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INDUSTRY SURVEYS

CHRISTOPHER MUIR Equity Analyst

Chemicals May 2016

May 2016

INDUSTRY SURVEYS

Chemicals

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PERFORMANCE

6 Sector Overview

17 Industry Overview

Revenues Expenses Profits & Margins Valuation Capital Markets

INDUSTRY PROFILE

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Industry Trends

How the Industry Operates

Key Industry Ratios and Statistics

How to Analyze a Company in This Industry

Glossary

Industry References

Comparative Company Analysis

May 2016

INDUSTRY SURVEYS

Chemicals

CONTRIBUTORS

ROBERT KEISER Vice President

KENNETH LEON Global Director, Equity Research

RICHARD PETERSON Director, Capital Markets

TODD ROSENBLUTH Director, ETF Research

BETH PISKORA Senior Director, Content

SAM STOVALL Managing Director, U.S. Equity Strategy

TOPICS COVERED BY INDUSTRY SURVEYS

Aerospace & Defense

Airlines

Automobiles

Banks

Beverages

Biotechnology

Capital Markets

Chemicals

Commercial Services & Supplies

Communications Equipment

Consumer Finance

Electric Utilities

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Health Care Providers & Services

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Household Products

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Information Technology Services

Life Sciences Tools & Services

Machinery

Media

Metals & Mining

Multiline Retail

Oil, Gas & Consumable Fuels

Paper & Forest Products

Pharmaceuticals

Real Estate Investment Trusts

Road & Rail

Semiconductors & Equipment

Software

Specialty Retail

Technology Hardware

Telecommunications

Textiles, Apparel & Luxury Goods

Thrifts & Mortgage Finance

May 2016

INDUSTRY SURVEYS

Chemicals To our valued Industry Survey clients:

S&P Global Market Intelligence is pleased to inform you of many insightful enhancements and modifications to our product offering. First of all, you will notice an entirely new Performance section in addition to our traditional coverage of key industry statistics and trends that are now contained in the Industry Profile portion of our publication. The new and innovative Performance section is predominantly driven and empowered by S&P Capital IQ company fundamental data that is aggregated and market capitalization index weighted according to Global Industry Classification Standards (GICS) methodology. By taking this customized proprietary approach to data collection and analysis we are now able to provide our clients with a unique, contemporary and highly relevant perspective on the financial performance of entire sectors and related specific industries representing groupings of multinational corporations included in the S&P 1500 index, according to the most current financial reporting metrics available to the marketplace.

Appropriately, the specific industry titles covered by our Industry Survey report service offering have now also been aligned to the widely recognized and accepted GICS format. This new approach provides a direct connection between the data and insights provided in our upgraded reports, and many stock market indices and index-based securities, such as Exchange Traded Funds (ETFs). We have also added a new Sector Overview portion at the beginning of each report that is designed to summarize the fundamental sector-level backdrop in which the specific industry in-focus operates and competes on a peer-group basis. Coverage of capital market activity (M&A and, IPOs), inclusive of data, trend and deal analysis, has also been significantly enhanced as part of our upgraded service offering.

The sector and industry level data, observations and analysis are presented in a deliberate ordered fashion where the cumulative insights flow in a logical and decision-supportive progression, specifically:

INDUSTRY SURVEYS CHEMICALS / MAY 2016 5

EXECUTIVE SUMMARY

 S&P Global Market Intelligence thinks cost saving efforts and a stabilizing dollar can spur earnings per share (EPS) growth for the chemicals industry by about 5% in 2016, from less than 3% in 2015, despite the slight decrease expected in industry revenues this year. Our profit and revenue growth forecasts are tied to the likelihood of a steadily growing US macroeconomic environment, significantly lower oil prices, and slowing economic growth overseas.

 Rising levels of capital spending and share repurchases in the industry are likely over the next few years, leading to an increase in debt levels that S&P Global Market Intelligence thinks will lead to weaker balance sheet metrics and interest coverage ratios in the near term. However, we think the industry will remain financially healthy, as we expect higher earnings growth to return in 2017.

 Chemicals industry stock-price performance could rise further in 2016, and S&P Global Market Intelligence foresees limited downside due to the prospect of earnings growth this year, assisted by low interest rates. While we do not foresee any new negative catalysts for the chemicals industry in the near term, slowing economic growth overseas and lower or flat commodity prices will likely offset economic growth in the US.

