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Green Really is Good
for Business
The adoption of green chemistry initiatives
may initially have been driven by consumer
demands and regulatory compliance needs, but
those companies that took the mission to
heart are finding the decision quite
profitable, too. Reducing or eliminating the
use and/or generation of hazardous materials
can lead to development of lower cost, more
efficient processes, reduce the amount of
waste produced and lower waste handling
costs, reduce emissions and therefore
increase compliance and potentially reduce
regulatory management costs, and much more.
Turning to green chemistry also helps drive
innovation, leading to products that are
highly differentiated from those already on
the market. As a result, companies with
green products often can charge a premium.
Most activity is taking place in the U.S.,
Europe and Japan. And one sector that is
hoping for great benefits is the pharma
industry, which relies to a great extent on
inefficient, solvent-based processes.
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Ferro agreed to sell its fine chemicals
business to Arsenal Capital Partners for $66
million. The deal is expected to close in
the fourth quarter of 2008. The business,
which manufactures electrolytes for energy
storage devices, solvents, electronic
materials and polymer, pharmaceutical and
agrochemical ingredients, will be renamed
Novolyte Technologies. Arsenal plans to
build an energy technology company based on
the business. General Manager Edward Frindt
will become CEO when the deal is finalized.
Ferro divested the business because it does
not fit with the company's core performance
materials operations.
New legislation being drafted by the
European Union (EU) could lead to the
banning of many pesticides from being sold
in European markets. The proposal aims to
ban the key ingredients used for the
production of fungicides, herbicides and
insecticides that make it possible to raise
crops in a cost effective manner. Yields
throughout Europe could fall by more than 30
percent for some crops. Pests will likely
develop resistance to the few agrochemicals
still available for use. In addition, some
fear that farmers will turn to illegal or
alternative and untested products, which
could lead to serious environmental, health
and safety problems.
Facilities for the production of fertilizers
will be built in the Uralsk, Mangystau and
Aktyubinsk regions, according to a recent
announcement by the Kazakhstan government.
The total investment will be about $5
billion, with $500 million spent in 2009. In
a separate project, state-owned KazMunaiGaz
will invest $5.2 billion in a new
petrochemical complex in Atyrau. However,
this project is moving forward very slowly.
The financial crisis is having a dramatic
affect on the biotech industry. While the
largest firms are highly profitable and in
good financial condition, many smaller,
publicly traded companies in the sector
don't have enough cash on hand to operate
for even six months. Nearly 40 percent of
small firms won't last a full year. At the
same time, venture capital investment is
declining significantly. As a way to
generate needed funds, biotech start-ups are
reducing employee numbers and R&D efforts.
They are also hoping that big pharma will
come to their aid by with licensing
agreements or possibly outright purchase of
the business.
Falling crude prices and declining demand
are driving European prices for aromatics
ever lower. Toluene values dropped to levels
not experienced since the end of 2003 before
climbing slightly. Producers who rely on
contract Ethylene feedstock are expecting to
achieve negative margins. Meanwhile,
European Benzene spot prices have plummeted
nearly 70 percent in the last month to the
lowest levels seen in over five years. With
a global recession looming, traders expect
aromatic prices to continue to track with
crude values, which are likely to decline
further.
Indian Oil Corp. (IOC) and Gail (India) Ltd.
announced their intentions to explore
opportunities for establishing a $2 billion
petrochemical complex in Barauni Bihar
State. The memorandum of understanding
signed by the companies indicates that a
feasibility study will be available early
next year. The companies are also
considering investment by third parties. The
complex would include a cracker and plants
for production of Ethylene and downstream
polymer products. Basic feedstock for the
cracker would come from IOC's refinery in
Barauni or possibly from a cross-country
pipeline proposed by Gail.
The Russian government has approved a $5
billion (Euro 3.7 billion) petrochemical
complex in Nizhnekamsk that is planned by
OAO Taneko, a subsidiary of Tatneft. The
facility will include a refinery and plants
for production of Ethylene, Polyethylene and
other key chemicals. It is expected to be
operational in 2011.
Pequiven, Venezuela's state-run
petrochemical firm, will partner with
companies from around the world, including
Iran's National Petrochemical, China's
Sinopec and India's Reliance Industries, to
build a complex consisting of seven plants
producing Ethylene, Propylene,
Polypropylene, Toluene, Benzene and
Paraxylene. President Hugo Chavez is seeking
to reduce the country's reliance on the
United States as a customer. The complex is
scheduled to be operative in 2014.
Weak demand for Caprolactone combined with
high stock levels and falling raw material
prices have caused most European producers
to reduce operating rates. Some have even
cut back production by more than 25 percent.
The environment committee of the European
Parliament voted to adopt tougher rules for
Europe's emission trading scheme (ETS)
beginning in 2012. The legislation aims to
reduce greenhouse gas emissions (GHG) by 20
percent by 2020 for most industries, plus
replace free GHG emission permits with
permits that must be purchased at auction.
Ammonia and petrochemical plants would be
included under the new rules. Before it
comes into effect, though, the proposal must
be voted on by the full parliament and be
approved by more than two-thirds of European
Union member states in the European Council
of Ministers. 
Chemical Companies in the United States can
expect the new Congress to take stronger
action on environmental issues in 2009.
Democrats have already announced plans to
increase oversight of the EPA, introduce
tougher legislation, enforce more strictly
its rules against violators and increase the
use and size of penalties. A recent report
by the Government Accountability Office
(GAO) found that total penalties assessed by
the EPA have declined by about 43 percent
since 1998. Democrats hope to control the
Congress in 2009, and they plan to push
through an agenda for environmental reform.
They have already tried unsuccessfully to
introduce Reach-like legislation in 2008,
and they can be expected to pursue this
issue again next year.
