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Impact
of Chinese Explosion Reaches Russia
An explosion in mid-November at the Jilin
Petrochemical (a China National Petroleum
Corp. (CNCP) subsidiary) Nitrobenenzene plant
in Jilin, China sent 100 tonnes of Benzene,
Nitrobenzene, and other similar chemicals down
the Songhua River in Northeastern China and
into Russia (in the Amur River). The source of
the explosion, which also caused the death of
five employees and injured around 70
additional people, is being investigated.
Municipal water supplies for the city of
Harbin were cut off for several days as the
Benzene level was measured at ten times the
safe limit.
The full extent of environmental impact of
this release is yet to be determined, but
unofficial reports include thousands of dead
fish and potential damage to the riverside.
The slick moved from China into Russia,
causing significant tension between the two
countries. By the time the slick reached the
Russian city of Khabarovsk, a city of 600,000,
the Amur was still polluted by Nitrobenzene,
Xylene and Ethylbenzene, but levels remained
below safety standards. China's foreign
minister Li Zhaoxing issued an apology to
Russia for the contamination of the river. The
chemical industry and Russian leaders have
responded to the incident by pledging to
review and upgrade chemical safety standards
for chemical products storage and
transportation, chemical production, and
production and handling of paints and solvents
and synthetic washing substances.
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DSM Pharma Products will shift its focus away
from early-stage non-registered intermediates
and generic active pharmaceutical ingredients
(APIs) to higher value-added products
including advanced and registered
intermediates, APIs, and more specialized
generic APIs. Early-stage intermediates will
be sourced from Asia/Pacific. The company will
also focus on the development of the human
cell line production technology platform
Per.C6 through an alliance with biotech firm
Crucell. It will close its DSM Biologics
facilities in Montreal, Canada in early 2006
and the DSM Pharma Chemicals operations in
South Haven, Michigan in the first half of
2007.
George W. Buckley, chairman and CEO of boat,
engine, and bowling equipment maker Brunswick,
has been appointed chairman and CEO of 3M,
effective immediately. Buckley replaces Robert
S. Morrison, who served as interim chairman
and CEO since James McNenery left for Boeing
in July. Analysts approve of the appointment,
indicating that Buckley has demonstrated
skills in value creation and driving organic
growth.
No Ki Ho will step down as president and CEO
of LG Chem in the first week of January, 2006.
The company has appointed Kim Bahn Suk, CEO of
wholly owned subsidiary LG Daesan
Petrochemical, to replace him. The
announcement was unexpected by the Korean
chemical industry. Ho will become an executive
advisor once he leaves his position within the
company.
The merger between General Electric and
Honeywell would "significantly impede
effective competition in the markets for
aerospace products and industrial systems and
deprive customers from the benefits of
competition" as originally determined by
the European Commission. That was the recent
decision of the European Court of First
Instance. The merger, valued at $41 billion
(Euro 34 billion) when first proposed, cannot
take place, even though it was approved by
U.S. antitrust regulators.
Pemex Petroquimica (PPQ), Mexico's state-run
oil company, increased its imports by nearly
100 percent in the first 10 months of 2006 to
nearly $86 million (Euro 72 million), up from
$45.7 million in the same period in 2004.
Trade agreements including NAFTA (North
American Free Trade Agreement) have made it
possible for Pemex to offer an increased
variety of supplies to meet the growing demand
in Mexico. The company's exports also
increased in the same period from $176.3
million to $226 million.
Sales of both paints and thermoplastic resins
in Brazil are expected to increase in 2006 as
compared to 2005. According to the Brazilian
Paint Producer's Association (Abrafati), paint
sales in the country should grow at 4 percent
in 2006. In 2005, revenues totaled $1.88
billion (Euro 1.59 billion) for the Brazilian
paint sector. Thermoplastic resins should
experience an even higher growth rate of 9
percent, according to Tendencias, a local
think-tank. Lower interest rates are expected
to result in increased construction, which
will lead to higher demand for paints and
coatings. The lower interest rate and overall
tightness of supply in the international
resins market will lead to growth in this
sector as well. Overall BES Securities
predicts that Brazil's chemical industry will
operate at greater than 90 percent of
installed capacity in 2006.
