Dow, BASF Sign Deals with Gazprom
Leading Russian gas producer Gazprom and its petrochemical subsidiary Sibur have signed a memorandum of intentions (MoI) with The Dow Chemical Company to study possibilities for joint gas processing projects near the Valanzhinsk gas deposits in Russia's Yamalo-Nenets Autonomous Region. A joint venture based at Dow's production facilities in Germany is also under consideration. Pre-feasibility studies will be conducted by a joint working group to identify any opportunities.

Separately, Gazprom formed a joint gas trading firm (ZAO Gazprom YRGM Trading) with BASF to buy gas from the Yuzhno-Russky gas deposit in Western Siberia. WINGAS, a joint a joint venture between Gazprom and BASF subsidiary Wintershall, plans to invest $4 billion (Euro 3 billion) to expand its natural gas infrastructure in Europe, including connecting its German pipeline to the Nord Stream Baltic Sea pipeline and the addition of natural gas storage facilities.

LyondellBasell has to Find New CEO

Lyondell chairman, president and CEO Dan Smith declined to accept the position of chairman of LyondellBasell Industries. Lyondell shareholders approved the deal, with just under two-thirds voting in favor of the merger. The transaction should be finalized around Dec. 20, 2007. Headquarters for the merged company will be located in Rotterdam, the Netherlands.

Restructuring Underway at Johnson & Johnson

To address patent expirations and some drug-safety concerns, Johnson & Johnson announced significant reorganization efforts aimed at improving company performance. Nicholas Valeriani will head a new Office of Strategy and Growth, while Christine Poom has been appointed to lead the drugs division. The medical devices and diagnostics business is being split into two separate units - surgery and comprehensive care, which will address diseases with a more integrated approach, from diagnostics to treatments. Overall the goal of the reorganization is to increase interaction between the company's 250 independently operating business to improve efficiencies. These changes are in addition to the previously announced reduction of its workforce by 4 percent.

High Crude Oil Affecting Chemical Manufacturers
Record high crude oil prices are driving price increases in many feedstock chemicals such as olefins and aromatics. Many downstream producers in turn have tried to push through price increases of their own. In the United States, the slowing housing market combined with high feedstock costs has hurt profit margins. The weak U.S. dollar hurt European companies who were less competitive in the global marketplace as a result

Latin American Chemical and Pharma Producers Making Moves
Brazil, Mexico, Argentina, Venezuela, Chile and Columbia are the largest petrochemical producers in Latin America, with Brazil far in the lead. Petrobras, Braskem and Grupo Ultra from Brazil have investments throughout the country and are expanding to other areas of South America where they can benefit from synergies between oil, gas, refining and petrochemicals. Recently the Brazilian government announced that it will invest approximately $23 billion in science and technology development, including biotech and biofuels operations. Venezuela is active in supplying neighboring countries with natural gas and is planning to increase its sales to Asia as well. Bolivia has also become a key supplier of natural gas in the region.

With respect to pharmaceuticals, there is tremendous potential for both branded and generic drug makers. The Latin American pharma market is estimated to be worth $29 billion and growing about 13 percent annually. Generics are experiencing the greatest increase in demand. Among pharma companies in the region, dosage manufacturers make up the largest group. Most APIs are imported, but there are a few manufacturers in Mexico. The growth rate has begun to attract international manufacturers, though. Increasing numbers of international pharma companies are setting up operations in Latin America and are beginning to import their own APIs. Some are even building production facilities and offering custom manufacturing services.

M&A Activity Robust in Chemical Industry
Merger & acquisitions in the chemical industry during the first three quarters of 2007 were valued at $88 billion, with 12 deals worth $1 billion or more and three valued at more than $10 billion. Almost half of the 615 announced transactions took place in North America. In all of 2006, just $51 billion in deals took place.

Recently, the pace of chemical industry M&A activity slowed down, though, due to difficulties in the financial markets and climbing oil prices. Banks that provide financing for such transactions are being far more cautious when it comes to higher value deals. Smaller deals (less than $750 million), particularly those in fine chemicals, are still taking place at a high rate as that sector continues to consolidate. Analysts also expect Chinese buyers and sellers to be more active in the next few years.

New Rules for Foreigners Investing in China
New investment restrictions have been placed on the production of several chemicals in China, including Polybutadiene rubber, emulsion Styrene butadiene rubber, thermoplastic elastomers, Calcium carbide-based Polyvinyl chloride, Titanium dioxide manufactured via the Sulfuric acid route and Caustic soda produced using older technology. Chinese companies must hold controlling stakes in coal chemical investments and producers of equipment for this application. Foreign investors also can no longer take a controlling interest in facilities targeting the biofuels industry such as fuel Ethanol and biodiesel plants and soybean and rapeseed crushers. The Chinese government was encouraging foreign investment in aromatics, Ethylene glycol, Bisphenol-A, purified Terephthalic acid, engineering plastics, certain fivers and recycled plastics.

