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China
Continues Strong Upward Growth, Consumption of
World Resources
Although China's GDP grew at a slightly lower
rate in 2005 than 2004 (9.9 percent vs. 10.1
percent, respectively), the continued strong
demand is impacting world supplies of many
basic chemicals. China's total GDP reached
$2.3 trillion (Euro 1.8 trillion, Rmb 18.2
trillion) in 2005, possibly allowing the
country to overtake the U.K. as the fourth
largest economy. Industrial output climbed
11.4 percent, exports grew 28.4 percent, and
imports increased by 17.6 percent.
With regard to chemicals, imports of Naphtha
climbed 586 percent and Ethylene imports
doubled. Imports of most polymers increased,
but those for low-density Polyethylene (ldPE),
Polyvinyl chloride (PVC) and Polystyrene (PS)
declined in 2005. Demand for paraxylene (PX)
was up 41.5 percent, and imports of fiber
intermediates such as Purified terephthalic
acid (PTA) and Monoethylene glycol (MEG) grew
around 15 percent.
At the beginning of the year, the Chinese
government set a target growth rate of 8
percent in an attempt to prevent the economy
from running out of control, a level that was
obviously exceeded. For 2006, the government
is trying to encourage more consumption and
reduce its reliance on overseas markets and
investments for growth.
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Polycarbonate
Market Hopeful Because of Rising Bisphenol-A
Prices
Rising Bisphenol-A (BPA) spot prices have
Northeast Asian Polycarbonate (PC) producers
hopeful of a rebound in the PC market. Strong
feedstock costs and the expectation of higher
prices following the Chinese New Year led to
increases in BPA prices of 5-8 percent.
Overall PC prices are down significantly since
reaching a five year high in May 2005. BPA is
a key raw material for PC, and rising BPA
prices may lead to higher prices for PC.
However, supply and demand are fairly balanced
at this point.
Many are concerned, too, about three new PC
facilities expected to come on stream in
Northeast Asia in 2006. Bayer MaterialScinet
has a 100,000 tonne/year plant in Caojing,
Shanghai that should start up in the second
quarter. Chi-Mei is adding a second 75,000
tonne/year line in Tainan, Taiwan, that is
reported to begin operations in the third
quarter. Lastly, Teijin Chemicals' 50,000
tonne/year line at Jiaxing, Zhejiang Province,
China, is predicted to come on stream in
October. It is hoped that additional demand in
China, which is projected to grow at 8 percent
annually, will consume much of this new
capacity.
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PPG will restructure its business, including
some level of workforce reduction, in order to
address the continuing downward pressure on
margins caused by increasing high energy and
raw material costs. No details of the plan
have yet been provided. The company did
announce that it is closing a fine chemical
production plant in Europe. PPG will also
write down the value of fine chemical assets
in the U.S. with underutilized capacity in
response to continued challenging conditions
for this business. Implementing other measures
to improve profitability will be a focus for
PPG in the fine chemicals area.
Iran's state-owned National Petrochemical Co.
(NPC) intends to take control of 14% of the
global petrochemical market by 2010. The
company has 17 large projects underway already
and recently announced that it plans to make
global acquisitions. NPC is also shipping its
products to more diverse locations around the
world in order to be able to shift shipments
from region to region as price attractiveness
varies. Recently the company acquired a 60
percent stake in Philippine firm Bataan
Polyethylene Co. and is considering the
purchase of a fertilizer producer in
Uzbekistan.
Following approval to seize material on
display by Hangzhou Pivot International at the
recent Milipol 2005 exhibition in Paris, DSM
Dyneema filed a patent infringement lawauit
against the Chinese company to request the
halt of sales of certain of its
Polyethylene-based, high performance fibers.
In addition to seeking a legal finding that
the sales infringe on Dyneema patents, DSM is
also requesting a recall of the infringing
products sold, damages, and other corrective
measures.
Sigma-Aldrich Fine Chemicals (SAFC) intends to
become one of the 10 largest global producers
of fine chemicals and will do so through both
acquisition and construction of new
facilities. The company is aiming for 10
percent annual growth. Currently SAFC is
building a plant in India to serve the
medicinal chemistry and API markets in the
region. Expansion of its Gillingham, U.K.
small molecule custom manufacturing facility
is also being considered. A retrofit project
at SAFC's St. Louis site will increase
capacity for protein purification.
International Flavors & Fragrances (IFF)
will reduce its manufacturing, sales, research
and administrative staff by approximately 300
(6 percent) in order to achieve improved
profitability. Most of the reductions will
take place in Europe and North America. The
company experienced a 2 percent decline in
sales from 2004 to 2005. JP Morgan believes
the job cuts could save IFF as much as $15
million (Euro 12.42 million) annually.
Demand for dietary supplements has increased
over the past several years as consumers have
become more interested in "natural"
food ingredients and preventive healthcare.
This growing demand attracted attention from
the FDA, which passed guidelines for the
manufacture of dietary supplements in April
2005. The new guidelines include stricter
quality control and labeling requirements, as
well as a requirement to adhere to cGMP
standards for some products. Identification of
raw material sources and more specific
compound labeling are some of the controls
contained in the guidelines.
Esteve will invest $18 million (Euro 15
million) in a new API production facility in
Shanghai, China. The project is being
implemented through its Chinese subsidiary
Esteve Huayi Pharmaceutical, of which it owns
61 percent. The company expects the plant to
come on stream by the end of 2006. The unit
will supply material to Esteve pharmaceutical
sites in China and customers in the West.
Linde announced that it will acquire Spectra
Gases, a specialty gas company located in
Branchburg, NJ, for an undisclosed amount.
Spectra produces high-purity specialty gases
and mixtures used in a wide variety of
applications. Linde Gas Inc. will operate
Spectra as a wholly owned subsidiary. This
acquisition follows on the purchase by Linde
of specialty gas manufacturer MNS Nippon Sanso
from Taiyo Nippon Sanso in December 2004.
Linde is looking to increase its position in
the fast growing specialty gases market.
BOC's board rejected unanimously an
unsolicited proposal from Linde to buy out BOC
for $13.37 billion (GBP 7.6 billion) because
of certain preconditions (financing,
anti-trust approvals, and due diligence), and
because the offer fails to "value fully
the growth prospects of BOC," according
to the company. Linde views the proposal as a
"friendly" bid and hopes to work
further with BOC's board. Analysts believe
that a bidding war for BOC may be possible in
the wake of Linde's offer, with companies such
as Air Products and Praxair, as well as
private investment firms, being possible
contenders. Antitrust concerns will be an
issue for any acquisition, with divestments of
some business units required.
UCB sold its custom peptide manufacturing
business to Lonza for $145.5 million (Euro 120
million). Lonza intends to make the UCB
Bioproducts' Braine l'Alleud facilities near
Brussels a global center of excellence for
peptide manufacturing. The sale fits into
UCB's strategy of focusing on research,
development and commercialization of
pharmaceuticals. With the acquisition, Lonza
will now be able to offer the three possible
peptide synthesis technologies: liquid phase,
solid phase, and recombinant fermentation.
