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Israeli Chemical Companies in Haifa Return to
Operations
Carmel Olefins, Gadiv Petrochemical Industries and
Haifa Chemicals have restarted operations at their
plants in Haifa. Carmel Olefins restarted its
Polypropylene production and expects to be at 100
percent capacity in early September. The company
purchased Ethylene feedstock to enable the startup
of Polyethylene production at the end of August.
Ethylene operations were expected to begin some time
in the first two weeks of September. According to a
spokesperson, Carmel expects to experience only a
small financial loss in the third quarter as a
result of the conflict between Israel and Lebanon.
Gadiv Petrochemical Industries, which declared force
majeure on all of the products it manufactures at
its Haifa facilities, returned to full capacity on
August 31st, 2006. The company lifted force majeure
the previous week. Gadiv produces Paraxylene,
Benzene, mixed Xylenes, Orthoxylene, and Phthalic
anhydride at this location. No specifics were
provided on a startup schedule.
Haifa Chemicals has returned to normal operations at
its Haifa Bay plant after experiencing only slight
capacity reductions. The company produces Potassium
nitrate, phosphorous fertilizers and salts.
Polymer trade to Lebanon, which was halted during
the conflict, is expected to resume in early
September. Lebanon does not have any of its own
polymer production capacity and relies exclusively
on imports. Traders are expecting strong demand in
the coming months as refugees return and rebuilding
takes place.
The Israeli government and trade unions agreed to a
compensation plan to assist companies in the
northern part of the country that suffered financial
damage as a result of the conflict with Lebanon. The
government will pay 100 percent of salary payments
and 80 percent of material damage caused by
missiles. Chemical producers indicated that the
level of compensation, while helpful, would fall
short of covering actual losses.
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Increasing domestic and export demand
resulted in higher sales and profits for
Japanese chemical firms in the first quarter
of 2006 as compared to the same period a
year earlier. Chemical sales at Asahi Kasei
rose 15.4 percent, but operating profit
declined slightly for this business due to
higher feedstock costs. Mitsui Chemicals
reported increases of 4.3 percent in
operating income and 15.7 percent in sales.
The company's petrochemical and functional
chemicals and engineered materials
businesses saw operating incoming nearly
double. Strong demand for plastics, film and
high-performance fibers resulted in a 12
percent increase in operating income at
Teijin.
The European specialty chemicals sector
should have an improved second half in 2006
while petrochemical companies will
experience moderating performance, according
to Standard & Poor's. Continued rising raw
material and energy costs coupled with
declining pricing power will hurt commodity
chemical producers. Specialty chemical
producers should experience increased
pricing power in the second half. Overall,
strong demand and high capacity utilization
in the European chemical industry are
expected to continue for at least the next
three quarters.
In the U.S., prices for pharmaceutical grade
Glycerin are declining in response to
increased imports of European vegetable
based material, which is produced as a
byproduct in the manufacture of biodiesel.
New biodiesel production in the U.S. will
bring additional supplies of various grades
of Glycerin to the market as well.
FMC Corporation said that it will fight a
recent proposal by the U.S. EPA to ban all
uses of the pesticide Carbofuran. According
to the agency, there are "considerable risks
associated with carbofuran in food and
drinking water, risks to pesticide
applicators and risks to birds that are
exposed in treated fields." Granular
formulations were banned in 1994 because it
caused the death of birds that consumed the
material. The liquid form remains in use,
and FMC says that its use for crops "meets
all standards under existing U.S. law." The
agency's proposal is open for public comment
for 60 days.
U.S. Ethylene producers should maintain
attractive margins in the third quarter,
according to Bank of America. Market
conditions are stable, but rising feedstock
costs could put upward pressure on Ethylene
prices. However, unplanned outages could
impact the supply/demand equation and result
in even higher prices and improved margins.
At the beginning of August, Styrene prices
in Europe surged to a record high in
response to a tight market and concerns
about future supplies. Rising energy and
feedstock costs have also contributed to the
hike in Styrene prices. Tightness in the
Benzene market contributed to high prices
for this chemical at the beginning of the
month. By the end of August, though, lower
energy costs and lackluster demand led to a
drop in Benzene prices of slightly more than
3 percent. Paraxylene prices plummeted as
much as 4 percent.
Methyl tertiary butyl ether (MTBE) prices in
Europe have fallen to a new record low,
trading more than 7 percent lower than the
previous lowest levels observed in late
April. While supplies are readily available
and demand is somewhat limited, market
players were uncertain as to the cause of
the recent significant price decline.
Chinese producers of Butadiene have begun
exporting product to the international
market in order to reap higher margins in
the current tight market. Butadiene is
selling at prices 6-9 percent lower in the
domestic Chinese market. The tightness in
the market is expected to worsen in the next
couple of months as the result of recent
unexpected outages and upcoming shutdowns
planned for September through November in
both Asia and Europe.
High crude oil prices, production cuts, and
the Israeli-Lebanon conflict have resulted
in very high polymer prices in the Middle
East. Many end users have been keeping
inventories at absolute minimum levels,
waiting to increase buying frequency when
prices decline. However, potential
international sanctions against Iran,
combined with the likelihood that crude
values will surge again, leave many still
worried that margins will further diminish.
Prices for Polyethylene (PE), Polypropylene
(PP), and Polyvinylchloride (PVC) rose as
much as 9 percent in recent weeks. Polymer
suppliers with contractual obligations are
most impacted by the high prices.
The closure for several months of
approximately half of BP's oil production (~
8 percent of total U.S. output) at its
Prudhoe Bay, Alaska location due to severe
corrosion and a leak in an oil transit line
should not have a significant impact on
supplies, according to the U.S. Energy
Information Administration (EIA). The agency
did indicate, however, that crude oil prices
will likely remain high as a result of the
closure.