Catalyst

Chemical makers continue to struggle with high and volatile feedstock costs as third-quarter earnings reports demonstrate. Forecasts that energy and feedstock costs would moderate in the second half have not materialized as crude oil, propane, and ethane continue to notch up to new record highs.
Conditions overall are solid but producers are still trying to recover soaring feedstock costs. “Margins [in the third quarter] did not expand to levels that we believe reflect the supply/demand balance,” says Lyondell Chemical chairman and CEO Dan Smith.
Ethylene increases of 5 cts-6 cts/lb in October have been announced, and a further increase of 9 cts/lb has been announced for November. Polyethylene increases totaling 15 cts/lb have been announced for October and November. Specialty chemical makers are also feeling the pain. Rohm and Haas announced price increases of 5%-15% across its product line last week, citing raw material pressures (p. 7).
Fourth-quarter price increases are more difficult to implement because of seasonal demand weakness and end-of-year inventory drawdowns. Margins dropped sharply for chemical producers, particularly those in the ethylene chain, in late 2006 and early 2007, due to a consumer-led inventory correction that caused prices, margins, and demand to fall sharply.
The failure of feedstock costs to moderate in the third quarter has led producers to become more urgent about the need for price increases this quarter. Conditions appear stronger this year as ethylene operating rates remain in the mid-90% range and exports are soaring. “I do not believe we will see much opportunity for any meaningful inventory builds in the fourth quarter, so I am also very bullish on 2008 for our industry on the assumption that the global economy stays reasonably healthy, oil prices and therefore naphtha prices stay relatively high, and the U.S. dollar will not strengthen significantly,” says Nova Chemicals president and CEO Jeff Lipton.

Join Chemical Week as it returns to New Orleans for the 13^th Annual Chemical Transportation, Distribution and Security Conference – the only event dedicated to supply chain, distribution, security and logistics within the chemical industry.

This year’s conference tackles a slew of urgent new issues in transportation, distribution, and security that the chemical industry is contending with. What do new security policies mean for the transportation and distribution of chemicals, especially hazardous materials? How is the chemical industry dealing with continuing labor shortages among carriers? Are freight rates going to climb further in 2008? Are there still lessons to be learned for shippers and carriers from the devastating hurricanes that hit the U.S. Gulf Coast in 2005?

Central themes to be addressed at the 13^th Annual Chemical Transportation, Distribution and Security Conference include:

· The ins and outs of the Department of Homeland Security’s new security law, and its implications for production, storage and transportation of chemicals

· How the industry is addressing rising freight rates and labor shortages among carriers

· A look at the rebuilding of New Orleans two years after the devastation caused by hurricanes, and the lingering effect on the transportation network

· Lessons learned in emergency preparedness and disaster recovery

This year’s conference will take a closer look at these issues, and provide you with the opportunity to analyze and discuss them with your peers and experts in the field.

To register for the 13^th Annual Chemical Transportation, Distribution and Security Conference, visit www.chemweek.com/conferences/transportation08.

Chemical Engineering announced today the release of its new beta website. The completely retooled site and online information service will provide up-to-the-minute news and in-depth technical expertise from Chemical Engineering’s global team of chemical engineers, CPI professionals and journalists.

“The new che.com site simply capitalizes on Web-based technology to improve how Chemical Engineering delivers timely, practical information to the chemical process industries,” notes Rebekkah Marshall, Editor in Chief of Chemical Engineering. “Now visitors can quickly and easily drill down within subcategories such as Processing & Handling; Software, Automation & Control; Environmental Health & Safety; and Business & Economics.

”The new site offers readers the choice of over 130 RSS feeds, which notify them of developments or technical expertise in areas as broad as up-to-the-minute Business News to those as specific as Project Management, Distillation, Alarms or Heat Transfer Media. Also in keeping with Chemical Engineering’s global audience and coverage, the new site enables RSS notification of content that pertains to certain geographical hotspots and makes it browsable via an online map.”

Nella Veldran, Publisher of Chemical Engineering commented “Now, more than ever, readers will search and find information and analysis on the specific processes, systems and workflows they manage everyday. Visitors will benefit directly from Chemical Engineering’s more than 100 years of experience as the publication of record in the chemical processing industries.”

