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Charles Schwarz Dies
at 81
Charles Schwarz, founder of Chemical
Information Services and an icon in the
chemical industry for over 60 years, passed
away on June 20th, 2007. He was 81 years old
and had been suffering from pulmonary
disease for approximately 10 years. Charles
fought very hard and very courageously for a
long time and had outlived all his doctors'
predictions.
His life was extremely diverse and
interesting. As part of the kinder
transports out of Germany in 1939, Charles
fled to France and spent most of World War
II in different schools in France and
Switzerland. After the war, he moved to
London and then emigrated to the US in 1948.
Charles worked in the chemical industry
virtually his entire adult life. He was a
chemical importer and manufacturer's
representative beginning in the late 1950s
with Gallard-Schlesinger Chemical in New
York. In 1970, he founded Chemical
Information Services.
"My father was an absolutely brilliant
businessman. He never missed an opportunity
and continued to find opportunities where no
one else could see them. He was a visionary
that was cultivating global markets 50 years
before it became fashionable to do so. He
also pioneered the use of direct mail 40
years before the term 'junk mail' was even
invented. His loss creates a large void in
our office that will never, ever be filled,"
says Ron Schwarz, one of Charles' two
surviving sons.
The family is requesting that if desired,
donations be made to the US Holocaust
Memorial Museum (www.ushmm.org) in Charles
Schwarz's name in lieu of cards or gifts.
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Chinese Tax Rebate Cuts and Deposit
Requirements Will Affect Several
Markets
The Chinese government reduced
rebates on export taxes effective
July 1, 2007 from 11-13 percent to
0-5 percent on more than 2000
products including chemicals such as
Soda ash, Polyvinyl chloride (PVC),
Polyethylene terephthalate (PET),
Maleic anhydride (MA), Methanol,
Paraffin wax and Toluene diisocyante
(TDI). Producers were actually given
a 20 day grace period in which to
ship materials. These cuts are
expected to significantly reduce the
amount of exports from China. The
goal of the government is to reduce
production levels for oversupplied
products and gain control of the
growing Chinese trade surplus.
Increased competition is expected as
producers sell these products on the
domestic market instead. Some may
turn to exporting higher value-added
products in order to increase
margins. Costs may increase as much
as $50-$60/dry tonne for some
products. Price increases of
exported products could be as much
as 8-13 percent and could eliminate
the low cost advantage these
suppliers have long enjoyed. Low
value-added plastic processors may
relocate to countries with better
incentives.
North American distributors are
concerned that rising prices and/or
delays in shipments of products from
Chinese suppliers could impact their
businesses. In anticipation of the
announcement, many Chinese
manufacturers were declining to
quote prices to overseas customers
until the rebate cuts are formally
announced. Chinese ports and
warehouses were overwhelmed with
chemical products during the grace
period as manufacturers rushed to
ship material before the tax rebates
took effect.
Beginning August 23, 2007,
processors that import raw materials
will have to pay deposits equivalent
to 50-100 percent of the import and
value-added taxes on the material,
currently around 22 percent.
Targeted are coastal processors that
were previously exempt from paying
import duties. The Ministry of
Commerce says the deposits will help
reduce the country's trade surplus
and improve the quality of finished
goods.
Included in the program are
producers of plastic products,
synthetic yarns, textiles, synthetic
leather, porcelain and furniture,
plus importers of raw materials such
as PV (PP), C, Polyethylene (PE),
Polypropylene, Polystyrene (PS),
Polyoxymethylene (POM), Nylon chips,
Methylene diphenyl diisocyanate
(MDI) and Polyurethane and Epoxy
resins. The deposits and interest
will be refunded once the finished
goods are exported. Cash flows will
be affected, and some processors are
expected to reduce production
levels.
These two programs are part of an
overall effort by the Chinese
government to shift its
manufacturing base to high value
added products that are produced via
more energy efficient,
environmentally friendly means while
reducing its dependency on exports,
which exposes the country to trade
protection actions and economic
slowdowns in other parts of the
world.