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SECTOR OVERVIEW

The chemicals industry is a component of the materials sector. This sector represents 2.9% of the S&P 500 and 3.3% of the S&P 1500, as of May 13, 2016. In the S&P Global Industry Classification System (GICS), the materials sector is comprised of 15 sub-industries organized into five industries. The five industries are chemicals, construction materials, containers & packaging, metals & mining, and paper & forest products.

From a stock-price perspective, the 11.9% price-decline recorded by the materials sector in 2015 lagged the 0.7% drop in the S&P 500 index. From a profit perspective, as of March 31, 2016, the sector recorded a 5.6% decrease in operating earnings per share (EPS) in 2015, compared with the S&P 500’s 0.6% decline.

For 2016, the materials sector is expected to record a 1.5% increase in EPS, versus an decrease of 0.1% for the S&P 500. The sector’s price-to-earnings (P/E) ratio of 17.6x, based on consensus 2016 operating EPS estimates as of April 6, 2016, is slightly above the S&P 500’s forward P/E of 17.3x. S&P Global Market Intelligence also reports that the consensus long-term EPS growth estimate for this sector is 10.3% versus the S&P 500’s 10.6%, giving the sector a P/E-to- projected-EPS growth rate (PEG) ratio of 1.7x, which is slightly higher than the broader market’s PEG of 1.6x. Finally, the materials sector pays a dividend yield of 2.3% as of May 13, 2016, the same yield as the S&P 500.

SECTOR AND INDEX PRICE PERFORMANCE

(values in percent)

2015 2016*

Consumer Discretionary Sector Index 6.2 1.5 14.0

Consumer Staples Sector Index 3.4 3.4 10.8

Energy Sector Index (24.4) 12.1 (4.0)

Financials Sector Index (2.8) (1.9) 7.2

Health Care Sector Index 5.8 (3.1) 14.7

Industrials Sector Index (4.7) 5.5 8.0

Information Technology Sector Index 4.0 (3.1) 9.8

Materials Sector Index (11.9) 9.8 3.5

Telecommunication Services Sector Index (1.8) 11.4 4.5

Utilities Sector Index (8.0) 12.0 8.1

S&P 500 (0.7) 1.0 8.7

S&P MidCap 400 (3.7) 4.5 7.6

S&P SmallCap 600 (3.4) 3.4 8.7

S&P Composite 1500 (1.0) 1.4 8.6

*Data through April 29, 2016.

Source: S&P Global Market Intelligence.

SECTOR ------ YEAR ENDED ------ 5-YEAR CAGR

In terms of size, from an equity market capitalization perspective (for the S&P 1500 as of March 31, 2016), the chemicals industry comprised 68.0% of the sector and metals & mining made up 13.3%.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 7

Chemicals 68.0%

Construction Materials

4.7%

Containers & Packaging

12.3%

Metals & Mining 13.3%

Paper & Forest Products

1.8%

INDUSTRY WEIGHTINGS WITHIN THE S&P 1500 MATERIALS SECTOR (as of March 31, 2016)

Source: S&P Global Market Intelligence.

From a profitability perspective, the chemicals industry’s net interest margin is the highest among all five industries; but at 9.9% as of March 31, 2016, it is below the 10.6% peak established in the first quarter of 2014. Only the metals & mining industry recorded a negative net income margin at the end of the first quarter of 2016.

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MATERIALS NET INCOME MARGIN BY INDUSTRY GROUP (as of March 31, 2016, in percent, quarterly)

S&P Composite 1500 Chemicals Index S&P Composite 1500 Construction Materials Index S&P Composite 1500 Containers & Packaging Index S&P Composite 1500 Metals & Mining Index S&P Composite 1500 Paper & Forest Products Index

Source: S&P Global Market Intelligence.

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In this Sector Overview section, all the data are calculated on an aggregated per-share basis within the materials sector as a component of the S&P 1500 index constituent universe. The average is market-weighted, which means larger companies are more influential than smaller ones.

Sector Revenues

Revenue and Revenue Growth  Since 2005, the materials sector’s revenue per share ranged from a trough of $164.85 in the first quarter of 2005 to its recent peak of $244.15 in the fourth quarter of 2014. For the first quarter of 2016, the S&P 1500’s revenue growth was -1.8%, down significantly from 4.6% growth in the fourth quarter of 2014.

 Revenue growth for the materials sector underperformed the revenue growth for the S&P 1500 during the first quarter of 2016, falling 6.8% from the prior-year period. The sector’s revenue growth surpassed the S&P 1500’s revenue growth in the latter half of 2014, although it lagged for the prior six quarters.

