A MARKET UPDATE for September / October, 2007

TCC periodically posts video “snapshots” regarding critical markets and economic updates on our web site. We welcome your viewing them and will appreciate your feedback.

We appreciate your taking the time to review this newsletter. We welcome your comments as well as contributions regarding our readers’ company/industry activities. Please send them to Bob Beavins at bob@www.baojishu.com

Critical Raw Materials Markets

Oil Price: ~$80.00/bbl.
Natural Gas: Current spot prices average ~$/6.48/MMBtu; October contracts settled at ~$6.42/MMBtu.
Benzene: Trading at $~3.50/gallon for October.
Propylene: US contracts for September were down $0.025/lb from August at $0.4975/lb
Orthoxylene: September contracts reduced $0.035 to $0.455/lb.

Chemicals Markets

Methanol: October contract pricing catapulted up approx. 70%, as expected, due to global supply issues and interruptions. MNDRP for October increased US$.74/ gal. to US$1.70/ gal. vs. Southern’s announcement set at US$1.65/ gal. Spot pricing was last noted at US$1.54/ gal. but available molecules are limited continuing the spot price climb.

Urea: Urea pricing steadily advanced $40- $50 per ton this summer especially in September ($15- $20 per ton), current spot pricing seen at $343- $348 per ton. PCS has announced a price increase for October of $35/ ton. Prices should continue to climb as agricultural and industrial users are not expected to go away anytime soon and overall world demand has increased substantially.

Adipic Acid: Demand in Asia has finally slowed due to MDI co-monomer supply problems into the booming Polyurethane market. This along with massive import volumes of Adipic Acid from most global producers has depressed the pricing some $50- $90+/ ton. Domestic pricing seen as stable with Benzene strengthening and demand flat.

Ammonium Nitrate/Ammonia/Nitric Acid: Ammonium Nitrate pricing is stable as of press time. Large scale construction projects should be slowing in the coming months but producers will use this time to regain inventories.

Ammonia is seen as stable but mildly strengthening over the past couple of weeks from US$265/ ton to US$275/ ton in Tampa.

Nitric Acid prices have been advancing as of late due to continued strong demand in both the agricultural and explosive markets. Price increase announcements of $15- 25/ ton were announced for October 1st as producers look to match the margin of other down stream products.

Plasticizers: Plasticizers continue remain in tight supply with steady demand. A snugness in 2EH and INA supply is affecting many products, while the tightness of trimellitic acid is causing problems with other plasticizers. DINP remains very short worldwide and the falling dollar against the Euro is causing cost problems with material coming from Europe. No price increase announcements were made for October, the first month without a price increase in the past 7.

TCC Plasticizers available:
ChemFlexx 206 Linear Phthalate Plasticizer
Brominated DOP
8,10 Trimellitate

Unavailable/Allocated Plasticizers:

Epoxidized Soybean Oil: TCC offers ESO to the North American Marketplace. A $.05/ lb. increase has been announced to take effect on October 1st.

Dicyandiamide: Price/availability stable.

Dicyclopentadiene: $.03/ lb. increase announced for October 1, 2007 by some producers. Due to the increased cost of Oil.

Fumaric Acid: Stable market; imports available.

Isophthalic Acid: Continued tightness as both Eastman and FHR have production troubles. Imports available at inflated pricing.

Maleic Anhydride: Pricing continues to follow Butane as demand is seen as stable to soft. Production costs continue to climb but demand expected to be a large factor in coming months.

Phthalic Anhydride: North American demand continues to be flat as prices deflate into October by $.035/ lb. Production in Europe has started to catch up as a large producer has come on line after a critical and unexpected outage.

Styrene monomer: Spot pricing increased $.005/ lb. to $.645/ lb.
For more information on these or any of the products and services provided by TCC please contact Robb Roach directly at Robb@www.baojishu.com or go to our web site at www.baojishu.com

Chemical Industry News

Bayer recently announced its withdrawal from the New York Stock Exchange, joining BASF and Eon, which had announced their plans some weeks ago. The main reasons for these actions are the high costs and enormous amount of bureaucracy required by the Sarbanes-Oxley Act. The passage of this legislation was the result of the corporate scandals involving Enron in particular. Bayer expects a reduction in cost of EUR 15 million per year. There is also little trading activity in the de-listed stocks on the NYSE.

RAG has changed its name to Evonik Industries and plans to enter capital markets under that name in the first half of 2008. Previous brand names such as Degussa, Steag, and RAG Immobilien will no longer exist. Coal mining operations will continue to be operated as RAG.

Wal-Mart recently announced plans to “go green” in its supply chain by encouraging suppliers to use more environmentally friendly and sustainable materials and manufacturing methods. Wal-Mart says that it will begin measuring the energy and resource consumption of a number of its key suppliers. Wal-Mart has voluntarily phased out certain plastic items, such as vinyl baby bibs. Chemical industry representatives have said that decisions are being made, not on science, but on pressure from advocacy groups.

