Chemicals Industry review Q2-2008; RSM EquiCo Capital Markets

Recent Trends

These are extraordinary times for the industry, with major producers announcing 40-45 percent price increases during the past two months in response to skyrocketing raw materials costs. With oil at $135 a barrel, one might expect the chemical industry to be suffering — and it is in specific sectors. Yet the questionwe keep hearing is: “Can I get the product?” Price concerns are much less important.

During the past year, the United States has again become an attractive place to produce chemicals, largely because of the soft dollar. Recently, the nation's appeal has been further enhanced by the rising cost of shipping, which has made Asian and Middle Eastern bulk-chemical suppliers less competitive. Despite the slowdown in the U.S. economy, the domestic market is still significant, and a production base in the United States has become almost mandatory for European producers, most of which have seen significant margin decreases due to the strong euro.

The result: some U.S. plants are gaining new life…and some companies are becoming highly attractive to international buyers. Read complete report.