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Jobs to be Eliminated in
Restructuring of Bayer Schering
Pharma
Worldwide, Bayer Healthcare will
reduce its workforce by 6,100 jobs
as it integrates its newly formed
Bayer Schering Pharma operations.
Annual savings from the personnel
reductions are expected to be around
$460 million (Euro 350 million)
beginning in 2009. Approximately
2,150 jobs will be eliminated in
Europe, 1,000 in the U.S., 750 in
the Asia Pacific region, and 1,200
in Latin America and Canada. By
function, 1,400 R&D, 1,850
production, and 2,850 administrative
positions will be removed. The
number of locations will be reduced,
R&D activities will be concentrated,
and marketing and administrative
functions harmonized.
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Positive Outlook for Asian Adipic
Acid
Following the Chinese New Year
holiday, analysts expect prices for
Adipic acid to rise in respond to
strong demand and short supplies.
The second quarter is typically a
key one for Polyurethane, a major
downstream product for Adipic acid.
In addition, two producers (Liaoyang
Petochemical,140,000 tonne/year
plant at Liaoyang, Liaoning province
in May; Rhodia Polyamide, 130,000
tonne/year plant in Onsan,
Kyungsangnam, South Korea in June)
are expected to shut down for
maintenance during that period.
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Overcapacity Threatens Taiwanese
Polymer Producers
Taiwan's polymer producers face
looming overcapacity problems.
Imports into China are falling,
additional capacity in the Middle
East will be coming onstream soon,
and local producers have also made
recent investments in capacity
expansions. Volatility in crude oil
prices is yet another negative
factor, particularly for smaller,
non-integrated manufacturers. The
combined result will be declining
plastics prices and lower operating
rates. Companies most likely to be
affected include Far Eastern
Textile, Nan Ya Plastics, Oriental
Union Chemical, Taiwan Fertilizer,
USI, Formosa Plastics and Taiwan
Styrene Monomer. Polyvinyl chloride
(PVC) and Polyester are polymers
highlighted by analysts to
experience stiff competition from
China, while Polyethylene will face
competition from the Middle East.
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Chemical Industry Works to Improve
World Living Conditions
Despite public perception that the
chemical industry in general causes
harm to the environment, leading
companies in the sector are deeply
invested in finding solutions to
worldwide problems such as
automobile pollution control, energy
efficiency, and potable water
availability. A significant portion
of R&D dollars are directed towards
developing improved vehicle emission
control catalysts, substitution of
traditional materials with newer,
lighter weight products in
automobiles, air planes, etc. for
improved fuel efficiency,
formulation of antifouling coatings
for marine applications,
investigation of new biofuels,
process development to identify
production routes that have reduced
energy consumption, the use of
renewable resources for the
production of existing or novel
products in an endless array of
applications, and identifying new
identifying economical and practical
methods for water purification and
desalination. These activities are
not only helping saves lives today,
but will help improve living
conditions on the planet for the
future.
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An 8.8 percent decline in the Shanghai
Composite Index, which occurred in response
to concerns about potential government
actions and nervousness about unrealistic
valuations, led to falling stock markets
around the globe, and the chemical industry
was not immune. Chemical stocks traded on
the U.S. market the following day fell
anywhere from just under 3 to nearly 9
percentage points. Most did, however,
stabilize during trading later in the week.
Asian chemical stocks also dropped by
similar amounts in response to worries about
the Chinese market, but were slower to
stabilize, even though the Chinese market
experienced some gains. Analysts suggest
that, despite the sell off in China,
expectations for the country's economy
remain unchanged.
In recent weeks, Linde has completed
various divestments and
acquisitions. The company sold AGA,
its Mexican and medical gases
business, to Praxair as part of a
deal in which it acquired
Turkey-based industrial gases
producer Karbogaz. The terms of the
deal, which is expected to close
some time in March 2007, were not
disclosed. 
A strike by approximately 2,800
workers at rail company Canadian
National had a temporary impact on
the ability of chemical
manufacturers to receive raw
materials and deliver products
within and outside the country. Some
had to shut down or significantly
reduce operations. Around 70% of
Canadian chemicals production is
moved by rail. Services at Canadian
Pacific Railway (CPR), the Port of
Vancouver, the major gateway to the
Asia Pacific regions, and deliveries
of Canadian chemicals into the US
were all affected by the work
stoppage. Customers of the chemical
industry, such as auto
manufacturers, pulp and paper
factories, and municipal water
supplies within Canada felt the
impact as well. Strikers finally
began returning to work after 16
days when the United Transportation
Union (UTU) and Canadian National
reached a tentative agreement. To
formally end the strike, the
agreement must be ratified on March
26th.
