Process Business News Digest March/April

March/April 2009

Sales of low voltage motor drives in China reached $1708m in 2008, a growth of about 8.3% over 2007 according to IMS Research. Analyst Jackey Wang said: “The slowdown or even decline of some machinery sectors did decelerate the growth of sales to machine builders significantly in the second half of 2008. However, the impact of the global financial crisis on end-user markets was insignificant till now. Sales to end-user markets continued growing as a result of the government-guided energy-saving and omission reduction projects and related policies. The fast growth in end-user markets offset the slowdown of the machinery market.

Solutia Inc. is to sell its nylon business to an affiliate of SK Capital Partners II LP, a New York-based private equity firm that is focused on the chemical, material and healthcare sectors. Solutia will receive $50 million in cash and a 2% equity stake in a new company formed to hold substantially all of the assets of the nylon business. Solutia will also receive $4 million in deferred cash payments to be paid in annual $1 million installments
beginning in 2011. SK Capital will assume substantially all of the liabilities of the nylon business, including employee and pension liabilities relating to the active employees of the business, and environmental liabilities.

Profinet has reported record growth in the number of installed nodes, with 1.6 million nodes by the end of 2008 - up 40% on the 1.1 million nodes recorded at the end of 2007). The figures, it cliams, make PROFINET the "undisputed market leader in Ethernet-based industrial communication," adding that the PI (Profibus & Profinet International) estimates that the number will rise to 3 million by the end of 2010. Read more

Sulzer is to acquire privately owned Kühni Ltd, Allschwil, Switzerland, a specialist for thermal separation processes with sales of CHF37 million in 2008 and over 80 employees. Kühni supplies thermal, diffusional and membrane separation technology for the separation and purification of aqueous and organic mixtures. It also provides process engineering services, designs, manufactures and supplies process equipment and turn-key modular plants to the process industry with a focus on the pharmaceutical and fine chemical industry. Sulzer Chemtech said it will establish a new process technology unit by combining its current offering of process solutions for columns, membranes and crystallization with the activities of Kühni.

BNS Nuclear Services, part of Babcock International Group PLC, has acquired half of Bristol-based, Weir Strachan and Henshaw (WSH). The other half, comprising the defence business, was also acquired by Babcock and is now being integrated into Babcock Marine. The £65m purchase of WSH follows Babcock's acquisitions of both Alstec of Leicester and INS of Manchester last year under a strategy to establish itself as one of the country's top three nuclear engineering and site services contractors. It now employs over 1,000 people geographically spread over the UK. Last month saw the completion of the legal and HR processes for the 230 WSH staff who had already been working alongside their BNS colleagues.

Plimsoll Publishing has rated each of the UK’s leading 324 process plant engineering companies on their acquisition attractiveness and found that 25 companies are “ripe for the picking” based on a combined scoring system, incorporating overall financial strength, ownership, valuation and future potential. These 25 companies are all privately owned, yet are showing a serious deterioration in the financial performance. Given the reluctance of the banks to lend more, their time, money and options are running out, the analyst firm said.

The change from a non-renewable to a renewable feedstock base in the chemical industry is accelerating due to increasing prices of non-renewable feedstock and the growing ability of certain microorganisms to yield higher productivity of the desired chemicals, notes Frost & Sullivan in a new analysis of the biochemicals market. In its report, titled Strategic Analysis of the Worldwide Market for Biorenewable Chemicals, F&S estimates that the market earned revenues of $1.63 billion in 2008 and will reach $5.01 billion in 2015. The research focused largely on applications for lactic acid, succinic acid, glycerol and 1,3 propanediol in bio plastics, bio composites and 'green' chemicals. Read more

Festo and leakage management firm LeekSeek International are launching a joint energy-saving service for users of pneumatic automation, which provides site-wide detection, management and resolution of compressed air leakages. The potential cost savings are huge industry analysts estimate that European manufacturers currently waste 25-35% of the compressed air that they generate, mainly through leakage caused by bad maintenance practices. In the UK, compressed air typically costs companies about 1.5 pence to compress 1 cubic metre of air to 7 bar and a medium-size manufacturing company is likely to consume about 50 cubic metres of air per minute at an annual cost of £394,200. Festo and LeekSeek claim their service could reduce these costs by up to 30%.

