biofuels.
According to Indian Bank, the long-term
nature of biofuels projects are additional
risks that must be considered, but sound
projects with a good business model would be
of interest.
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Robert Malone, previously chief executive of
BP Shipping, has been appointed chairman and
president of BP's U.S. operations. He has
replaced Ross Pillari, who retired effective
July 1, 2006. The company stated that
Pillari's retirement is not connected to the
2005 fatal accident at a BP refinery in
Texas that resulted in the deaths of 15
people.
Robert Amen, previously president of
International Paper Company, has taken the
position of board chairman and CEO at
International Flavors & Fragrances (IFF),
replacing Arthur Martinez, who held the
positions on an interim basis since the
retirement in May of Richard Goldstein.
Martinez has once again taken up his regular
position as lead director.
Five new vice presidents were recently
appointed by PPG. James Latch was named vice
president, automotive replacement glass and
insurance and services. Viktor Sekmakas was
appointed vice president, coatings, and
managing director, Asia/Pacific. Jorge
Steyerthal has become vice president,
coatings, and managing director, Latin
America. Glenn Bost II was named vice
president and associate general counsel. Reg
Norton was appointed vice president,
environment, health and safety.
A survey conducted by PA Consulting and ICIS
Chemical Business found that European
chemical producers view South America as the
latest low cost manufacturing region, but
few have capabilities located there. China
remains the leading threat today, but S.
America is seen by 80 percent of the survey
participants as overtaking that position
within five years. India is also expected to
be a major threat by that time.
Over 90 percent of Engelhard shareholders
have accepted BASF's $39/share offer. With
the completion of the $5 billion
transaction, Engelhard has become the 13th
operating division of BASF. The acquisition
enables BASF to enter new markets such as
specialty pigments and refinery catalysts as
well as gain better access to the big U.S.
auto manufacturers for its own catalyst
business. BASF immediately began the process
of integrating Engelhard into the company
once the transaction was finalized.
The increasing participation of Chinese
companies at trade shows for the fine and
specialty chemical industry reflect their
growing ability to attract European buyers.
As the number of Chinese companies
exhibiting at trade shows like Chemspec
Europe, CPhI Worldwide, and Informex has
grown, competition has increased for Western
providers of fine and specialty chemical
products and custom manufacturing services.
Competition is even heating up between the
Chinese suppliers themselves.
Croda International agreed to acquire
Uniqema from ICI for $743 million (Euro 593
million, GBP 410 million). The companies
expect to complete the transaction in the
third quarter upon receipt of regulatory and
shareholder approval. ICI will use the
proceeds to cover the costs of the deal and
reduce post-retirement benefit deficits and
net debt. Croda stated that the acquisition
will improve its position in consumer care.
The Uniqema specialty operations (esters,
alkoxylates and performance additives) will
be integrated into five different business
groups, while the oleochemicals businesses
of the two companies will be combined.
Restructuring activities may include the
disposal of some activities.
FDA approval of Dacogen (Decitabine) for the
treatment of the bone-marrow disorder
myelodysplastic syndrome is good news for
custom manufacturer Ferro Pfanstiehl. The
company developed the drug for MGI Pharma
and continues to work with its customer as
the drug proceeds through additional
clinical trials for other therapeutic
indications. Ferro Pfanstiehl specializes in
the manufacture of highly potent active
pharmaceutical ingredients, particularly
those with fast-track status that address
unmet clinical needs.
Linde's $15.3 billion (Euro 11.8 billion,
GBP 8.2 billion) takeover of BOC has been
given conditional approval by the European
Commission (EC). Linde must dispose of its
UK industrial gases business, sell off
industrial and specialty gases activities
that BOC has in Poland and contracts that
BOC has with Linde's Ethylene oxide
customers in the UK and Ireland, unload
Helium wholesale supply contracts that both
companies have, and exit from some Asian
joint ventures that Linde has with Air
Liquide. U.S. authorities have not yet given
their approval, but Linde hopes to have the
transaction completed no later than the end
of September 2006.
Teva has confirmed its position in the
pharma industry as being much more than a
generics supplier with the FDA approval of
Azilect (Rasagiline), a new oxidase type-B
(MAO-B) inhibitor drug for the treatment of
Parkinson's disease. Azilect is the second
branded drug launched by Teva. Copaxone (Glatiramer
acetate injection), its first, is currently
the leading multiple sclerosis treatment in
the U.S.
Exports of Ethanol from China were six times
higher in April than during the same month
in 2005. Growing demand, in large part
driven by the switch from Methyl tertiary
butyl ether (MTBE) to Ethanol for fuel
blending in the U.S., has driven the growth.
Established Ethanol suppliers in the U.S.
and Brazil cannot meet the higher demand.
Producers in China responded to fill the
gap. The increased demand has driven up the
price of Ethanol in Asia as much as 15
percent in the past few months, but Asian
material is still cheaper than that coming
from South America.
Turnaround at several Asian and European
Adipic acid production sites has caused a
tightness in the market and resulted in
record contract prices in China. Higher
feedstock prices have placed additional
upward pricing pressure on the market.
Overall prices are up as much as 33 percent.
According to consultants Euromonitor
International, the Chinese market for paints
and coatings will increase by 63 percent
between 2005 and 2010. An expanding housing
market is one driver behind the dramatic
growth. The greatest increases, though, are
expected in the industrial sector,
particularly in coatings for appliances,
automobiles and electronic goods. Currently,
sales of paints and coatings in China are
second only to those in the U.S.
