 |
|
|
|
|
|
|
|
|
|
|
Pharma Companies
Looking to India for R&D - Not Just
Manufacturing
India has been a key location for contract
manufacturing in the pharma industry for
some time. In recent years, though, Indian
companies have focused efforts on enhancing
their drug discovery and development
capabilities, and big pharma is taking
notice. Companies like Nicholas Piramal, Dr.
Reddy's Laboratories, and Ranbaxy have spun
off their discovery divisions off in an
attempt to attract such attention. Other
firms such as GVK Biosciences, Syngene, Sai
Advantium and Accutest are focusing on
contract services, such as medicinal
chemistry, toxicology and development. Many
global pharma companies are also turning to
Indian firms for R&D support in the areas of
genomics, proteomics, translational
research, pathway analysis and other biotech
services.
Intellectual property protection remains an
issue, as does the inability to retain
talented and skilled employees. The
government has a new patent plan in place
and has committed to the IP rules of the
World Trade Organization.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hexion/Huntsman Saga
Continues
Since both Hexion and Huntsman have filed
lawsuits against each other regarding their
proposed $10.6 billion (Euro 6.7 billion)
merger, further communication has taken
place. Hexion claims the merger would create
an insolvent company, while Huntsman is
suing for breach of contract, breach of good
faith and fair dealing, defamation,
injurious falsehood and commercial
disparagement.
Hexion also has stated that Huntsman's
estimated second-quarter results support its
claims about the untenable financial
position of a combined company. Peter
Huntsman said he would "fight to the bitter
end" to enforce the terms of the merger
agreement with Hexion.
Huntsman requested an extension of the
merger deadline beyond July 4, 2008, but
Hexion said there was no basis to do so.
Even so, Huntsman delivered a formal notice
of a 90-day extension to the merger
agreement. Hexion responded that the
extensions violated the terms of the
agreement.
Hexion is required to try and save the deal.
The company requested additional financing
from two lenders already involved in the
transaction. The banks rejected the request
and questioned whether they should be
obligated to proceed at all. Hexion then
sent a letter to Huntsman requesting
permission to ask for additional financing
from other sources. Huntsman received
unsolicited offers from several financial
investors for additional money to salvage
the deal and asked Hexion for permission to
share confidential information with the
investors. In turn, Hexion referred the
unnamed investors to its financial adviser.
The trial of the lawsuit filed by Hexion in
the Delaware Court of Chancery is scheduled
to begin on Sept. 8, 2008. Huntsman has
stated that it expects the lawsuit will be
resolved quickly and in its favor, and that
the merger between the two companies will
take place before mid-September.
In the midst of this turmoil, the European
Commission approved the merger on the
condition that Hexion divest certain epoxy
resin assets in the United States and
Germany.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Investment in Green Energy Way Up in 2007:
Will Trend Continue?
According to the United Nations, $148
billion in global funding was directed
toward the development of renewable energy
in 2007, corresponding to a 60 percent
increase in such spending in 2006. Most of
the investment took place in Europe and the
United States, but growing activity was
noted in China, India and Brazil. In the
United States, $152.2 million was spent on
biofuel technology research, with the
majority of it spent on discovering routes
to Ethanol based on cellulosic materials.
During the first four months of 2008,
production of biodiesel in the United States
increased by 73 percent as compared to the
same period a year ago.
Latin American countries together invested
over $8 billion in biodiesel and bioethanol
projects in 2007. With its fertile lands and
ideal climate for growing crops for biofuels
production, the region has become a leading
player. It looks to serve emerging markets
where demand for fuel outpaces petrochemical
based oil and gas production. In fact, U.S.
biodiesel producers face serious competition
from lower-priced material coming from
Argentina.
Further activity has continued into 2008.
Most recently, India's government agreed to
establish a board to oversee biofuel
cultivation, production, research and
development. The industry in India is
pleased to have a government body that will
address regulatory issues.