 The materials sector’s best period was the second quarter of 2011 when its revenue increased 15.7%.

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S&P 1500 - Revenue per Share (left scale) Materials - Revenue per Share (left scale) S&P 1500 - Revenue per Share Growth (right scale) Materials - Revenue per Share Growth (right scale)

REVENUE AND REVENUE GROWTH (as of March 31, 2016, aggregate value weighted per share, $, last 12 months)

Percent

Source: S&P Global Market Intelligence.

Sector Profit Margins

Gross Margin  The materials sector’s gross margin since 2010 had a relatively tight range following a trough of 21.7% in the third quarter of 2009. Since then, the sector’s peak gross margin was 27.0% in the fourth quarter of 2015, and its low point was 24.4% in the fourth quarter of 2012.

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 Despite the sector’s record gross margin in the fourth quarter of 2015, the margin remained well below the S&P 1500’s 31.5% gross margin in the same period, due to substantial costs of manufacturing or mining the sector’s products.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

GROSS MARGIN (as of March 31, 2016, last 12 months, in percent)

S&P 1500 Materials Sector of S&P 1500

Source: S&P Global Market Intelligence.

EBITDA Growth  Since 2005, the materials sector’s earnings before interest, taxes, depreciation, and amortization (EBITDA) per share ranged from a trough of $23.61 in the fourth quarter of 2009 to its recent peak of $41.61 in the third quarter of 2015. For the first quarter of 2016, the S&P 1500 materials sector’s EBITDA growth was -5.7%, lower than the -2.4% EBITDA growth for the S&P 1500.

 The materials sector’s best period came during the fourth quarter of 2010, when its EBITDA grew 34.2%.

EBITDA Margin  The materials sector’s EBITDA margin trend peaked at 17.8% in the third quarter of 2011. The average EBITDA margin from the fourth quarter of 2005 to the first quarter of 2016 was 16.1%. In the first quarter of 2016, the sector’s EBITDA margin was 17.1%, while the S&P 1500’s EBITDA margin was 18.4%.

EBIT Margin  Since 2005, the materials sector’s earnings before interest and taxes (EBIT) margin per share ranged from a trough of 7.4% in the fourth quarter of 2009 to its peak of 13.0% in the fourth quarter of 2011. For the first quarter of 2016, the sector’s EBIT margin was below the peak at 11.1%, which is 1.4 percentage points below the EBIT margin for the S&P 1500.

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

S&P 1500 - EBITDA per Share (left scale) Materials - EBITDA per Share (left scale) S&P 1500 - EBITDA per Share Growth (right scale) Materials - EBITDA per Share Growth (right scale)

EBITDA AND EBITDA GROWTH (as of March 31, 2016, aggregate value weighted per share, $, last 12 months)

Percent

Source: S&P Global Market Intelligence.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

EBITDA MARGIN (as of March 31, 2016, last 12 months, in percent)

S&P 1500 (left scale) Materials Sector of S&P 1500 (right scale)

Source: S&P Global Market Intelligence.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 11

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15.5

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EBIT MARGIN (as of March 31, 2016, last 12 months, in percent)

S&P 1500 Materials Sector of S&P 1500

Source: S&P Global Market Intelligence.

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0.0

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NET INCOME MARGIN (as of March 31, 2016, last 12 months, in percent)

S&P 1500 Materials Sector of S&P 1500

Source: S&P Global Market Intelligence.

Net Income Margin  The net income margin for the materials sector was 2.6% in the first quarter of 2016, versus the 3.2% decline in the fourth quarter of 2009. The average net income margin over the past 10 years was 5.3%. The sector’s net income margin has stayed below this level since the fourth quarter of 2014.

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 Despite the slower start to 2016 compared with the past six years, the sector’s net income margin at 2.6% is substantially higher than the -3.2% recorded in the fourth quarter of 2009, and it reflects the general expansion of margins over that time due to improving economic conditions.

 However, like the other margin measurements, the net income margin of the materials sector lags that of the S&P 1500. For the first quarter of 2016, the net income margin of the materials sector was 450 basis points (bps) below the S&P 1500’s net income margin of 7.1%.

Sector Earnings

 From an earnings perspective against the S&P 500, the materials sector underperformed in the past 10 years. Looking at earnings on a compound annual growth rate (CAGR) basis, the materials sector’s growth lagged the S&P 500 by 145 bps over a 10-year period ended March 31, 2016. At a growth rate of 3.0%, the materials sector was the eighth-leading sector. Over a five- year period ended March 31, 2016, the materials sector’s growth of 1.7% also lagged the S&P 500 growth of 5.6% by 394 bps.