Positive Outlook for Bulgarian Chem Industry
The Bulgarian chemicals market is estimated to be worth $4.4 billion (Euro 3 billion) in 2007 and will grow at an overall rate of 5 to 6 percent annually, according to Germany's foreign trade agency. Products for the pharmaceutical, cosmetics, paint, coatings, construction and environmental markets will experience double digit growth. Domestic producers account for 40 percent of the Bulgarian market, while Germany leads foreign players with a 20 percent share.

U.S., Latin America Build Chemical Trade Relationships
Three free trade agreements (FTAs) between the United States and Latin American countries are expected to boost chemicals and plastics exports from America to the region. The FTAs with Peru, Colombia and Panama will provide more open access to these markets. They also require the governments of these countries to implement and enforce various environmental and labor initiatives.

Older agreements already grant tariff-free access to U.S. markets for exports from Bolivia, Colombia, Ecuador and Peru, even though high tariffs have continued to be placed on goods imported from the United States. Chemical producers in America hope that the new FTAs will enable them to regain market share lost to other Latin American manufacturers. The United States already has free trade agreements with Chile, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

Demand for Silicon Driven by Solar Energy Market
Interest in solar energy is growing rapidly in the wake of rising crude oil prices. According to the Solar Energy Industries Association, by 2020, about 10 percent of the electrical needs in the United States could be met with solar power. Silicon is the most popular material for solar cells, accounting for more than 90 percent of photovoltaic (PV) production. The PV industry has been growing at greater than 40 percent since 2003, with demand exceeding the supply of silicon available for PV cells, resulting in rising silicon feedstock costs. The addition of capacity by several companies (for example Wacker Chemie and Hemlock, which is a joint venture between Dow Corning, Shin Etsu Handotai and Mitsubishi Materials) should address this shortage in about three years.

The other big challenge for the solar cell industry is to bring costs in parity with traditional energy prices. Increasing cell efficiencies will be critical. Government grants, subsidies, tax credits and other actions will initially help drive the adoption of solar energy in the United States. To be successful in the long term, though, solar electricity coats must be competitive without subsidies.

Diagnostics Chemicals Ltd. Sells Diagnostics Division to Genzyme

Genzyme agreed to acquire the diagnostics division of Diagnostic Chemicals Ltd. for $56.5 million. The purchase includes more than 50 clinical chemistry reagents and diagnostics operations in Canada and Connecticut, which will be incorporated into Genzyme's diagnostics business unit. The deal is expected to close before the end of 2007.

Europe, U.S. Introduce New Orphan-Drug Rules
Agencies in the United States and Europe have agreed on a common process for orphan-drug status application with more lenient rules designed to encourage the development of therapies targeting rare diseases. Pharma companies will be able to use one application to seek orphan designation in both Europe and the United States. There are more than 6,000 rare diseases affecting over 50 million people in the two regions.

Low Drug Approval Rate in 2007
The number of approvals for new molecular entities (NMEs) by the FDA in 2007 looks like it will be less than the 22 awarded by the agency in 2006. Only 15 drugs were approved by FDA during the first 10 months of the year, which equates to an annual rate of 18, according to an industry analyst. Several key players attributed to reduced pace of approvals to stricter drug-safety policies. The launch of several potential blockbuster drugs has been delayed already.

Organon Acquisition Completed
Akzo Nobel completed the $16 billion (Euro 11 billion) sale of its Organon BioSciences business to Schering-Plough Corp. after receiving approvals from the U.S. Federal Trade Commission and the European Commission. Headquarters for Schering-Plough will remain in New Jersey, while headquarters for the merged company's animal health business will be located in the Netherlands. The acquisition gives Schering-Plough an additional five Phase III drugs and expands its presence in women's health and central nervous system markets.

Nufarm Agrees to ChemChina Purchase
China National Chemical Corp. (ChemChina), along with Blackstone and Fox Plaine Management, will acquire agrochemical company Nufarm for $2.8 billion. The Nufarm business will be combined with ChemChina's agrochemicals unit, which is the largest pesticide producer in China. Maintaining the Nufarm management team and retaining the company's business culture are considered important aspects of the deal. ChemChina expects the due diligence process to take about a month.

Biotech Plant May Receive Approval for Cultivation
Currently, only GMO seeds have received approval for planting by governments around the world. The European Union may soon change that situation. It is considering approval of the Amflora potato from BASF AG for cultivation. This GM product is designed for use as an industrial starch. BASF has partnered with Monsanto to develop additional biotech products that it plans to bring to market that have better output-traits, including higher yields, unsaturated fatty acids and starch content.