On the negative side, the Environment
Committee of the European Parliament
recommended that the European Commission
reduce the 10 percent biofuels target to 4
percent by 2020 in response to complaints
that farmers are switching from food crops
to fuel crops, leading to higher food
prices. Alternative measures, such as
producing renewable fuels from nonfood
sources and increasing the use of biogas,
hydrogen or electricity for vehicles were
also suggested.
Leading French biodiesel firm Sofiproteol
has indicated that, in light of the
recommendation for lower biofuels
requirements, the company will review its
long-term investments, including the
development of second-generation
cellulosic-based biofuel plants. In a letter
to the heads of the G8 nations, the major
associations of renewable fuelspredicted
that increased investment in biofuels
production would lead to lower prices for
oil and alleviate the global food crisis.
The letter also stated that gasoline prices
would be much higher without biofuel
products in the market, and that higher food
prices could be attributed mainly to higher
fuel costs for farmers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benzene, Styrene,
Toluene Hit Record Prices in Europe
European Benzene spot prices have risen to a
new record of $1,430 to $1450/tonne. These
prices recently grew nearly $100/tonne in a
day. Several production problems, which have
resulted in reduced supplies, combined with
higher crude values, have been the major
drivers of the price hikes. Contract prices
for August have settled a bit lower at
$1,330 to $1,380/tonne, as many buyers held
back to see what the market would do.
Market tightness and higher Benzene
feedstock costs have driven European spot
Styrene to a new record high of
$1,830/tonne. Many producers have cut
capacity in response to cost concerns and
are buying on the spot market to fulfill
contracts, resulting in the reduced
availability of material. With prices so
high, it is anticipated that some buyers
will purchase Styrene from producers in the
United States.
Toluene contracts also settled at a new
record high, between $1,220 and
$1,230/tonne. The higher prices are driven
largely by hikes in crude oil. Spot Toluene
prices have also hit record highs. Higher
Toluene and other downstream prices have
reduced demand, resulting in a slightly
lower July contract price for Benzene.
Considering market fundamentals, the
decrease was deemed necessary, but producers
cannot be expected to go lower as their
margins would be too diminished.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Acetone Prices
Continue to Rise
Spot prices for Acetone in the United
States, Europe, Asia, India and the Middle
East are mounting in response to tight
global supplies and rising Propylene
feedstock costs. In the United States, the
July truck price for Acetone, which is sold
to the solvent and distributor markets,
increased by 30 percent. Dow Chemical
declared "excused performance" to its
distribution partners to avoid selling
Acetone at a loss, and indicated that the
company would be allocating production and
deliveries among its customers. Many
producers in the country have reduced
operating rates in response to high
Propylene and natural gas costs.
In Europe, spot prices remained flat for the
past six months as new capacity came
onstream. Capacity was reduced recently as a
result of strikes and a lack of export
opportunities, resulting in shorter supply.
Rising Propylene feedstock costs are also
driving up the price of both contract and
spot material. Despite tightness in the
market, several producers have plant
turnarounds scheduled during the next few
months.
Asian Acetone producers raised prices as
well, reacting to higher raw material costs.
Indian and Middle Eastern Acetone prices
climbed in response to the higher prices in
other parts of the world.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petchem Producers Find
Vietnam Attractive
Foreign companies find Vietnam's 8
percent/year growth a great incentive for
investment in the country, and petchem
producers are no exception. Demand for
polymers is very strong and growing rapidly,
with leading polymers including
Polyethylene, Polypropylene, Styrenics,
Polystyrene, expandable Polystyrene,
Acrylonitrile-butadiene styrene and
Polyvinyl chloride. Major producers
including Mitsui, Idemitsu Kosan, Vietnam
Oil and Gas (Petrovietnam) and Vietnam
Chemical (Vinachem) have already made or are
now making investments in the country.
Long Son Petrochemical Co. just received
approval from the Vietnamese government to
build a $3.77 billion (Euro 2.4 billion)
complex in the south that should be
operational in 2013. Sinopec and Petrolimex
are considering construction of a $4.5
billion refinery and chemical plant in the
central part of the country. If all projects
come onstream, Vietnam will become a leading
polymer producer in the Association of South
East Asian Nations (ASEAN) region. It will
face competition from countries such as
Singapore, Thailand and Malyasia, however.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carbon Credits and
Emissions Trading Could Have Significant
Impact on Chemical Industry
With a global agreement to reduce carbon
emission by 50 percent by 2050 adopted by
many countries, the $14 billion carbon
credit market is set to expand rapidly.