Chemtura Corp. has announced that it and 26 of its US affiliates have filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code. Chemtura's non-U.S. subsidiaries were not included in the filing and will not be subject to the requirements of the US Bankruptcy Code. Chemtura's US and worldwide operations are expected to continue without interruption during the restructuring process, the company said. With 2008 sales of $3.5 billion, Chemtura is a global manufacturer and marketer of specialty chemicals, crop protection products, and pool, spa and home care products.

Carbon nanotubes could be more affordable and useful to many industrial areas, including flame retardant materials market, said Frost & Sullivan. The global flame retardant chemicals market is valued at just under $3 billion, with demand for non-flammable products ever growing. The compound annual growth rate of this market is estimated at 4% to 5% for the total market up to 2015. There will be stable demand in established markets such as North America and Europe. As of 2006, the North American market was valued at $780 million, and the European market was valued at $762 million. Based on its analysis, F&S believes there are growing market opportunities for carbon nanotubes application as a flame retardant material.

Despite the prevailing economic gloom, interest in ACHEMA remains as strong as ever, according to Dr Thomas Scheuring, head of exhibition congresses at DECHEMA. The Frankfurt event "remains the trend-defining platform for chemical engineering and the process industries. It is the number one showcase for new technologies and products in our field," he said. ACHEMA 2009 runs from 11 to 15 May. A total of 4,000 exhibitors have booked space to show their products, in halls spanning 140,000 square metres, to an estimated 180,000 visitors from 100 countries.’

The worldwide market for production machinery automation is set to grow at a compounded annual growth rate (CAGR) of 3.4% over the next five years. The market was $18.0 billion in 2008 and is likely to be over $21.2 billion in 2013, a new ARC Advisory Group study forecasts. "Increasingly more machinery applications are moving to much higher speeds of operation as well as providing more capability to reduce changeover time. Production raw materials are becoming less consistent as recycled materials enter the market. The result is that machine builders need to consider a wider range of operation in the original design to accommodate changes," according to research director Sal Spada, the principal author of the report.

Sales of machine vision hardware are projected to grow faster than the average for industrial automation, according to a report on this market by IMS Research. The world machine-vision hardware market was estimated to be worth over $1.6 billion in 2008 and forecast to grow to over $2.1 billion by 2012. The average annual growth in revenues was projected to be 7.2%, and in unit shipments 9.0%. Fierce competition, particularly from manufacturers in the Far East, is driving average prices down. “However, there are substantial differences between the market growth expected in different regions. Two thirds of revenue growth to 2012 will come from Asia” commented John Morse, author of the report.

The market for photoelectric sensors fell 40% in December 2008 and 42% in January 2009 compared to the month of the previous year, and according to ARC Advisory Group, will have a strong negative growth in 2009 and growth rates around zero for 2010. “The development in the next years is mainly bound to the development of the machinery and automotive market that are both strongly tide to the photoelectric sensor market. This will sustainably alter the structure of the photoelectric sensor market, “ said Florian Güldner, the principal author of a new ARC photoelectric sensor study. On the technology side, sensor manufacturers face the challenge of network standards like IO-Link and the fact that production will get more flexible. "IO-Link also offers a way to partly avoid the harmful price competition, which dominates the market structure and competitive environment on most parts of the markets," said the report.

The European Commission on 12 March approved the acquisition of Ciba Holding AG by BASF, subject to it divesting individual product lines and production plants as well as a product license. The conditions apply to products that accounted for sales of less than €100 million in 2008, said BASF.

Arkema plans to close its production at the La Chambre industrial site in Savoie, France by end 2009. The site produces various amines and oxygenated solvents, including methyl ethyl ketone used primarily in paint and varnish manufacture. Its raw material, secondary butanol, is supplied from the Total Petrochemicals plant in Notre-Dame de Gravenchon, Seine-Maritime. The supply conditions for this secondary butanol feedstock are creating ongoing difficulties for Arkema¹s methyl ethyl ketone production operations. The plan also includes investments to consolidate the Savoie site's other activities, and would result in the loss of 22 positions, with no redundancies, said Arkema, which also aims to sell its methyl ethyl ketone marketing and sales assets to Sasol Solvents Germany GmbH (Germany).

