Prospects for Specialty Chemicals in 2007

Michael Sison KeyBanc Capital Markets analyst recently pointed out, by the strong growth in sales of organic chemicals in 2007, global specialty chemicals industry profits will be further growth, specialty chemicals company will benefit. In addition, Sison said that the recovery of the European market and the continued strong growth of the Asian market have made the professional chemicals market look promising.

However, Sison also expressed concern that the global professional chemical industry is also facing some unfavorable factors. According to KeyBank statistics, as of November 30, 2006, specialty chemical company's product inventory increased by 27% over the same period of last year. At the same time, due to the rapid increase in the price of petrochemical products, the profitability of professional chemical manufacturers is squeezed.

Due to the restructuring of some of the world's major professional chemical manufacturers and the influence of mergers and acquisitions, the global professional chemical industry landscape in 2007 will change. The German RAG completed the acquisition of Degussa in September of last year and plans to rename Degussa this year. At the same time, it reorganizes the RAG business into two departments, one of which includes coal related business and the other non-coal business. , including Degussa. Rohm and Haas Company plans to reorganize its business into three core divisions: specialty materials, electronic materials and performance materials. It also plans to increase investment in emerging markets. Both BASF and Dow Chemical have stated that they plan to acquire specialty chemicals assets to provide more products. BASF has recently acquired the Sichuan Pengshan Hi Con Concrete Admixture Company, had in 2006, BASF has acquired Johnson Polymer, the company Engelhard and Degussa's construction chemicals business. These mergers and acquisitions made BASF’s sales revenue in North America from US$11.3 billion in 2005 to US$15 billion in current years, making it the second largest chemical company in North America after Dow.