Carbon emission reduction trading platforms
are already in place in Asia and Europe,
with further exchanges in Asia under
discussion.
The United States continues to resist
ratification of the Kyoto Protocol. Most
recently, the Bush administration said it
would not regulate the emission of
greenhouse gases (GHGs) under the Clean Air
Act (CAA), defying a Supreme Court order in
doing so. Instead, the EPA issued a notice
of proposed rulemaking, asking for public
comment on "the effects of climate change
and the potential ramifications of the Clean
Air Act in relation to greenhouse-gas
emissions." Many in the industry and at the
EPA believe that the CAA is not the
appropriate forum for regulating GHGs, and
that Congress should establish a national
policy to manage this issue.
Separately, the European Commission has
proposed changes to the European Union's
Emission Trading Scheme (ETS) to enable
reduction of greenhouse-gas emissions by 20
percent by 2020. The proposals specifically
cover the petrochemical and inorganic
subsectors, and the proposals reduce and
ultimately eliminate free allowances to
chemical companies, reduce emissions caps
annual, and include provisions that prevent
or at least make costly the use of
"off-shoring" as a means for avoiding
participation in the ETS.
Many believe the changes could have profound
effects on the petrochemical industry,
adding a significant financial burden that
would be difficult to pass on to customers,
considering the highly competitive global
marketplace. Both the European Parliament
and the European Council have shown an
interest in getting these proposals adopted
by spring 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scientists Claim NF3
Poses Greater Greenhouse Risk than CO2
Nitrogen trifluoride (NF3), used as a plasma
etchant and for equipment cleaning in the
semiconductor industry, has a lifetime of
550 years and a global warming potential
thousands of times greater than Carbon
dioxide, according to scientists in the
Earth System Science Department at the
University of California, Irvine. The
substance is not included in the Kyoto
Protocol on Climate Change because it was
produced in much smaller quantities in 1995
when the Protocol's data was gathered.
Leading producers of NF3 include Air
Products, Formosa Plastics, Mitsui Chemicals
and Kanto Denka Kyogo. According to
scientists, current production is
approximately 4,000 metric tonnes/year.
Planned expansions could double that by
2010. While most of the NF3 used in
production processes is destroyed,
scientists argue that some fraction must
escape to the atmosphere during the process
and when the substance is being transported
or disposed.
Air Products, a major producer of Nitrogen
trifluoride, responded that the study
presents an "inaccurate and implausible
scenario." According to Corning Painter,
vice president of global electronics for the
company, NF3 serves as a source for
Fluorine, which is used to clean
manufacturing equipment. Of the two percent
that isn't consumed in the process, most of
the gas is destroyed by emission control
equipment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dow Chemical will acquire Rohm and Haas for $18.8
billion (Euro 12 billion), taking "a defining step
in its transformational strategy," according to
Chairman and CEO Andrew Liveris. The Rohm and Haas
name and headquarters will be retained for certain
specialty chemical businesses, which will
incorporate some Dow operations including coatings,
biocides and personal care products. Rohm and Haas
also provides Dow with greater access to specialty
technologies and positions in emerging regions. The
combined companies will also benefit from raw
material synergies, such as the use of Propylene for
acrylic polymer production. 
The slowing of the global economy is
happening at a time when significant new
capacity will be coming onstream in
Southeast Asia. Four new Ethylene crackers
under construction in Thailand and Singapore
will have feedstock and technology
advantages, but questions remain as to
whether these advantages will be enough to
maintain profitability in the face of
slowing demand and lower prices. Rising
inflation and high food prices in
particular, could dramatically impact demand
for plastics and other downstream
petrochemicals in the region.
