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Indian Chemical
Industry Shows Great Potential
A growing Indian economy, particularly in
the increasing manufacturing sector, will
continue to drive the growth of the
country's chemical industry for the next
decade. A sharp rise in per capita income
will also be a factor. Since 2006, the
Indian chemical industry as grown at 12
percent per year, and that rate could
increase to as much as 16 percent annually
by 2010. Pharmaceuticals and biotechnology
are leading the way with growth rates of 18
percent per year. With a 14 percent annual
growth rate, the petrochemical sector is
also receiving significant investment
dollars. In 2007, the government announced
its plans for investing more than $9 billion
over the next five years and a policy to
create several designated petroleum,
chemicals, and petchem investment regions (PCPIR)
throughout the country. Analysts expect
India to become a major global player in
specialties and polymers, in addition to
pharma, biotech and petrochemicals. Rising
feedstock costs, reduced credit availability
and shortages of skilled engineers and
construction equipment could, however, delay
projects planned for the near future.
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Dr. Reddy's Makes
Western Acquisitions
Dow Chemical announced that it is selling
its Chirotech Technology Ltd. business to
Dr. Reddy's Laboratories Ltd. for an
undisclosed amount. The deal is expected to
be completed by the end of April 2008. With
the acquisition, Dr. Reddy's gains access to
proprietary chiral and biocatalysis
technology, as well as scale-up capability,
and it will get a stronger position in the
industrial synthesis of complex
prostaglandins and carbohydrate chemistry.
With the sale, Dow will be able to focus
more on core markets, an arena where it can
become a long-time leader.
Separately, BASF agreed to sell a U.S.-based
drug production facility and its related
contract manufacturing business to Dr.
Reddy's Laboratories. The plant makes and
packages prescription and over-the-counter
products. According to BASF, the facility
was sold because it is not part of the
company's core businesses, which include
APIs, excipients and custom synthesis
services.
Other Indian firms are looking for
acquisitions in the United States and
Europe. Biotech companies, such as GVK
Biosciences, TCG Life Sciences, Jubilant
Organosys, Sanmar Speciality Chemicals
Limited and Syngene, offer contract research
and manufacturing services to the life
science industries, and hope to add custom
synthesis assets in both regions to their
portfolios. Acquisitions provide not only
existing infrastructure and expertise, but
an established customer base on which to
build.
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FDA Faces Further
Criticisms on International Inspections
The Government Accountability Office (GAO)
testified before Congress that despite the
FDA's increased oversight of foreign drug
facilities to about 11 percent, the agency
still needs around $70 million to inspect
adequaltely all overseas manufacturing
operations. FDA head Andrew von Eschenbach
said that a complete overhaul of the system
was required, not just an increase in
overseas inspections. The FDA has already
set in motion its plan to place agents in
China and other countries.
Separately, Democrats in the House of
Representatives have proposed legislation,
the "FDA Globalization Act," which would
require the labeling of all foods, drugs and
medical devices with country of origin
information. Drug labels would include a
listing of the origin of active ingredients
and the place of manufacture. The
legislation would also create a permanent
inspection force dedicated to inspecting
facilities in foreign countries. Funds to
support these activities would be provided
through higher registration and user fees.
Janet Woodcock, director of the FDA's Center
for Drug Evaluation and Research, said the
agency should be allowed to set inspection
schedules based on risk assessments, and
that the inspection requirement in the
legislation might be a financial burden to
the FDA. She did not support the immediate
imposition of higher fees.
The FDA has announced, though, that it will
hire 1,300 additional scientists by October
2008 to monitor drug-safety data before and
after product approval and to manage the
safety and inspections of imported goods.
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Chemical Industry in
China Affected by Olympic Games'
Preparations
In an attempt to reduce pollution in advance
of the August Olympics, the Chinese
government will control the sale and
production of 257 specific chemicals in
Beijing from May 1 to Oct. 17, 2008.
Chemicals on the list include Aniline,
Acetic acid, Ethanol, Ethylene, Methanol,
Monoethylene glycol (MEG), Propylene and
Urea. In addition, 20 heavy polluters will
be required to reduce operations or even
shutdown from July 20 to Sept. 20, 2008.
