Uncertainty looms in EU
European chemicals output contracted by 2% in 2012 compared
with 2011, according to European chemicals group Cefic. By
lowering its forecast released in September, the chemicals
trade body downgrade reflects recent data showing a stagnant
European economy and a further decline in chemicals output
since the first quarter of 2012. Cefic forecasts a slight expansion of 0.5% in 2013.
EU automotive and construction segments were a drag on
chemicals demand in 2012, offering few encouraging signs.
Sluggish demand remains for new cars as government-backed
incentives to replace vehicles have now run their course. The
fallout from overcapacity in the construction market has yet to wind
down as the European building sector remains at historically
Once the final numbers are in, EU chemicals production for
2012 will likely remain 8% below its pre-recession level. On
the product front, volatile oil and naphtha prices have caused
further uncertainty in the petrochemicals sector as customers
and producers both attempt to optimize inventory levels.
A recent survey by the American Automobile Association (AAA)
finds a strong likelihood of consumer confusion and the
potential for voided warranties and vehicle damage as a result
of the US Environmental Protection Agencys (EPAs)
recent approval of E15 gasoline. Ninety-five percent of
consumers surveyed have not heard of E15, a newly approved
gasoline blend that contains up to 15% ethanol. AAA is
encouraging regulators and the industry to stop the sale of E15
until more than 5% of the cars on the road (the current number)
are approved by automakers to use the fuel. Only about 12
million out of the more than 240 million light-duty vehicles on
the road today are approved by manufacturers to use E15
gasoline, based on a survey conducted by AAA of auto
manufacturers. AAA automotive engineering experts also have
reviewed the available research and believe that sustained use
of E15 in both newer and older vehicles could result in
significant problems such as accelerated engine wear and
failure, fuel-system damage and false check engine
lights for any vehicle not approved by its manufacturer to use
One employee at Valeros Memphis, Tennessee, refinery died after a chemical
exposure incident, according to news reports. The accident
occurred December 3 when an equipment failure released a
hazardous chemical inside the refinery, leading to chemical burns
when a small glass window shattered in the alkylation unit.
Valero said the incident did not involve an explosion or fire,
despite initial reports from local media to the contrary.
Operations at the 180,000-bpd refinery were not affected,
according to the company.
Ecolab has amended its acquisition agreement with Permian
Mud Service, the parent company of Champion Technologies, so
that Champions downstream process and water solutions
business will be spun-off to Permian shareholders prior to the
Ecolab acquisition. As such, Ecolab will not be acquiring those
specific operations. Sales in 2011 for the downstream business,
which primarily serves refineries, were approximately $50
million. Accordingly, the value of the transaction will be
reduced to $2.16 billion from $2.2 billion, subject to further
adjustment as provided in the acquisition agreement.
The Vietnamese government recently announced a roadmap for
the blending ratio of biofuel with traditional fuel. The policy
mandates the use of E5 biofuel in seven Vietnamese localities
beginning December 1, 2014. From December 1, 2015, the use of
E5 will be compulsory for all road vehicles nationwide. E10
biofuel will be used in these localities from December 1, 2016,
and E10 use will also become compulsory nationwide from
December 1, 2017. Production and supply chain/distribution
challenges have resulted in Vietnams ethanol production
being more expensive than what could be produced overseas.
Vietnamese consumers have also been reluctant to use ethanol
because of perceptions about fuel quality and safety.
Economic prospects are looking brighter for the heating,
ventilation and air conditioning (HVAC) industry in 2013.
Potential growth exists in a resurgent housing market and in
consumer interest and investment in green HVAC
equipment, according to a new report from SBI Energy. The
report projected the total shipment value
of HVAC manufacturing products to reach $14.5 billion by the
end of 2012, with that number growing to nearly $17 billion by
Growth of the industry will begin to accelerate by
2015, said Darren Bosik, an analyst with SBI, when
the impact of government-funded initiatives is felt in US construction and housing industries,
most notably the movement to construct zero-energy buildings
Critical to the growth of HVAC manufacturing is the
resurgence of US household remodeling and the recovery of new
construction and housing and related industries such as steel.
Driving the total HVAC equipment manufacturing growth to 2017
will be heat transfer equipment [4.4% compound annual growth
rate (CAGR)] and air source heat pumps (4.9% CAGR). The two
categories are characterized by lower unit costs, and demand
will increase with an expected boom in construction projects that require replacements
of these products.
The market for fuel ethanol in the US remains
unconcentrated, with 154 firms nationwide either producing
ethanol or likely to be in production in the next 12 to 18
months, according to the US Federal Trade Commissions
(FTCs) 2012 report on the state of US ethanol production.
FTC staff calculated market concentration for ethanol
production using different measures. The staff concluded that,
as of September 2012, there were 10 fewer ethanol producers in
the US than at the time of the FTCs 2011 report. The
largest ethanol producers share of capacity decreased
slightly to 11.1% of domestic ethanol production capacity,
which was below the 11.5% share in 2011.
Plains All American Pipeline has agreed to acquire four
operating crude oil rail terminals, one terminal under
development and various contractual arrangements from US
Development Group for approximately $500 million. The assets to
be acquired include three crude oil rail loading terminals
located in the Eagle Ford, Bakken and Niobrara producing
regions with an aggregate daily loading capacity of
approximately 85,000 bpd; a rail unloading terminal at St.
James, Louisiana, with a capacity of approximately 140,000 bpd;
and a project to construct a crude oil
unloading terminal near Bakersfield, California.