During this beta testing period, the team at Chemical Engineering is actively seeking feedback on all aspects of the website and its content so they’ll be able to continue fine-tuning the user experience to be even more useful to professionals seeking information online and via mobile devices. As beta testing continues, the Chemical Engineering team will further enhance the site with added functionality and content. Users will see advanced customization and search capabilities, an online “store” and new information and data products in the coming months.

For information about beta testing contact John Rockwell at +1 212 621-4668, email: jrockwell@accessintel.com.

Third-quarter earnings reports this week promise to show how well chemical makers are coping with the slowdown in U.S. manufacturing and with surging energy and feedstock costs.
Census Bureau data shows that U.S. exports, aided by a weakening dollar, are picking up the slack in U.S. demand. Domestic exports of chemicals gained 6.9% in August, to $13.5 billion, and chemical imports fell 6.3%, to $12.7 billion. The chemical trade balance swung from a deficit of $820 million in July, to a surplus of $1.13 billion in August. Improvements were across the board, according to ACC’s analysis of the data. This is one of the few monthly surpluses for chemical makers since trade surpluses turned to deficits in 2001.
PPG Industries, an early earnings reporter, last week said it expects the North American economy to grow slightly in the fourth quarter aided by higher exports, albeit at a slower pace (p. 10). “We currently see evidence of customers cautiously managing or even paring inventories, due to conflicting economic projections,” says PPG CFO William Hernandez. “Also, we see no signs of improvement in residential construction, which may result in customer outages in a seasonally slower fourth quarter.” Non-residential construction, one of the bright spots in the U.S. economy, is holding up, though there are signs that growth may be peaking. “Regarding commercial construction, there is anecdotal evidence of certain sub-segments hitting a plateau, while other sub-segments continue to grow nicely.”
Demand outside the U.S. is expected to remain solid, however. “We anticipate Europe will continue to grow at nice levels, but slightly slower than has been recorded over the past few quarters,” Hernandez says. “Meanwhile, we are pegging the other emerging economies, including China, to continue with their current pace.”
Growth and momentum have clearly shifted away from the U.S. How well producers do in capturing growth outside the U.S. will go a long way in determining whether the industry’s healthy margins can be sustained into next year.

The International Council of Chemical Associations’ (ICCA; Brussels) has released its inaugural review of the global chemical industry, highlighting the expansion of Responsible Care to 52 national associations and the promotion of the Responsible Care Global Charter. Other initiatives ICCA is supporting include the industry’s Global Product Strategy program to improve public awareness and confidence that chemicals are safely managed throughout their lifecycle, the long-range research initiative, and high-production volume testing program.

“We are building momentum for product stewardship and sustainable chemistry,” says Andrew Liveris, Dow Chemical chairman and CEO and ICCA president. Challenges including climate change, energy, and water resource scarcity, as well as other environmental matters represent “opportunities for our industry because the world is searching for sustainable, innovative solutions that can only be realized through the advances that our industry is uniquely positioned to deliver,” Liveris says.

ICCA plays a central role in the development of position statements and is the main channel of communication between the industry and international organizations including the United Nations Environment Programme (UNEP; Nairobi), the World Trade Organization (WTO; Geneva), and the Organisation for Economic Co-operation & Development (OECD; Paris).

Worldwide chemical industry revenues in 2006 were estimated at about €2.3 trillion ($3.24 trillion), including pharmaceuticals, which account for one-third of the figure, according to an ICCA report. Almost 45% of the value of the global chemical industry is traded, and more the 35% of this trade is intra-company in nature, ICCA says.

“The ICCA is committed to leading the international discourse on innovation, sustainable chemistry, performance, and the responsible management of chemicals,” says Jack Gerard, ACC president and CEO and ICCA secretary.

A strong ICCA-led dialogue on these matters is needed as the industry continues to globalize. Uniform industry standards are critical, particularly sharing best practices with high-growth developing markets including China, India, and the Mideast. As industry officials have long acknowledged, the sector is only as strong as its weakest link. The tragic consequences of disasters such as the 1984 methyl isocyanate leak in Bhopal, the 2005 benzene spill in China, and the 2005 Texas City, TX refinery explosion harm the reputation of the entire sector, not just the participants directly involved.