Royal Dutch Shell plc and Codexis Inc. have expanded their agreement to develop better enzymes that could accelerate commercialisation of next generation biofuels. Shell also increased its equity stake in Codexis and will take an additional seat on the company¹s board. As part of the agreement, Codexis will work closely with Shell and Iogen Energy Corp. to enhance the efficiency of enzymes used in the Iogen cellulosic ethanol production process. The Iogen demonstration plant in Ottawa, Canada currently produces hundreds of thousands of litres of cellulosic ethanol from agricultural residue, such as wheat straw. The research programme with Codexis aims to enhance the Iogen process and shorten the timeline to its full-scale commercial deployment. Iogen¹s technology uses enzymes to break down the cellulose in agricultural fibre and convert it to sugars, which are then fermented and distilled into ethanol.

Dow Chemical Co. has reached an eleventh hour deal with Rohm and Haas to close the acquisition on "substantially altered" financial terms by 1 April. The agreement resolves the litigation initiated on 26 Jan by Rohm and Haas against Dow for apparently trying to back out of the acquisition, which creates the world's leading specialty chemicals and advanced materials company. "Dow has taken the time and steps necessary to close this transaction on substantially improved financial terms to the company, despite the continuing financial and economic uncertainty facing our world. The strategic benefits of the acquisition of Rohm and Haas have never been in question; just the path to completing the deal," said Andrew Liveris, Dow chairman and CEO.

ABB has posted what it described as "solid operational results in a demanding market," with record revenues, EBIT and cash from operations for the full year 2008. The performance, however, included a substantial dip in Q4 earnings as orders decreased 19% due to lower orders for large new power infrastructure projects, especially in emerging markets, and reduced investments in new industrial capacity. Orders to upgrade power grids and replace equipment continued to grow in mature markets. Demand for energy efficient technologies also increased. CEO Joe Hogan said: "Orders were down as customers delayed projects or cut capital expenditures. But the long-term drivers of our business to increase energy efficiency, secure reliable power and improve industrial productivity have not changed. The outlook for 2009 remains uncertain. We are taking steps now to ensure that we remain competitive, no matter how the market develops."

Peristaltic pump specialist, Watson-Marlow Pumps Group is reporting significant growth in the South African water industry, as demand increases for the precise dosing capabilities of its peristaltic technology. The peristaltic pump market’s growth in South Africa is heartening news. Despite the challenging market conditions, continued economic growth is being observed in this region. Further details

Drax Group plc has reached agreement with Welsh Power Group Limited to acquire Haven Power Ltd , an electricity supply business serving business customers. The consideration for the business is £10.75 million which includes a power trading book position worth £3.5 million, reflecting its current mark to market value. Haven currently supplies electricity to around 22,000 small and medium sized businesses, equating to some 0.7TWh per year. It has the capacity to grow significantly from this base, adding value in its own right. In addition, Haven will provide another route to market for electricity generated by Drax, not only in terms of volume but through securing term contracts with customers.

Over 26 million new nodes were installed in industrial automation networks in 2007, estimates a recently published report from IMS Research. Despite current economic uncertainties, the report concluded that the average annual growth rate of the numbers of all new nodes installed between 2007 and 2013 would be 7.8%. Ethernet will grow more than twice as fast as the overall average. Report author John Morse commented “Assessing the market from product data has allowed us to get a clearer picture of where different protocols are used; it also highlighted the considerable regional differences in their likely use. Another of the report’s findings was, of the different products, just how influential sensors would be, on how the market would develop”.

Tyco Flow Control, part of Tyco International Ltd, has completed the acquisition of Kings Control Services Ltd. Privately-held Kings Control Services is a valve service and repair business based in Teesside, UK, that specialises in servicing industrial control valves, as well as safety relief valves. “Kings Control Services’ knowledge and experience in this high-value product group will strengthen our service platform in Europe and provide additional aftermarket business opportunities for our customers,” commented Gilbert Villa-Massone, President of Tyco Valves & Controls, Europe, Middle East & Africa. “Our end users are increasingly looking to outsource their service requirements to concentrate on core competencies and this acquisition will help us to meet our customers’ needs in the UK.”

