Middle East Revolts and Chemicals Part II
Mar03

Middle East Revolts and Chemicals Part II

Here’s an interesting statistic, traffic through the Suez Canal increased in January 2011 versus the same month in 2010. Some 1,485 vessels passed through the canal in January 2010, versus 1,418 the year before. Tonnage increased from 66,440 in 2010 to 75,501. However, this might not be all that telling. The protests began on January 25. So the statistics only cover the first, and least intense, week of the uprising. The Suez Canal Authority hasn’t yet come out with statistics for February, which would be more instructive. (BTW, the Suez Canal Authority keeps annual statistics on the kinds of cargo passing through the canal, including chemicals.) Also, the image was taken from marinetraffic.com, where you can track traffic headed to and from the canal on the Mediterranean, or anywhere else in the world for that matter. Looks like the transponders are off during the passage itself. There is another consequence of the unrest of the Middle East that I overlooked in the last post. That of BASF. Melody Voith, who is writing about BASF’s earnings for the next issue of C&EN, points out that analysts were quite interested in the Libyan operations of BASF’s Wintershall oil and gas unit. Wintershall shuttered production in Libya last week. The German military airlifted 21 German employees out of the country, leaving 368 local staff to, in a very close to literal sense, mind the fort. According Goldman Sachs analyst Richard Logan, the operations produce about 100,000 barrels per day. However, despite those high numbers, he and BASF don’t see a substantial impact to BASF earnings. A high, 93%, tax rate and the Gazprom minority stake in the operations whittle €1.3 billion in EBIT down to only €70 million in net income. “With respect to Libya,” chairman Jürgen Hambrecht said in a press release “BASF hopes that the situation will calm down soon.” Good luck with...

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The Middle East Revolts And Chemicals
Feb28

The Middle East Revolts And Chemicals

Here’s an interesting question: How might the political turmoil in the Middle East affect the global petrochemical industry? Let’s look at the potential areas of impact: Directly, the countries that have seen the most serious challenges to their ruling regimes—Egypt, Libya, Algeria, Tunisia, Yemen, And Bahrain—don’t have very large petrochemical industries, at least not in the sense that they are major producers of olefins and derivatives. However, they do have significant production of methane derivatives like nitrogen fertilizers and methanol. (Dow did once sign a preliminary agreement to modernize and expand a small Libyan petrochemical complex in 2007. But I haven’t heard company officials mention that project in a couple of years.) The countries that do have large petrochemical industries—Saudi Arabia, Kuwait, the UAE, and Qatar—haven’t seen as much unrest, though they haven’t been completely immune to political protests. If these countries do see serious challenges to the regimes, then there could be a disruption in chemical operations. Iran, which has had significant protests, is a separate question. Politics have already impacted its petrochemical industry in the form of sanctions over its nuclear program. This has been making it harder for Iranian firms to export chemicals. Geographically, the countries that are major petrochemical producers sit on the Persian Gulf. In addition, Saudi Arabia has the major Red Sea port of Yanbu, which is also a major petrochemical center. The countries with the turmoil are mostly in North Africa. Most petrochemical exports are headed in the opposite direction, towards Asia. However, Oman, which sets right near the Strait of Hormuz, is experiencing major protests. Moreover, any disruption to the Suez Canal would also disrupt petrochemical exports to Europe. But if there was such a disruption, the world would have more important fish to fry than a few containers of polyethylene. Oil prices always have the ability to disrupt the chemical industry. Brent crude prices have climbed since the turmoil began and have since hit $100 per barrel. That said, prices began the year in the mid 90s. The turmoil seems to be exacerbating an existing run up in prices. This will tend to make the natural gas based North American industry even more competitive versus the naphtha cracking rest of the world. (It should be noted that Algeria is also a major player in the international natural gas market, and has pipelines that connect it directly with Europe.) Finanlly, never underestimate the power of high oil prices to sabotage the economy. The last time oil prices climbed into the 90s was in the fourth quarter of 2007, when the recession...

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