Sales of chemicals in Canada reached $19.6
billion (Euro 16.5 billion, Can $23 billion)
in 2005 and are expected to increase 12
percent in 2006, according to the Canadian
Chemical Producers Association (CCPA). The
trade association also predicts that operating
profits for Canadian chemical companies will
rise by 33 percent, while fixed capital
investment will decline by about 17 percent.
Factors that could affect this positive
outlook include rising natural gas costs and
any additional increases in the Canada-U.S.
exchange rate.
Downsizing by certain players and an expected
growth in demand has fine and specialty
chemical companies looking forward to 2006.
Capacity utilization increased slightly in
2005 and is expected to rise further in the
coming year. DSM has realigned its business
model and is now offering complete services
from drug development to final packaging.
Degussa's fine chemicals business is
restructuring in order to improve its
profitability and capitalize on core
capabilities. Isochem just recently
reorganized its business in order to position
itself in the agrochemical and pharmaceutical
markets, particularly focusing on phosgenation
and production of advanced intermediates and
generics. Lanxess announced the spinoff of its
fine chemicals business under the name Saltigo.
Custom manufacturing operations are running at
full capacity for BASF, and the company is
investing in the Orgamol facility it acquired
in 2005 in preparation for future growth.
Siegfried, after recent position reductions
and restructuring, expects growth in its
actives and biologics businesses and is
increasing capacity at several sites.
Like any other industry, China offers
significant opportunities to the pharma
industry - a large and quickly growing market
and a low-cost manufacturing base, plus a
reduced regulatory environment for conducting
clinical trials. As the Chinese government
works to improve its intellectual property
laws and make foreign investment more
attractive, western pharma companies are
looking at how to capitalize on these
opportunities. They are also aware of the
improved ability of Chinese producers to
compete in the global pharma market.
The unexpected shutdown of Chinese Petroleum
Corp's (CPC) No. 5 cracker in Taiwan led to a
shortage of Ethylene supply and a rise in
prices of $30-$50 per tonne. Prices rose above
$800 per tonne in December. With several
planned outages occurring in the early part of
2006, prices could climb above the $1000/tonne
mark, which hasn't been seen since September
2005. Increased demand from derivative sectors
will also fuel future price hikes.
Reduced demand and increasing inventories
resulted in a decline in spot Ethylene prices
in the U.S. Lower costs for crude oil and
Ethane also contributed to the drop in price.
Typical prices for Ethylene in late December
ranged from $0.475-$0.50/lb delivered, down 25
percent from earlier in the month.
Rising natural gas prices in China could lead
to higher prices for the gasoline additive
Methyl tertiary butyl ether (MTBE). Industrial
and urban utilities in China were recently
informed of the first price increases for
natural gas since 1997 by the National
Development and Reform Commission (NDRC), the
state body responsible for economic
development. The price of MTBE, which has been
slightly depressed due to reduced demand,
could rise if producers that rely on natural
gas cut back output in response to the higher
gas costs. Further price increases for natural
gas are expected in the coming years as the
Chinese government brings prices more in line
with international markets.
The European Union's Competitiveness Council
voted to accept key amendments to the
registration, evaluation and authorization of
chemicals (Reach) legislation proposed by the
European Commission (EC) that require the
registration and control of as many as 30,000
chemicals. This action follows on a November
vote by the same Council that accepted most
amendments proposed by the European
Parliament. The legislation returns to the
Parliament for a second reading, with final
adoption by all 24 member states expected late
in 2006 or early 2007. A new European
Chemicals Agency based in Finland will handle
registration of the chemicals.