According to the European Commission
(EC), European chemical
manufacturers lose as much as $379
million (Euro 289 million) per year
in business opportunities as a
direct result of Chinese non-tariff
barriers (NTBs). Import tariffs for
more than 1000 chemicals have been
reduced since China joined the World
Trade Organization in 2001, but NTBs
continue to be a problem. Chief
among them is the lack of strong
enforcement of intellectual property
rights and environmental standards,
and the difficulties confronting
foreign companies looking to invest
in China. In some cases, European
companies are required to obtain
licenses to export raw materials and
are thus at a disadvantage when
compared to Chinese firms. The EC
does note, however, that there are
many opportunities for European
chemical companies to influence the
Chinese market and maintain a
competitive advantage.
The U.S. chemical industry achieved
a positive trade balance of $5
billion (Euro 3.8 billion) in 2006.
These good results were due to three
factors, according to Kevin Swift,
chief economist at the American
Chemistry Council: the value of the
dollar; growth in demand in
developing countries; and lower
prices for natural gas in the U.S.
as compared to global crude oil
prices. Plastics had the largest
surplus at $14.4 billion, followed
by organic chemicals ($8 billion)
and inorganic chemicals ($92
million). These gains were offset by
a trade deficit of $2.44 billion in
fertilizer chemicals.
Restructuring activities and well
planned investments have made it
possible for Japanese chemical
companies to make the most of the
current economic recovery in that
country. Strong demand coupled with
the ability to pass on price
increases has boosted earnings, a
trend that is expected to continue.
Many Japanese chemical companies
have also been able to source less
expensive feedstocks, further
increasing their profit margins. A
shift in their focus to higher
value-added, high margin products,
which is being supported through
increased R&D investment levels, has
also raised earnings. Analysts are
predicting that increased M&A
activity will be yet another way
that Japanese chemical firms are
looking to gain competitive
advantages and improve
profitability.
The Dubai Chamber of Commerce and
Industry released a report
indicating that the petrochemical
industry in the United Arab Emirates
(UAE) invested $4.1 billion (AED 15
billion) in 2005, accounting for 22
percent of total manufacturing
investments in the country. In the
plastics sector, the UAE is second
behind Saudi Arabia within the Gulf
Cooperation Council (GCC) countries.
The Ministry of Agriculture,
chemical companies, consumer groups
and retailers have formed a council
in Japan that will work to develop
methods for promoting and
encouraging the use of plastics made
from biomass such as corn, wood
chips and other plant materials. The
ministry is highlighting projects
like those of Fujitsu and Toyota
that involve the production of
personal computers and automotive
interiors using carbon
emission-neutral materials.
The strong demand in China that has
driven Acetone prices to the highest
levels seen since early May 2005, is
expected to slow. Some decline was
observed preceding the Chinese New
Year holiday. Increased supplies are
expected in early March and are
anticipated to fuel the decrease in
price. Some Acetone producers in the
region do not expect a significant
impact on the market, and are
waiting until after the holidays to
announce their March offers.
The Saudi Arabian Ministry of
Finance reported that non-oil
exports could rise to as much as $21
billion (Euro 16 billion, SR 79
billion) in 2007, an increase of 11
percent over exports in 2006.
Petrochemicals to Iraq, East Asia
and Europe account for about
two-thirds of exports. The growth
has largely occurred since the
country joined the World Trade
Organization in 2005. Additional
increases are expected when new
petrochemical production comes on
stream at the Yanbu National
Petrochemical Company (Yansab) and
Jubail industrial city complexes.
Other non-crude oil exports include
electrical goods, machinery and
industrial equipment, construction
materials, wood products, and
textiles and garments.
An unexpected increase in demand for
Isopropanol (IPA) has led to
shortages of the commodity chemical
in the U.S. The exact reason for the
increase in demand is unknown. Some
have suggested that an unexpected
and undisclosed production problem
could be one cause. Others believe
some Ethanol users are switching to
IPA in response to the higher prices
and tighter supplies of that key
commodity. The rail strike in Canada
could also be a factor. Producers
are expected to introduce a price
hike at the beginning of March.
Proposals by the Indian government
to change the Indian Environmental
Impact Assessment regulations would
require chemical companies, once
they have received environmental
approvals, to gain permission before
any changes to their product mix can
be made. In the past, minor
production level and product changes
could be made as long as emissions
were within approved limits. The new
rule could make it very difficult
for producers, particularly custom
manufacturers.