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Strike in South Africa Could Affect
Chemical Industry
Following the rejection of an 8
percent pay hike, workers in the
Chemical, Energy, Paper, Printing,
Wood and Allied Workers' Union (CEPPWAWU)
and the General Industrial Workers'
Union of South Africa (GIWUSA),
about 40,000 altogether, went on
strike. Members of the South African
Chemical Workers' Union (SACWU) and
the Solidarity union accepted the
offer. The chief negotiator for the
National Petroleum Employers'
Association (NPEA) said that some
refineries were still operating, but
that others were affected, including
Sapref, a 50/50 joint venture
between Shell SA Energy and BP
Southern Africa, PetroSA and
Chevron.
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China Takes Action Against Polluters
Seven chemical producers and three
coking companies in China are
included in a group of 32
manufacturers ordered to stop
production by the State
Environmental Protection Agency (SEPA)
because they violated state
pollution policies. Sinopec unit
Zhongyuan Oilfield Petrochemical, a
titanium dioxide manufacturer, a
phosphorus plant operator and a
fertilizer producer must correct
their environmental practices. The
agency will announce shortly the
'punishments' each company will
receive as a consequence of their
polluting activities.
In addition, the Chinese government,
in order to prevent four major
rivers in the country from being
further polluted, has banned new
industrial projects from being set
up near them. The ban, which
excludes treatment and recycling
plants, is in effect for at least
three months or until sources of
untreated wastewater are eliminated
and treatment facilities installed.
The government will also be taking
action to prevent further pollution
of several lakes and to ultimately
be able to provide clean drinking
water. Permits for discharge of
waste water will be required
beginning in 2008. New projects that
discharge heavy metals, nitrogen and
phosphate into lakes will be
suspended. Small paper, chemical,
textile and dye plants and breweries
located on the lakes will be closed
by 2010, and any larger facilities
that cannot meet emissions standards
will also be shut down.
Separately, 30 Chinese companies
that have violated environmental
regulations have had credit
suspended. The government is also
placing credit controls on highly
polluting industries including
petrochemicals, chemicals,
construction materials, steel, power
and non-ferrous metals. SEPA will
provide a list of violators to
financial institutions, who will be
responsible for blocking funding for
the projects and reporting
violators.
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Wuxi PharmaTech, a leading Chinese
pharmaceutical and biotech R&D
outsourcing company, applied to the
U.S. Securities and Exchange
Commission for an initial public
offering to raise $130 million (Euro
94.9 million). The company will use
the funds to expand output and build
a preclinical drug safety evaluation
center in China.
Celanese appointed Sandra Beach Lin
as president of its Ticona
engineered materials business and an
executive vice president of
Celanese. Beach Lin replaces the
retiring Lyndon Cole.
Latin American petrochemical
producers have just a few years to
improve their competitive position,
or they could face stiff competition
from global players in their own
domestic markets. According to
industry analysts, key players in
the region must build world scale
complexes that can compete with the
mega-plants located in the Middle
East and North Africa. Feedstock
pricing must also be adjusted so
that natural gas prices are
competitive with those in the Middle
East and not benchmarked against
U.S. prices, which have climbed
significantly in recent years.
Before these changes can happen,
however, long-term political
stability must be attained in the
region and investments in
infrastructure must be made. Moves
towards nationalization of
industries and resources will be
reconsidered as well.
For manufacturers, China provides
many advantages, including cheap
labor, lower raw material costs and
access to a large and growing
market. For companies looking to get
involved in the logistics side of
the business, the advantages are not
so apparent. The Chinese government
extensively regulates import and
export activities, technical and
other services can be very expensive
and the legal structure is very
different than that in the U.S. and
Europe. In many other Asian
countries, distribution costs are
lower, productivity is much higher
and the quality is better.
Intermittent strikes by
petrochemical workers in Argentina
have disrupted production of various
products. Lanxess declared force
majeure on Chromium sulfate produced
at a plant in Zarate, while Eastman
did the same for Polyethylene
terephthalate manufactured in the
country. Other companies affected
include Petrobras, Carboclor,
Monsanto, Merissant, Quipro,
Quimigas and Cabot Argentina.
Facilities were initially run by
non-union management and contract
workers, but recently striking union
members have blocked access to the
plant. Producers are supplying
customers from stock and from other
locations in the region at this
time. Union leaders have agreed to
meet with Labor Ministry officials
as long as the Chemical and
Petrochemical Industry Association (CIQyP)
handles the negotiations. 
