Engineering News

Chemicals seen returning to 1989 peak
Merrill sees tight supply-demand balance boosting prices

By Leslie Wines, CBS MarketWatch

SAN FRANCISCO (CBS.MW) - Top chemicals producers gave a mixed performance Wednesday after Merrill Lynch predicted an accelerated recovery in the sector in 2005 and 2006 to the peak levels seen in 1988 and 1989, noting strength in the ethylene glycol, ethylene and Chlor-alkali market segments.

DuPont was up 5 cents at $48.11 as Dow Chemical traded 11 cents lower at $48.28.

Lyondell was unchanged at $28.09 while Air Products and Chemicals strengthened $1.09 to $58.02..

Nova Chemicals was down $1.65 at $44.46 after Merrill Lynch said it remains neutral on the stock, projecting potential price appreciation of less than 20 percent in 2005.

Merrill Lynch lifted its 2005 earnings per share estimates for Dow, Lyondell, and Nova to reflect much stronger-than-expected commodity chemical margins "particularly for those producers like Dow and Lyondell who have the ability to utilize a heavy liquids feedstock slate."

The research firm also increased its 2006 estimates for Lyondell and Nova in light of an anticipated return to the peak margin levels for ethylene seen in 1988 and 1989.

According to Merrill Lynch, in 2005 and 2006 there will be a peak in the sector which will build on the tighter supply-demand balances and sharply improved margins for ethylene glycol, ethylene and Chlor-alkali products which appeared in late 2004.

Merrill also reiterated "buy" ratings on Air Products and Chemicals, DuPont, and Monsanto, which was down $1.35 at $50.99 after the herbicide maker reported a first-quarter loss.

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