S&P 500 OPERATING EPS GROWTH HISTORY*

(values in percent)

5-YEAR 10-YEAR

Consumer Discretionary 10.9 9.4

Consumer Staples 4.4 6.6

Energy (14.4) (6.5)

Financials 7.7 (3.3)

Health Care 8.6 9.5

Industrials 8.5 5.8

Information Technology 7.3 10.7

Materials 1.7 3.0

Telecommunication Services 10.8 3.9

Utilities 1.3 3.2

S&P 500 5.6 4.4

*Data as of March 31, 2016.

Source: S&P Global Market Intelligence.

S&P 500 SECTOR COMPOUNDED EPS GROWTH

 From a year-over-year perspective, the materials sector’s earnings growth has been volatile. From 2004 to 2008, the sector topped the S&P 500, only to lag it in 2009. Then, after topping the S&P 500 once again in 2010–2011, materials sector’s earnings growth jockeyed back and forth. In 2015, earnings growth for the materials sector lagged the S&P 500, falling 5.6% compared with a 0.6% decline for the S&P 500. For 2016, the materials sector’s projected 0.8% earnings decline is below the S&P 500’s anticipated gain of 0.8% (which is expected to be weighed down by the projected 73.0% drop in energy earnings). Excluding energy, the S&P 500 growth would be 3.3% in 2016, well above the expectations for the materials sector.

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S&P 1500 Materials Sector of S&P 1500

NORMALIZED DILUTED EPS GROWTH (as of March 31, 2016, last 12 months, in percent, quarterly)

Source: S&P Global Market Intelligence.

Sector Balance Sheet

Interest Coverage  Over the past several years, materials companies exhibited improving interest coverage, which means that, in general, the sector offers improved stability to creditors from a cash flow and credit perspective.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

INTEREST COVERAGE (as of March 31, 2016, in multiples)

S&P 1500 Materials Sector of S&P 1500

Source: S&P Global Market Intelligence.

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 The improvement was likely fueled by increasing cash flow and reduced interest rates that companies have capitalized on through refinancing activity. This trend was similar to that of the S&P 1500, which also saw its credit strength improve.

Sector Valuation

Forward P/E Ratio  Forward price-to-earnings ratio (P/E) is one of the most popular valuation metrics, because it measures an investment based on how it is expected to perform in the future, and not what it accomplished in the past.

 The S&P 1500 materials sector was valued at 18.4x in the first quarter of 2016, higher than the average of 15.5x since the third quarter of 2009, which represented the period that followed the last US recession.

 As of the end of the first quarter of 2016, the sector’s forward P/E of 18.4x represented a premium versus its 15.2x historical average since the first quarter of 2005. From the third quarter of 2013 through the first quarter of 2016, the sector was also valued above its historical forward P/E average.

 The forward P/E for the S&P 1500 was 17.6x at the end of the first quarter of 2016, versus its 10-year average of 14.9x.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

FORWARD PRICE-TO-EARNINGS RATIO (as of March 31, 2016, in multiples)

S&P 1500 Materials Sector of S&P 1500

Source: S&P Global Market Intelligence.

EV/EBITDA Ratio  The enterprise value-to-EBITDA (EV/EBITDA) ratio has solidly recovered since its trough in 2011, but it is valued at a discount to the market.

 The materials sector has traded at a discount to the S&P 1500 since the first quarter of 2010.

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

TOTAL ENTERPRISE VALUE-TO-FORWARD EBITDA RATIO (as of March 31, 2016, in multiples)

S&P 1500 Materials Sector of S&P 1500

Source: S&P Global Market Intelligence.

ETF Market Flows and Investing Landscape

 Investors interested in exploring opportunities aligned with either the broad materials sector, or more specifically, the chemicals industry, may want to consider exchange-traded funds (ETFs). In recent years, investors have increasingly turned to ETFs when seeking exposure to specific sectors or industries within the stock market. In addition to market focus, ETFs offer investors added benefits, such as intraday market liquidity and lower management fees, relative to other diversified financial instruments.

 In 2015, $18.2 billion was added to all sector ETFs. In the first four months of 2016, these ETFs experienced outflows amounting to $4.6 billion. The materials sector had inflows of $490 million.