China’s GDP increased 11.9% in the second quarter, 2007 compared to the same period in 2006. Its trade surplus increased to ~$25 billion in August.

Spartech plans to spend $61 million to acquire Creative Forming, a plastic packaging maker based in Ripon, WI.

PPG Industries is selling its fine chemicals business to ZaCh, a subsidiary of Zambon, an Italian pharmaceutical and chemical company for $65 million.

The purchase by Sabic of GE Plastics has been completed, and the company is now called Sabic Innovative Plastics. Sabic had previously acquired DSM’s line of engineering thermoplastics. Shortly before the acquisition was finalized, GE Plastics bought the remaining half of Exatec, a maker of polycarbonate auto glazing materials, that it did not own.

The American Chemistry Council has announced that US chemical production rose by 0.5% in August, following a July gain of 0.4%. Production was down 0.2% compared to August a year ago. The West was the only region showing a downturn, with 0.6% decline.

ExxonMobil Chemical has said that it will build its second world-scale steam cracker complex in Singapore. Cost estimates are approximately $4 billion. Products to be manufactured will be polyethylene, polypropylene, benzene, and an oxo-alcohol expansion of 125,000 tonnes/year.

Lehman Brothers Commodity Services intends to build a new natural gas trading hub in northeast Louisiana with anticipated start-up in October, 2008. Plans to connect a dozen pipelines must be approved by the Federal Energy Regulatory Commission. Called the Eagle Hub, it’s expected to move gas to Northeast and Midwest markets.

OPEC recently agreed to boost crude oil output to 500,000 bbls/day after November 1. The announcement had little impact on the market, with general opinion that the relatively small increase will not equal growing demand. It was reported that Saudi Arabia forced through the increase over the objections of Iran and Venezuela. OPEC has denied responsibility for oil price increases, citing as causes recent attacks on Mexican oil facilities, Hurricane Humberto, and the crisis arising from US mortgage markets.

Excess wine supplies in four European countries are to be used for the production of bioethanol. The wine will come from EU members France, Greece, Italy, and Spain.

Volvo in Europe has produced seven heavy-duty demonstration trucks, each of which runs on a renewable fuel. The fuels have been reported as biodiesel, biogas, a biodiesel/biogas mix, dimethyl ether, ethanol/methanol, synthetic diesel, and biogas/hydrogen gas mixture. Volvo stated that all the fuels will be made from renewable raw materials and will add no carbon dioxide to the air.

A recent report on biofuels issued by the Organization for Economic Cooperation and Development says that governments should cease to create new mandates for biofuels and investigate ways to phase them out. This opinion is based on their conclusion that overall impact of ethanol and biodiesel can exceed those of fossil fuels. Another conclusion was that certain biofuel policies may be a way to support domestic agriculture.

The EU is a long way away from the 20% reduction in carbon dioxide emissions planned for 2020, with the accompanying increase in the proportion of renewable energies to 20%. Most member states take a strong position regarding energy policy as a national concern.

The force majeure declaration by Celanese at its Clear Lake, TX acetic acid plant has not been lifted, although reports indicate close to a complete recovery. Producers have announced a $.04/lb increase for the fourth quarter.

Chinese urea exports appear to be setting record levels after it was announced that 515,000 tonnes were exported in July, compared to 49,000 tonnes in July, 2006.

The Finnish government has sold one-third of the shares of Kemira Oy for ~$900 million. This sale makes Ora Invest, a private company, it biggest shareholder.

DuPont has declared force majeure on vinyl acetate monomer at its plant in LaPorte, TX. Logistical problems are reported to be the cause.

New Norwegian tax regulations threaten to cost shipping operators such as Seatrans, Odfjell, and Jo Tankers millions of dollars and cause them to move elsewhere.

The Economy


Sales of new single-family homes fell 8.3% in August. On a year-to-year basis, sales are down 22.7%, but the heaviest downturns were in the West and South, with advances in August in the Northeast and Midwest. Combined sales have fallen 26.4% from a July, 2005 peak.

New orders for durable goods decreased $11.3 billion, or 1.4%, to $219 billion in August. This followed two consecutive monthly increases. Excluding transportation, new orders decreased 1.8%. Excluding defense, new orders decreased 5.9%.

Consumer Price Index declined 0.2% in August. The August level was 2.0% higher than August 2006.

Interest rates: Prime at 7.75%.

Inflation: Currently 2.7%; lower 2008.

Unemployment: Continued 4.6% in 2007.

Trade Deficit: Decreased to $59.2 billions in July from $59.4 billions in June.

Crude Oil: Some analysts predict $85/bbl by year-end, with possible spike to $95. Forecasts are for $80 or more in 2008.

Industrial production for August rose 0.2%, and was 1.7% above its year-earlier level.

Economists predict average 3%+ GDP growth in 2007, less than 3% into 2008.

The US dollar trading at 115.66 yen. $1.413 = euro. The British pound sterling = $2.012.

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