Some are scheduling maintenance turnarounds
during this period to reduce some of their
losses. Unsaturated Polyester resin makers
fear that without supplies of Diethylene
glycol (DEG) for three months, they will be
forced out of business permanently. Some
larger facilities are retrofitting plants to
ensure that their emissions meet acceptable
levels, but smaller producers will likely
have to shut down. Business in the Beijing
area has also slowed because many buyers and
sellers do not want to deal with the
significant amount of additional paperwork
required by the government.
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European Chemical
Agency Ready for Reach
According to the European Chemicals Agency (ECHA),
all guidance documentation and information
technology systems necessary for handling
the pre-registration phase of the European
Union's Registration, Evaluation, and
Authorization of Chemicals (Reach)
legislation will be in place by June 1,
2008. Approximately 180,000 pre-registration
chemical dossiers will be submitted during
this phase, which extends from June to
November 2008. ECHA expects to receive
assistance from the environmental agencies
of member states.
Fees and charges associated with Reach
registration have been published. The basic
fee ranges from $2,530 (Euro 1600) for small
volume chemicals to approximately $49,000
for substances produced above 1,000 metric
tons/year. Smaller companies will receive
discounts, as will firms that cooperate on
registrations. There are additional fees for
notification of R&D activities, for some
confidentiality requests and for appeals of
ECHA decisions.
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Law Suit Claims Damage
to Marine Equipment
Consumer law firm Kabateck Brown Kellner LLP
filed a lawsuit in the U. S. District Court,
Central District of California (Los Angeles)
alleging that fuel blended with Ethanol
damaged marine fuel tanks, engines and other
components, polluting the environment and
costing consumer thousands of dollars in
repairs. According to a statement by the law
firm, Ethanol is corrosive to this equipment
and dissolved fiber glass resins used to
manufacture the tanks. Damage to tanks led
to the destruction of other equipment.
ExxonMobil, Chevron, BP, Shell, Valero,
ConocoPhillips, PetroDiamond, Tower Energy
and Big West were all named in the suit.
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The National Development and Reform Commission in
China approved an increase in export taxes of 100
percent on all fertilizers. Rising fertilizer prices
and a shortage of some fertilizer products are
causing concern for the food supply in China. The
new taxes are an attempt to curb exports to address
the situation and are in force from April 20, 2008
through Sept. 30, 2008. Some traders believe,
though, that the government will extend the higher
duty through the spring of 2009. International
fertilizer prices rose dramatically in response to
the news of the increased tax, increasing by around
25 percent in some parts of the world. Chinese
prices, however, have fallen significantly. Some
Chinese Diammonium phosphate (DAP) manufacturers
indicated that -- due to the restriction on exports
and rising feedstock costs -- they may reduce
production. Industry players expect the global
supply of phosphate fertilizers to be reduced by as
much as 20 percent. In 2007, China exported more
than five tonnes each of Urea and phosphate
fertilizers, largely to Southeast Asia and the Far
East.
The European Commission (EC) is
investigating several companies in the
paraffin waxes industry that have allegedly
been involved in cartels and restrictive
business practices. No names have been
published, but Repsol has confirmed that it
is one of the firms receiving scrutiny by
the EC. Other possible companies being
investigated include Total, Enel and Sasol.
The cost of processing petrochemicals in
Vietnam has increased by as much as 10
percent due to inflation. In particular,
higher transportation and labor costs have
had a significant impact. In addition, the
government's attempts to curb inflation with
interest rate hikes has led to a higher cost
of credit. The country is one of the largest
importers of plastic resins in Southeast
Asia, and the regional plastics market could
be affected if Vietnam's plastic industry
experiences a slowdown.
As part of its program to consolidate its
plastics industry and reduce the country's
large trade surplus, China's government may
withdraw the 5 percent tax rebate currently
available for plastic exports. In July 2007,
the rebate for plastic products was dropped
from 9 to 11 percent down to 5 percent,
along with reductions on more than 2000
other products. Plastic processors are
concerned that the removal of the rebates
will force them to raise prices and reduce
their competitive position in the global
market significantly.