SECTOR ETF INFLOWS

(total inflows for the period ended, in $, millions)

Consumer Discretionary 3,161 (3,406)

Consumer Staples (711) 1,041

Energy 9,823 2,737

Financials 659 (4,750)

Health Care 7,400 (5,004)

Industrials (4,513) 432

Information Technology 3,601 (3,299)

Materials 475 490

REITs 1,692 2,296

Telecommunication Services 13 536

Utilities (3,353) 4,316

Source: State Street Global Advisors.

SECTOR YEAR ENDED 2015

FIRST FOUR MONTHS, 2016

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 Investors in to two of the most popular diversified ETFs for the materials sector, Materials Select Sector SPDR (XLB) and Vanguard Materials (VAW), provide significant exposure not only to the chemicals industry, but also have smaller stakes in paper & forest products and metals & mining companies.

 Both XLB and VAW gathered fresh money in the first four months of 2016. However, the sector ETF trends were hurt by direct exposure to metals & mining ETFs.

ETFS WITH MEANINGFUL CHEMICALS EXPOSURE

XLB Materials Select Sector SPDR 2,429 0.15

VAW Vanguard Materials 1,849 0.10

IYM iShares US Basic Materials 468 0.43

MXI iShares Global Materials 175 0.47

FXZ First Trust Materials AlphaDex 144 0.70

PYZ PowerShares DWA Basic Materials 83 0.60

Source: S&P Global Market Intelligence ETF Report April 7, 2016.

COMPANY TICKER

ETF NAME

ASSETS UNDER MANAGEMENT (in $, millions)

NET EXPENSE

RATIO

INDUSTRY SURVEYS CHEMICALS / MAY 2016 17

INDUSTRY OVERVIEW

Industry Weighting

 The chemicals industry is comprised of five sub-industries: specialty chemicals, diversified chemicals, fertilizers & agricultural chemicals, industrial gases, and commodity chemicals. The specialty chemicals and diversified chemicals sub-industries combined made up 59.8% of the chemicals industry, as of April 1, 2016. The four largest companies account for 40.8% of the industry’s total market capitalization, while the 10 largest companies comprise 76.5%.

 While specialty chemicals makes up the largest portion of the chemicals industry’s market capitalization (32.7% as of April 1, 2016), the companies within the sub-industry tend to be smaller, with the largest specialty chemicals company being Ecolab, Inc. Out of the 45 companies in the S&P Composite 1500 chemicals industry, there are 23 specialty chemicals companies.

Specialty Chemicals 32.7%

Diversified Chemicals

27.1%

Fertilizers & Agricultural Chemicals

14.3%

Industrial Gases 16.1%

Commodity Chemicals

9.8%

CHEMICALS MARKET-CAPITALIZATION WEIGHTINGS BY SUB-INDUSTRY (as of April 1, 2016)

Source: S&P Global Market Intelligence.

 On the other hand, diversified chemicals makes up the second-largest share (27.1%) of the S&P Composite 1500 chemicals industry, but just two companies, Dow Chemical Co. and E.I. du Pont de Nemours (DuPont), account for 24.4% of the total industry market capitalization. The other three companies in the diversified chemicals sub-industry combined comprise 2.7% of the S&P Composite 1500 chemicals industry market capitalization.

 The two largest industrial gas companies account for 13.9% of the S&P Composite 1500 chemicals industry market capitalization. The only other industrial gases company (Airgas) has 2.2% of the total chemicals industry market capitalization, but it has agreed to be acquired by a foreign company.

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 The fertilizers & agricultural chemicals sub-industry is the fourth largest (14.3%) of the chemicals industry; however, just one company, Monsanto Co., accounts for 8.4% of the S&P Composite 1500 chemicals industry market capitalization. The next four companies combined make up 5.8%, and the remaining two companies combined account for 0.1%.

Dow Chemical 12.4%

E.I. du Pont de Nemours

12.1%

Monsanto 8.4%

LyondellBasell Industries

8.1% Ecolab 7.1%Praxair

7.1%

Air Products and Chemicals

6.8%

PPG Industries 6.5%

Sherwin-Williams 5.7%

Eastman Chemical 2.4%

Others 23.5%

CHEMICALS MARKET-CAPITALIZATION WEIGHTINGS BY COMPANY (as of April 1, 2016)

Source: S&P Global Market Intelligence.

 As of April 1, 2016, the largest commodity chemicals company, LyondellBasell Industries, accounts for 8.1% of the S&P Composite 1500 chemicals industry. The next two largest companies combined comprise 1.3%, while the following four companies make up just 0.5% of the industry market cap.

