Intellectual Thoughts by Sanjay Panda: chemicals

Showing posts with label chemicals. Show all posts
Showing posts with label chemicals. Show all posts

Oil Prices drops Below $30 a Barrel

Since  the new year, the price of oil has surprised even the most bearish punters, plunging  below $30 a barrel, its lowest level since 2003.  ( Lost almost 70% in last eighteen months) Turmoil in Chinese markets and the expected increase in Iranian crude exports added to concerns that a global glut will linger.

The trouble is that apart from India and a shaky China ( consumes about 12% and second only after US of total  global oil demand), demands are not looking promising anywhere  else this year.  Europe is unlikely to see  strong oil-demand.  Although America’s economy continues to grow, tightening fuel-efficiency standards,  caps the upside.  In  Middle East, where fuel use rose last year,  however citizens are more likely to keep their cars off the road after their governments raised petrol prices/ eliminated fuel subsidies altogether to shore up  their public finances.

Selective  oil  & allied  industries  has began  big cutbacks. But as of now they are not yet enough to reduce the glut. Global inventories are at record highs. An estimated 2,50,000 oil workers have lost their jobs,  manufacturing of drilling and production equipment has also fallen sharply. About 40 companies in North America have gone into bankruptcy protection.

Goldman Sachs said this week, it is sticking to its call that oil prices could fall to $20 a barrel but added that it is still not the bank’s base-case forecast.  Such low prices  seems possible as we   expect  a  surge  in Iranian  oil ( likely to add about 500,000 barrels within weeks of the sanctions relief)  to the already oversupplied global market.

Largest U.S. chemical companies to combine in megamerger. Could spark more deals!!

Two American  Chemical giants and possibly among the oldest,  DuPont and Dow Chemical  have agreed to combine in an all-stock merger valued at $130 billion  which  would be the 18th largest deal ever.

Dow Chemical Co. and Dupont Co. that are 118 and 213 years old, respectively, announced the blockbuster, tax free  deal that would take two years to complete.  Following the completion of the deal's in 2016, the  merged entity  would eventually    will  break up  into  3 separate, publicly-traded entities focusing on Agricultural products, Material sciences, and Specialty products.

The deal, the fifth-largest corporate merger of 2015, would certainly receive scrutiny from federal regulators, especially regarding the new companies  place in global agricultural production, including seeds, insecticides, and pesticides. Executives from both companies  however said the agrochemicals businesses have little overlap and any asset sales would likely be minor.

By revenue, the material sciences company – which makes products for the packaging, transportation, and infrastructure industries, to name a few – will be the largest. Its combined revenue in 2014 was around $51B on an adjusted basis. It will compete with the likes of corporate titans BASF, Honeywell, and 3M.

The specialty products company, with a combined revenue of $13B in 2014, would sell materials to the electronics and communications industries, among others.

The agriculture company, focusing on seeds and chemicals, would have a combined adjusted revenue of $19B overtaking BASF as the leader in agrochemicals. In the seed industry, DowDupont is pitted against behemoth Monsanto.

Dow shareholders would own 52 percent of the new company after preferred shares are converted, the companies said. The agreement includes a $1.9 billion termination fee under specified circumstances, such as rejection by shareholders.
The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation

Prior to the merger, Dupont said in a statement it will slash $700 million in costs, with ten percent of its workforce "impacted" by the move, while Dow is expected to drop $300 million in costs.

As per Dealogic , this   merger would represent the 18th largest corporate deal of all-time. It would trail the 2015 deals made by Allergan and Pfizer, Anheuser-Busch InBev and SABMiller, BG Group and Royal Dutch Shell and Time Warner Cable and Charter Communications.

Dow and Dupont have a combined annual revenue of around $83 billion, with operating profit of about $15 billion.

Pfizer regains pole position by acquiring Allergan in a $160B deal.

Pfizer and Allergan are joining in the biggest buyout of the year, a $160 billion stock deal that will create the world's largest drugmaker. The deal is the latest and the largest to be aimed at helping an American company lower its taxes by reincorporating overseas, a practice known as a corporate inversion. The transaction would be structured as a so-called reverse merger, in which Allergan, the smaller of the two companies, would technically be the buyer.

Pfizer will keep its global operational headquarters in New York but   its legal domicile and principal executive offices in Ireland.  Legacy Pfizer expected to lead the combined company which will be called Pfizer Plc, which would have more than $63 billion in combined sales and a product portfolio that includes Viagra, Celebrex, Botox , JuvĂ©derm and  about 110,000 employees worldwide.

Under the terms of the all-share deal, Pfizer would essentially pay $363.63 for each Allergan share .  Allergan shareholders would receive 11.3 shares of Pfizer for each share of Allergan they hold. Pfizer shareholders would receive one share in the combined company for each share they hold, but have the option to take up to $12 billion in cash for some or all of their shares instead.

Pfizer Inc. Chairman and CEO Ian Read will serve in the same roles with the combined company while Allergan Plc. leader Brent Saunders will become president and chief operating officer. The combined company’s board would consist of 15 directors, with Pfizer’s 11 current directors and 4 directors from Allergan.