As crude prices continue to climb, Chinese
government price controls on refined oil and
other petroleum products are affecting
earnings at many Chinese oil and
petrochemical producers. Sinochem,
PetroChina, Yangzi Petrochemical and
Guangzhou Petrochemical have all reported
lower operating results for the first
quarter, and they expect continued poor
performance in the second quarter as well.
Sinopec, in fact, expects earnings to
decline by 50 percent in the first half of
2008 as compared to the same period in 2007.
The government eventually raised price
limits in June, but the action was too late
to impact the results from the first of the
year.
With rapid growth in their domestic market,
Indian chemical firms are looking for
international acquisitions and other
activities that will provide access to
cheaper feedstocks and new high-growth
markets. 
The growing economy in Brazil offers great
opportunities for petrochemical companies in
the country, including Braskem, Quattor, and
state-owned Petrobras, which has stakes in
these two companies. Many petrochemical
assets in the Northeast have been
consolidated into Braskem, while operations
in the Southeast have been joined to form
Quattor. Braskem hopes to develop a large
Ethane-based petrochemical complex in
Venezuela that will be competitive with
major Middle East ventures. Quattor offers
basic petrochemicals, intermediates and
plastics, and will account for 40 percent of
Brazil's Polyethylene and Polypropylene
production capacity once ongoing plant
upgrades are completed.
PolyOne will close eight Polyvinyl chloride
(PVC) plants over the next nine months,
reducing its staff by about 150. A decline
in the housing and automotive markets
combined with rising raw material and energy
costs led to the decision to shutdown the
facilities. Production will be consolidated
in its remaining plants. Six of the sites
are located in the United States, and one
each in Canada and England.
Experimental drugs in Phase I development
will be exempt from some good manufacturing
practice (GMP) regulations, according to a
final rule published by the FDA. Both small
molecule drugs and biologicals will be
covered when the rule goes into effect on
Sept. 15, 2008. The agency has also issued a
guidance document containing recommended
approaches for complying with those GMP
requirements that still apply to these
drugs.
Roche Holding hopes to gain full control of
Genentech. It has offered $43.7 billion for
the outstanding shares in Genentech, of
which it already owns 55.9 percent. The deal
would be the largest biotech acquisition
ever. Many within Genentech and the industry
were surprised by the offer. Analysts expect
Roche will need to make a higher bid that
will more accurately reflect the potential
value of Genentech's drug pipeline and its
leading cancer therapy Avastin. Although
Roche says it will continue to operate
Genentech as a separate business, many are
concerned that Genentech could lose its
identity if it becomes a part of the large
pharma firm. A special committee of three
independent directors appointed by Genentech
has determined that Roche's buyout offer is
not covered by any agreement between the
companies. Legal action may follow. 
In response to recent safety issues with
imported drugs, toys and animal feeds,
members of the U.S. Congress continue to
seek changes in how the FDA is managed.
Representative John Dingell has introduced a
bill on drug imports that would add
registration fees and require certification
to ensure the purity of ingredients. Senator
Charles Grassley wants to make safety
evaluators independent of the FDA Office of
New Drugs. He believes that the industry has
too much influence on approval decisions.
Both would like to see a new FDA
commissioner that does not come from within
the industry. 
Private equity firm Kohlberg & Co. has
agreed to purchase the auto-glass and
services business of PPG Industries for $330
million (Euro 211 million). PPG will also
retain a 40 percent ownership in the new
company formed by Kohlberg that will
actually make the acquisition. The sale is
part of PPG's strategy to focus on coatings
and specialty products and reduce its
exposure to the automotive market in the
United States. A previous $500 million deal
with Platinum Equity fell through when the
equity firm sued PPG, alleging that PPG
misrepresented the financial condition and
performance of the company. PPG countersued
for a $25 million break-up fee. Litigation
is ongoing.
With a highly diverse population and
established technology centers, Singapore is
an ideal location for consumer product
companies to establish research and
manufacturing sites for consumer products
designed for the Asian market. In the
region, demand for consumer products such as
perfumes and cosmetics, food and beverages
and household care has risen dramatically as
incomes have increased. Many international
flavor and fragrance and consumer product
companies such as Procter & Gamble, Unilever
and Johnson & Johnson have already
established R&D facilities in Singapore.