 Specialty chemicals companies’ products are more refined and are used in many sectors of the S&P 1500, including energy, industrials, and health care, as well as other materials industries. The two largest diversified chemicals companies have segments in other chemicals sub-industries, except for industrial gases. Fertilizers & agricultural chemicals companies produce largely nitrogen-based fertilizers, as well as pest and weed control products for agriculture. Industrial gas companies produce gases for many industrial uses, while commodity chemicals companies produce basic chemicals that are used by other chemicals companies or other industries.

Industry Revenues

Revenues  Over the past five years, the annual aggregate value-weighted revenue per share for the chemicals industry has benefited from a growing global economy. However, a strong dollar and economic weakness overseas have had a negative effect on recent results, resulting in slower growth than in the 2010 to 2013 period.

 Revenues of specialty chemicals companies are mostly influenced by volumes, while commodity chemicals companies face significant threats to revenue per share from changes in commodity

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prices for their products or raw materials. For fertilizers & agricultural chemicals companies, product prices will likely affect fertilizer revenue per share, while agricultural chemicals, including specialty seeds, are more-specialized products driven by volumes. Industrial gas companies are likely to see a mix of volumes and prices driving revenues.

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REVENUE PER SHARE AND GROSS MARGIN (aggregate value weighted per share, $, trailing four quarters)

Revenue per Share (left scale) Gross Margin (right scale)

Source: S&P Global Market Intelligence.

Percent

 Growth has slowed markedly as slowing gross domestic product (GDP) growth in China pressures global economic growth. China’s real GDP grew more than 9.0% annually from 2008 through 2011. In 2012, the country’s GDP growth began to drop, with levels of 7.7% in 2012 and 2013, 7.3% in 2014, and an estimated 6.9% in 2015. As of April 5, 2016, Standard & Poor’s Economics expects GDP in China to grow 6.3% in 2016 and 6.1% in 2017.

 The value of the dollar versus other currencies rose in the second half of 2014 and first quarter of 2015, and remained at high levels through most of 2015. While this increase had a negative effect on revenue per share growth in 2015, the change in currency values will likely have a much smaller negative effect in 2016. A decline in the dollar index would benefit revenue per share comparisons.

 S&P Global Market Intelligence uses Dow Chemical and DuPont as indicators for the chemicals industry. Dow and DuPont have widely varied agricultural and specialty chemicals operations. Together, these two sub-industries make up half of the total chemicals industry market capitalization. Dow and DuPont saw strong price and volume growth in 2010 and 2011; however, from then up until 2014, prices remained relatively flat, while volumes saw only a slight increase. In 2015, volumes and prices declined somewhat due to a more challenging global economic environment.

 S&P Composite 1500 chemicals industry revenue per share is expected to fall slightly in 2016, due to pressure from the stronger dollar earlier this year and lower energy prices that will likely lead to lower product prices and many specialty chemicals companies passing on some savings to their customers. Economic growth and new chemicals plants becoming operational in the US will likely also partially offset the effect on the industry.

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Gross Margins  Over the past six years, many US-based chemicals companies with commodity chemicals operations have benefited from high oil prices coinciding with relatively low natural gas prices, leading to lower feedstock costs than their foreign counterparts, and making US companies more competitive. This scenario has helped to prop up gross margins for these companies, but margins in 2012 were negatively affected by slowing economic growth in China, leading to higher inventories and pricing pressure.

 Looking ahead, slowing growth overseas will likely be a negative for growth in volumes; however, capacity growth will likely slow somewhat, allowing pricing pressure to abate. Specialty chemicals companies will benefit from the slow but steady growth in the US economy, in S&P Global Market Intelligence’s view. However, with oil prices expected to move higher after the projected $37 per barrel in 2016, (Standard & Poor’s Economics forecasts that oil prices will average $4337 in 2017 and $53 in 2018), commodity chemicals companies are likely to experience gross margin pressures in the coming years.

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NORMALIZED EPS AND EBIT MARGIN (aggregate value weighted per share, $, trailing four quarters)

Normalized EPS (left scale) EBIT Margins (right scale)

Source: S&P Global Market Intelligence.

Percent

Industry Profits

EBIT Margins  Chemicals companies are constantly working to control operating costs, and they often announce restructuring efforts for underperforming divisions or for the entire company. As a result, chemicals companies often achieve earnings before interest and taxes (EBIT) growth in excess of revenue growth. In recent years, several acquisitions have yielded merger savings for the acquirer. S&P Global Market Intelligence thinks EBIT margins will be helped by future merger and acquisition (M&A) activity, but new products will likely be more important.

