August 2006

Five Picks In Ethylene Production For A 2007 Peak

Banc of America Securities said the near-term outlook for ethylene appears "balanced" although supply is expected to remain constrained until 2008. The research firm favors Dow Chemical and Lyondell Chemical, both rated at "buy," for ethylene production. It also favors PPG Industries, Eastman Chemicaland Celanese.

"We continue to project an ethylene peak of 2007," Banc of America said, adding that as project delays in the Middle East mount, producers may enjoy "a wider window of opportunity to reestablish and maintain peak margins." The research firm projects global ethylene capacity utilization could exceed 93% in 2008, versus 91% to 92% in 2005 through 2007. The research firm said delays in Middle East ethylene projects will benefit Nova Chemicals, Lyondell Chemical, Westlake Chemical, Dow Chemical and Eastman Chemical. In its coverage of the chemicals sector, Banc of America's top picks are Monsanto and PPG Industries, both rated at "buy" with target prices of $78 each. Its least favorite picks are Nova Chemicals and Westlake Chemical, both rated at "neutral" with respective target prices of $31 and $30.

Liveris' Dow Sees Good Chemistry In The East

Dow (nyse: DOW - news - people )President and Chief ExecutiveAndrew Liveris added that its China unit is likely to merge with other chemical companies in China and that the country may become its biggest market by 2030. The company counted $2.2 billion in sales in the "Greater China region" in 2004, nearly 40% higher than the previous year, although Liveris did not provide a forecast for the company's operations in China this year. As well as setting up a research and development center in Shanghai to help boost its growth, the company is also conducting a feasibility study with China's largest coal producer Shenhua Group for a coal-to-olefins project. Olefins--or alkenes--are coal by-products that can be used for packaging and other products. The company has ten factories in the China region, with business centers in five major cities.

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