As part of its overall strategy to divest
additional plants and focus on core
activities, Pfizer will increase its
outsourcing of manufacturing of both APIs
and formulated drug products over the next
several years. Since acquiring Pharmacia in
2003, the company has closed or sold 45 of
its plants and will reduce the current
number of 55 down to 43 by 2010. Within
three years, Pfizer expects to outsource 30
percent of its manufacturing business based
on cost. Of that 30 percent, 65 percent will
be to sites the company has sold. The
internal sites that Pfizer retains will
still have to compete with external
providers. The company will also be reducing
the number of contract manufacturers it
uses, which presently totals more than 200.
The U.S. Congress has drafted a bill to ban
the use of some phthalates in children's
toys. The sale of toys containing more than
0.1 percent of Di-(2 ethylhexyl) phthalate (DEHP),
Dibutyl phthalate (DBP) or Benzyl butyl
phthalate (BBP) would be banned permanently,
while the sale of toys containing more than
0.1% of Diisononyl phthalate (DINP),
Diisodecyl phthalate (DIDP) or Di-n-octyl
phthalate (DnOP) would be prohibited on an
interim basis until further research can
determine their impact on infant health. To
become law, the bill must be voted on by
both the House and Senate. President George
Bush is expected to sign the measure. 
Private equity firm Vestar Capital Partners
will buy Unilever's U.S., Canadian and
Puerto Rican laundry business for $1.45
billion (Euro 928 million). Unilever is
retaining its laundry businesses in Europe,
Asia, Africa and Latin America. Unilever is
divesting the North American operations
because they were a minor player in that
market and the region is experiencing slow
growth. Vestar will form the company Sun
Products Corporation via the merger of the
business with its private label brand
detergents business, Huish Detergents.
An expected shortage of material has
affected the price of Urea traded on the
forward market, resulting in a record high
of $800/short ton in the United States. With
Chinese material being held by the
government for domestic use only, the amount
of material available for the 2009 planting
season is expected to fall short of demand.
Prices for Urea are also rising on the
international market. Large purchases by
Indian companies have driven global Urea
prices to record highs, particularly in the
Middle East and Central Europe. 
European producers of Acetone, Phenol,
Adipic acid, Caprolactam, Nylon and Methyl
methacrylate are faced with a slowdown in
demand in many downstream markets. The
slowdown in the economy in the United States
has impacted many of these sectors around
the world. In China, reduced export tax
rates and new labor laws, plus restrictions
on the production and shipment of chemicals
because of the Olympic Games are also having
a negative effect. At the same time, the
rising raw material and energy prices are
placing pressures on margins because
producers cannot pass on these additional
costs. The difficult market conditions are
anticipated to last through the end of the
year, at least.
Paint and coating manufacturers in the
United States were happy to hear the recent
ruling by the Supreme Court of Rhode Island,
which overturned a lower state court
decision holding paint companies liable for
the removal/remediation of lead-based paint
in buildings where children could be
exposed. 
Lynn Elsenhans, who recently joined Sunoco,
has been elected CEO and president effective
Aug. 8, 2008, and will replace the retiring
John Drosdick. Elsenhans came to Sunoco from
Shell, where she served as executive vice
president of global manufacturing.
The Chinese government has issued tighter
regulations on several chemicals including
Ethylene, Phenol, Nitric acid, Sulfur and
Perchloric acid that will be in effect until
Sept. 30, 2008. Companies without safety
licenses or business certificates will not
be allowed to buy or sell these chemicals,
and purchasers must provide identity cards.
Many "heavy pollution enterprises,"
including metal and petrochemical
manufacturers in and near Beijing, have
already shut down operations and are
expected to remain closed for several weeks
after the Olympic Games are over. New harbor
regulations in Olympic co-host cities across
the country include restrictions on
transportation of chemicals. Products
considered hazardous goods or explosives
will not be allowed to enter or pass through
Beijing and several other cities from July
11through Aug. 31, 2008. Traders expect
these restrictions to impact the shipment of
chemicals in the country significantly.