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 Specialty chemicals companies and divisions spend money and time developing new products. In most cases, these new products are highly specialized to suit the end user, and are therefore often sold at much higher margins than their less specialized counterparts. While there are few large specialty chemicals companies (only three are more than 3% of the S&P Composite 1500 chemicals industry market capitalization), the large number of specialty chemicals companies makes this an important driver for the industry.

 S&P Global Market Intelligence expects chemicals industry EBIT margins to improve modestly in 2016, driving industry profitability higher through cost containment and lower raw materials prices, following weakness in 2015 due to the economic slowdown overseas, lower oil prices, and the effects of the stronger US dollar.

Net Income  Net income has tracked EBIT relatively closely, although net income has grown at a slightly slower pace over time. Several capital spending projects by large commodity chemicals companies have had an upward influence on interest and depreciation costs, in S&P Global Market Intelligence’s view. However, we see this as positive for the industry, as the spending focuses on building new chemicals plants in the US due to the feedstock cost advantage driven by low natural gas prices.

 Overall, net income growth for the chemicals industry will likely experience some pressure in 2016, due to slowing growth in overseas economies, the strong US dollar, and lower oil prices. However, net income will likely return to a more normal growth rate in the 9%–11% range in a year or two. S&P Global Market Intelligence sees this increase as mostly driven by increased volumes, improving prices and margins, and the stabilizing US dollar and oil prices.

Dividends per Share  Dividends have generally increased faster than earnings per share (EPS) since mid-2011, and payout ratios have reached levels seen before earnings started to drop in the most recent US recession. Earnings and dividends for companies in the chemicals industry have grown significantly since the recession.

 Dividends are not a big factor when investing in the chemicals industry. While S&P Global Market Intelligence thinks that rising interest rates are a potential source of slight pressure on the industry’s stocks, we note that the industry’s dividend yield, at 2.4%, is only slightly above the yield of the S&P 1500, recently at 2.1%. On the other hand, strong growth in industry dividends is a positive.

 S&P Global Market Intelligence expects dividends to increase at a rate of about 7%–9% annually, with the payout ratio likely to continue growing over the next several years; however, we expect to see slower growth after that. A sustained dividend payout ratio of more than 45% is not likely, in our view.

22 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

110

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Dividends per Share (left scale) Dividend Payout Ratio (right scale)

DIVIDENDS PER SHARE AND PAYOUT RATIO (aggregate value weighted per share, $, last 12 months)

Percent

Source: S&P Global Market Intelligence.

Industry Capital Expenditures

Capital Expenditures  Chemicals industry capital expenditures as a percentage of sales are relatively low. Many specialty chemicals and fertilizers & agricultural chemicals companies have relatively low capital needs, while some commodity chemicals, diversified chemicals, and industrial gas companies have been increasing their capital spending or have higher capital needs.

 S&P Global Market Intelligence thinks this increase in spending is directly related to an increase in spending for the commodity chemicals industry, which is driven by low natural gas prices. Low natural gas prices have led to an advantaged feedstock position for US-produced chemicals. Despite the recent fall in oil prices, US producers will likely continue to enjoy an advantaged feedstock position for the near future. This advantage exists because oil prices are more than seven times the price of natural gas, in our view.

 Capital expenditures per share climbed from 4.4% of sales in 2005 to an economic cycle peak of 5.7% in the first quarter of 2009, before falling to 4.5% after the recession. Capital expenditures have since climbed steadily, reaching 7.4% of sales in the third quarter of 2015, and will likely remain at relatively high levels over the next several years as companies continue to expand US operations, helped by the low natural gas prices. Finally, expansion of foreign operations for some companies will likely also provide a slight boost to capital expenditures, although S&P Global Market Intelligence foresees the expansion continuing to slow slightly, given the weak overseas economies.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 23

3.50

4.25

5.00

5.75

6.50

7.25

8.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CAPITAL EXPENDITURES PER SHARE (aggregate value weighted per share, $, trailing four quarters)

Capital Expenditures per Share (left scale) Percent of Revenue per Share (right scale)

Source: S&P Global Market Intelligence.

Percent

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

DEBT-TO-CAPITALIZATION (in percent, quarterly)

Long-Term Debt-To-Total Capitalization Net Debt-To-Total Capitalization

Source: S&P Global Market Intelligence.

