CHEMICAL WEEK

ESTABLISHED 1914

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Several key indicators show again.Naturalgasspotandcon that the chill of the global recessionmaybestartingtothawforchemicalmak- ers. Demand recovery, which began late in the first quarter, appears to be holding. U.S. chemical production, as measured by a three-month moving average, rose 0.1% sequentially in April, following a 0.6% gain in March, ACC says. The strongest region was the Gulf Coast “which is more focused early on in the supply chain, and this is welcome news,” ACC says.

U.S. petrochemical producers are also getting a welcome lift from subdued natural gas prices. Surging gas production and weak industrial demand continue to send natural gas prices lower even as crude oil prices start to surge tractpricesarenearsix-yearlo wswithMaycontracts

at $3.49/million Btu. That is very positive for U.S. vinyls and polyolefin makers as U.S. resin exports become more competitive.

Even investors have taken a liking to the chemical sector again. Chemical stocks in the CW75 Index were up 15% year-to-date through May 26, compared with the flat performance of the S&P500. The CW75 stock index is now up 29% from its 2009 lows in early March.

Bond investors are also returning. Ashland and Dow Chemical were able to sell long-term debt offerings and retire, or dramatically reduce, bridge loans used to pay for the respective Hercules and Rohm and Haas (R&H) acquisitions. Praxair tapped short-term bond markets last week, and Rockwood Holdings said it would seek to change the terms of its senior secured credit facility, citing improving credit markets (p. 4).

M&A activity could heat up as well. Deals involving several sizable assets are progressing. Dow alone has identified $25 billion in assets that could possibly be sold, including recent deals to sell Morton Salt, a petroleum refining jv in the Netherlands, and its stake in an olefins and derivatives jv in Southeast Asia. Other possible Dow divestments include certain olefin and derivative businesses (p. 6), its rubber and latex units, and R&H’s powder coatings business. Dow is also evaluating options for its Dow AgroSciences business.

Sunoco continues to shop its chemical unit, and Ashland indicated recently that it is considering major assets sales, possibly including its Valvoline and distribution businesses.

There is still a way to go before recovery can be declared, but it is becoming clear that the chemical industry has reached its bottom and can start to look up.

R obert We sterveltrobw@chemweek.com

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