BP and Verenium Corp. have formed a 50-50 joint venture to develop and commercialise cellulosic ethanol from non-food feedstocks. The JV company will act as the commercial entity for the deployment of cellulosic ethanol technology being developed and proven under the first phase of the BP-Verenium partnership, announced last August. Together the companies have agreed to commit $45 million in funding and assets to the joint venture company. This collaboration is intended to progress the development of one of the nation's first commercial-scale cellulosic ethanol facilities, located in Highlands County, Florida and to create future opportunities for leveraging cellulosic ethanol technologies.

Flexsys America LP, part of Solutia Inc. is moving forward with its patent infringement case against Sinorgchem Co. Ltd, Korea Kumho Petrochemical Co. Ltd, Kumho Tire Co. Inc. and Kumho Tire USA Inc. in the US District Court for the Northern District of Ohio. The suit claims infringement of US patents held by Flexsys as a result of the importation, sale and use in the US of 4-ADPA made by Sinorgchem, 6PPD and other antidegradants made from Sinorgchem's 4-ADPA, and tyres made by Kumho Tire containing those antidegradants. Flexsys is seeking a multi-million dollar damage award, as well as a permanent injunction against the defendants.

Previewing BP's annual strategy presentation by the executive management team to the financial community in London, chief executive Tony Hayward said the turnaround the company had achieved in the last 18 months gave it strong financial and operational momentum to face what will be a tough year in 2009. "We intend to meet the challenges of 2009 head on and, where possible, to turn them to our advantage. Our strategy is an enduring one. We are delivering upstream growth and making good progress turning around our downstream business. The future has not been cancelled."

"India's petrochemicals sector looks set to become a major global force over the longer term," Vikram Mehta, chairman of Shell India has told the Indian Plastics Federation. However, it will need to overcome short-term economic difficulties and the longer term energy challenge of securing more energy while reducing carbon dioxide emissions to protect the environment. A major driver for future growth is India's economic development program, which includes over $500-billion for infrastructure investment. Government petrochemical policies in India are focused on supporting demand and production growth. The timing of new projects will be important to their profitability, the Shell executive suggested. India will need a greatly expanded energy infrastructure, Mehta noted.

PPG Industries is implementing a second restructuring plan in response to global economic conditions, low end-market demand, and acceleration of cost-savings from the integration of the SigmaKalon businesses acquired in 2008. The plan is expected to deliver pretax cost savings of about $60 million in 2009, growing to an annual run rate of about $140 million thereafter. It is expected to cost about $160 million, with a further charge of up to $50 million possible later this year for additional plant closures. The cuts include a paint manufacturing operation at the company¹s Saultain, France, plant; several smaller production, laboratory, warehouse and distribution facilities across PPG's businesses and regions; and a broad reduction in employment across the company globally. In total, approximately 2,500 jobs will be axed. Charles Bunch, chairman and CEO said most of the cost-reduction activity would be in the company's automotive OEM coatings and industrial coatings business units, which have been particularly hard hit by severe declines in global end-use market demand.

BP recently announced record full-year replacement cost profits of $25.6 billion for 2008, a jump of 39 per cent compared with 2007. Total investment for the year totalled $30.7 billion, including acquisitions and asset exchanges. Replacement cost profit for the fourth quarter was $2.6 billion, down 24 per cent on the corresponding quarter of 2007. BP chief executive Tony Hayward said the depressed fourth quarter result mainly reflected the recent dramatic fall in the world price of crude oil. There was also a net adverse effect of $900 million from items not expected to recur in future quarters. These items, which arose from the unprecedented volatility of oil prices and exchange rates during the fourth quarter, included a TNK-BP loss of $700 million arising from excise duty lags and impairments, foreign exchange losses in the downstream business, and a one-off increase in the tax rate for the quarter.