Twenty-four hour strikes at ports across
France caused widespread disruptions and
delays. Dry cargo ships were affected the
most, but there were also backlogs of
tankers. The Confederation Generale du
Travail Union planned the strikes to protest
a potential new law that would transfer jobs
at state-controlled port authorities to
private cargo-handling companies. A strike
by tugboat crews across France also affected
major ports, preventing the berthing and
departure of chemical tankers, even though
the planned three-day event was called off
one day early. This tugboat worker strike
was organized to support the striking port
workers. Additional 72-hour strikes
protesting industry reforms in the industry
were scheduled at several ports beginning
Friday, May 2. With other privatization
bills scheduled for the summer, many expect
more strikes will plague the chemical
industry in future months.
The $5.4 billion (Euro 3.4 billion) sale of
ICI's National Starch adhesives and
electronics materials businesses to Henkel
has been finalized. Henkel agreed to
purchase the company when Akzo Nobel made
its bid for ICI in 2007. The acquisition
significantly increases the company's market
share for adhesives in the Asia Pacific
region. Henkel will sell all or part of its
29.4 percent stake in Ecolab to pay for the
deal.
The electronics industry in India is growing
rapidly, and producers of electronic-grade
chemicals are set to experience significant
growth. In 2007, the Indian government
announced an incentive scheme for
semiconductor and related micro- and
nanotechnology projects that provides a 20
to 25 percent of the project cost, depending
on location. Numerous applications have
already been received from companies such as
Reliance Industries, Signet Solar Inc.,
Titan Energy, Videocon Industries and Moser
Baer.
The rising cost of electricity is placing
severe pressure on Chlor-alkali
manufacturers. Further hikes are expected,
particularly in Europe, where climate change
legislation that is aimed at reducing carbon
dioxide emissions and revising the current
carbon emissions trading scheme should come
into effect in 2012. The European Commission
plans to give energy-intensive industries (EII)
assistance with the higher electricity
costs, and producers want the Chlor-alkali
sector to be designated an EII. The rise in
energy prices comes at a time when
manufacturers are investing heavily in more
environmentally friendly technologies and
have little ability to accept lower margins.
Valero announced that it will build a $1.4
billion (Euro 882 million) refinery
expansion at its St. Charles, La., site, and
is also considering a $2 billion
benzene-recovery unit. The company's board
must approve the Benzene-recovery unit. The
refinery expansion, which involves a new
50,000 bbl/day hydrocracker and a 10,000
bbl.day coker increase, and should be
complete by 2010.
Despite its rapid growth as a key region for
production of petrochemicals, the Middle
East could be facing some serious issues. In
one case, the limited supply of inexpensive
Ethane feedstock and the growing
competitiveness of European and North
American producers could affect Middle East
olefin manufacturers. Downstream Polyvinyl
chloride producers are already facing
limited availability of feedstocks. Higher
costs for plant construction are impacting
Middle East competitiveness as well.
Producers in the region are also facing
higher costs for natural gas feedstock as
much of this material is now being sold into
the rapidly growing liquefied natural gas
(LNG) market. In the near future, the use of
alternative feedstocks such as biobased
materials is expected to result in reduced
demand as well.
High labor and raw material costs, the
reduced export rebate and a stronger Chinese
currency are forcing the closure of Chinese
shoe factories and leading to reduced demand
for Adipic acid. The shoe sector is the
major consumer of Adipic acid in China.
Price declines for synthetic leather are
leading to reduced demand in this market as
well. Inventories are high and the product
is readily available, leading to lower
prices.
A drop of nearly 11 percent for the May
contract price for European Monoethylene
glycol (MEG) shook the market and upset many
producers. Most players were expecting a
decrease of half that much. These contract
prices are on par with the Chinese spot
market.
According to the National Composite Center,
the growing need to repair failing bridges
in the United States could lead to strong
demand for structural polymers. Polymer
bridge spans made of fiber reinforced
polymer (FRP) composite and containing Vinyl
ester or Polyester plastic are manufactured
in sections and assembled on-site. These
bridges cost 25-30 percent more than
traditional bridges built of steel and
reinforced concrete, but they weigh 20
percent less (to reduce load stress on
underlying structures), are much more
resistant to corrosion and have nearly twice
the life span. Around 60 percent of hundreds
of thousands of road bridges in the United
States need repaired or replaced, according
to the Federal Highway Administration.