After the transaction, Pfizer shareholders are expected to own about 56 percent of the combined company, with the remaining 44 percent owned by Allergan shareholders The combined entity expected to achieve more than $2 billion in annual cost savings over the first three years after the deal closes.

Pfizer said that it expected the combined company’s adjusted tax rate to be between 17 percent and 18 percent by the first year after the deal is finalized. Last year, Pfizer’s tax rate was about 26.5 percent, and it is expected to be about 25 percent this year. By comparison, Allergan reported a tax rate of just 4.8 percent for 2014 and is expected to have a tax rate this year of about 15 percent.

Pfizer, based in New York, has engaged in several large deals in recent years, buying Wyeth in a $68 billion  deal and  Hospira, a maker of generic treatments, for about $17 billion this year.

Allergan was created through several mergers since 2012 that included the drug makers Forest Laboratories, Actavis and Warner Chilcott.

The deal would enable Pfizer to surpass  Novartis AG  and regain the industry's top spot.

Electric vehicles ( EVs), Tesla & Lithium

( Pic: Tesla's web site)

Throughout modern times we have witnessed  many  advancements in technology. One  major advancement  in environmentally friendly technology is the Electric Vehicle (EV). Electric vehicles have brought about many advantages and impacts including: decreased emissions, minimal   fossil fuel usage and increased safety.
So what exactly a electric vehicle ( EV) is ???. EVs differ from fossil fuel-powered vehicles in that the electricity they consume can be generated from a wide range of sources, including fossil fuels, nuclear power, and renewable sources such as tidal power, solar power, and wind power or any combination of those and stored mainly in  Lithium Batteries.

The modern electric vehicle (EV)  is broadly divided into  two categories Hybrid ( and or  Plug in)  Electric Vehicles (HEVs & PHEV) and   Pure Electric Vehicles (PEVs).  HEV & PHEVs combine internal combustion engines with limited-range electric battery packs. After the battery runs out, the internal combustion engine takes over, giving the driver unlimited range as long as there is a fuel station nearby. PEVs, on the other hand, run only on battery power   &  for these battery  our  Lithium   products  are the crucial ingredients.

The PEVs are  ‘pure’ electric vehicles. Since there is no internal combustion engine (and hence, no emissions), the environmental benefits are immense. PEVs are expected to grow at a whopping 37% CAGR over the next few years and account for  3% of all global vehicles sales by 2020.  More enthusiastic estimates, predicts electric cars to completely replace  Petrol/Diesel vehicles by 2030.

Several factors are driving the growth of  EVs are:
  • Decreasing battery costs, which are expected to drop by 70% by 2015 & 90% by 2018.
  • Decreasing  Battery charging time.
  • Better cars with a range in excess of 500 KMs (Tesla Model S).
  • Innovations, such as Tesla’s electric Supercharger network.
  • Prices of solar panels, widely deployed in Tesla’s Supercharger network, which have dropped by 60% from 2011.
  • Improved safety of PEVs over   fossil fuel  vehicles. Tesla’s Model S, for instance, was recently awarded the highest ever safety rating by NHTSA, Euro NCAP.
  • Strong public perception due to environmental benefits of zero-emission PEVs.
Altogether, the tremendous growth of electric vehicles has shaken up the automobile industry and sent most manufacturers scrambling to compete with existing industry leader, Tesla.

Tesla’s Impact 

The EV industry can be broadly divided into two periods: before and after Tesla.
The EV  industry’s ambition – to create a  fully electric vehicles that could outperform cars with internal combustion engines (ICE) – was deemed too far-fetched to be worthy of serious consideration. With limited resources, incompetent technology and lack of public interest, the industry produced vehicles that were too eccentric, too incapable or too cost-prohibitive for mass-consumption.
All this changed after Tesla. Tesla’s first stab at an EV resulted in the Tesla Roadster – the fastest ever production electric car with a top speed of 125 mph and a range of 244 miles. That it could go from 0 to 60 in 3.7 seconds and looked like a  sportscar was testimony to Tesla’s engineering capabilities. More importantly, it signalled to the broader audience that EVs had arrived on the big stage. Tesla phased out the Roadster  to focus on the more consumer-friendly Model S sedan. At a base price tag of $64,000, the Model S is significantly more affordable than the Roadster. With the company expected to launch a long-awaited SUV (Model X), followed by a low-cost consumer model, expect the automobile industry to be transformed radically in the next few years.
Tesla’s success has triggered a panic catch-up reaction among automobile majors. GM, Nissan, Ford, VW, etc are now getting into  both  PEVs and H (P)EVs at different price tags instead of  earlier offerings of limited numbers of  HEVs  only approach. With research dollars pouring into EV R&D,  we expect  further significant  technological breakthroughs in the next few years for these  Lithium  batteries.  Further wider adoption of electric cars will also reduce battery prices   significantly as economies of scale kicks in. 

Who will reign supreme in the EV market is a matter of speculation for now. Tesla’s low-cost model could be a phenomenal hit or a complete dud, or  Tesla’s competitor might go kaput on launch or VW’s Audi A3 e-Tron could hit the jackpot with its simple design and Audi brand name.  The only thing concrete for now is  whoever wins the EV race,   Its  the   Lithium producers  getting increased  attention  due to  winds of change that have gripped the entire global  automobile industry.