Mitsui, Qurain, Lurgi and other
Algerian and Trinidad based
companies in the Almet consortium
were awarded a contract to build a
$1 billion (Euro 730 million)
Methanol plant in Algeria. The
consortium will own 51 percent while
state owned Sonatrach will own the
remainder. The 1 million tonne/year
complex will start up in 2011.
Sonatrach will also be partnering
with Total (51 percent ownership) to
build a $3 billion petrochemical
complex that will include a 1.4
million tonne/year Ethane cracker.
The 1.1 million tonne/year Ethylene
produced at the plant will be
converted to Monoethylene glycol,
high density Polyethylene (HDPE) and
linear low density PE, all largely
for export. This plant is expected
to come on stream in 2012.
Prices for aromatics in the U.S.,
Europe and Asia have fluctuated in
recent weeks as gasoline demand and
prices have varied in the U.S.
Benzene and Toluene prices typically
track U.S. gasoline prices during
the summer driving season. Prices
dropped in early and mid July,
recovered somewhat in the second
half of the month and then fell once
again at the very end. Prices for
mixed Xylenes rose in response to a
force majeure at Total's MX unit in
Antwerp, Belgium. Reduced demand for
aromatics in China as a result of
the shutdown of many downstream
plants in Jiangsu province for
pollution violations has resulted in
excess supply in that region. Asian
traders were exporting larger
amounts than usual to the U.S. to
reduce inventory.
Exports of Caustic soda from Japan
increased by more than 1200 percent
compared to June 2006, despite the
fact that production was down 2.8
percent for the period compared to
the previous year. Production of
Soda ash was up 2.9 percent in June
as compared to a year ago, while
Hydrochloric acid production climbed
13.8 percent.
Production disruption at Celanese's
plant in Clear Lake, Texas created
shortages of Acetic acid in Mexico
and Central America. Prices have
risen dramatically as a result. The
plant is expected to restart in the
near future but could take several
weeks to return to normal
operations. Price declines are not
anticipated until the tightness in
the market is relieved following the
return to production of the Celanese
plant.
Low inventories and very tight
supply of low density Polyethylene (LDPE)
in the Middle East are driving
prices to record highs. Demand is
very strong from the packaging
sector in particular. Production
issues and the diversion of cargoes
to Europe and Africa have
contributed to the tightness in the
supply.
Demand for plastics such as
Polyvinyl chloride (PVC),
Polyethylene (PE) and Polypropylene
(PP) will continue to grow at a high
rate for the next several years.
Rapidly expanding sectors such as
construction, agriculture and
pharmaceuticals are driving the
growth. Supply of PVC is tight in
the country, and imports have and
will continue to significantly
increase as a result. Shortages of
PE and PP around the world due to
plant turnarounds and outages are
adding to the tightness in the
Indian market, and prices are
rising. Domestics producers raised
prices 3 to 5 percent in response to
the situation and in order to be
level with higher import prices. New
Asian and Middle Eastern PE and PP
exporters are targeting India
because prices are more attractive.
Just a short time after Bain Capital
put SigmaKalon on the block, the
second-largest coatings supplier to
Europe attracted a $3.0 billion
(Euro 2.2 billion) bid from PPG
Industries. Bain purchased the
business in 2003 from Total for
approximately $1.4 billion (Euro 1
billion). The acquisition would give
PPG a much better position in the
European architectural coatings
market, nearly doubling its sales in
the region and increasing its global
coatings portfolio more than 40
percent, according to the company.
PPG and Bain Capital were conducting
exclusive negotiations. Any deal
would be expected to close by the
end of 2007 and would require
regulatory approval.
The European Commission is
considering adoption of the Globally
Harmonized System for Classification
and Labeling (GHS). The objective of
the GHS is to facilitate global
trade and harmonize different
legislative systems. Some groups
fear, however, that adoption of the
system could confuse consumers if it
is not consistent with Reach
requirements. Specific concerns
include an increase in the number of
compounds with more severe
classifications and the sale of more
dilute formulations as a way to
reduce the level of hazard for
labeling purposes.