Industry Balance Sheet

Debt-To-Capitalization Ratios  Over the past 10 years, the aggregate value-weighted per share long-term debt-to-total capital ratio dropped from 2005 through 2008, before rising again in 2008 and 2009 to levels above

24 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

those in 2005. Since 2009, it has trended sideways, mostly between 35%–39%. However, over the past several quarters, the figure started to increase from 35.8% at the end of the second quarter of 2014 to 46.4% at the end of 2015. Net debt-to-total capitalization closely tracked the long-term ratio until 2009, when net debt started to fall until 2014. It has since risen quickly, and is starting to catch up to the long-term ratio.

 The recent increases stem largely from ratio increases at six of the largest eight companies by market capitalization. The biggest change was a more than twofold increase in debt levels for Monsanto, where the company significantly increased its long-term debt levels to repurchase shares.

 While Monsanto’s change is the largest on a market capitalization-weighted basis, the five other companies have also increased share repurchase activity. In addition, many of the companies in the industry have significantly reduced their cash levels as they increase capital spending and repurchase shares. The releveraging for these largest companies will likely continue to increase leverage ratios for the next few years, although S&P Global Market Intelligence does not expect the ratios to approach 50%.

EBITDA Interest-Expense Coverage  Interest-expense coverage levels have improved dramatically since 2005, hurt temporarily by the recession. Earnings before interest, taxes, depreciation and amortization (EBITDA) has increased steadily from an aggregate value-weighted $30 per share to about $50 on a trailing 12- month basis, while interest expense increased in 2009 from about $3 to around $4; it has since remained between $3.50–$4.50.

 S&P Global Market Intelligence notes a recent downtick in the ratio to about 12x from more than 13x, and the increase in debt levels for the biggest companies in the chemicals industry will likely pressure this ratio over the next few years, driven by industry share repurchases, capital expenditures, and industry fundamentals.

2.5

3.0

3.5

4.0

4.5

5.0

7.0

8.5

10.0

11.5

13.0

14.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

INTEREST COVERAGE (trailing four quarters)

Interest Expense (right scale) Interest Coverage (left scale)

Source: S&P Global Market Intelligence.

Multiple In $, per share

INDUSTRY SURVEYS CHEMICALS / MAY 2016 25

Industry Valuation

P/E Ratios  In 2009, the forward price-to-earnings (P/E) valuation measures increased, mainly as a result of falling earnings estimates. However, rising EPS estimates led to a decline in the forward P/E ratio from 2010 through 2011. Through mid-2015, the forward P/E ratio advanced steadily before dipping again in late 2015.

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FORWARD 12 MONTHS PRICE-TO-EARNINGS RATIO (in multiples, monthly forward)

(60)

(30)

120

150

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INDEX RELATIVE PERFORMANCE (monthly index value)

S&P 1500 Composite Chemicals Index S&P 1500

Source: S&P Global Market Intelligence.

 While forward earnings estimates rose steadily from 2012 through 2015, the faster increase in share prices during that period led to a forward P/E ratio that steadily increased and reached around 18.0x in mid-2015. A drop in share prices since mid-2015 led to the recent decline in P/E ratios. S&P Global Market Intelligence notes that the high levels since 2002 were set following

26 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

periods of economic upheaval. We think the current forward P/E ratio has more room to fall in the event of weakening economic growth.

 Given the risks posed by expanding leverage at some of the largest chemicals companies and the low oil price environment, it is unlikely that P/E ratios will expand significantly from current levels over the next year, in S&P Global Market Intelligence’s view.

TEV-To-Forward EBITDA  The aggregate value-weighted per share total enterprise value (TEV)/EBITDA ratio also fell recently due to overseas economic pressure, the strong dollar, and low oil prices, which are putting pressure on industry earnings. S&P Global Market Intelligence thinks this ratio has room to fall if the economy weakens, given the recent focus on increasing leverage and some pressures on EPS growth for the industry.

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ENTERPRISE VALUE-TO-FORWARD EBITDA RATIO (as of April 2016, in multiples, monthly)

S&P 1500 Composite Chemicals Index

Source: S&P Global Market Intelligence.

Book Value per Share  Over the past five years, the aggregate value-weighted per share book value increased steadily. Improving industry profitability has helped drive the increase. However, with the recent releveraging activity, growth in book value per share has stagnated over the past year or so; nevertheless, S&P Global Market Intelligence thinks it will resume its growth as the share repurchase activity slows. We note the decline in book value for the S&P 1500 due to large write- offs in the energy sector caused by falling oil prices.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 27

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BOOK VALUE METRICS

S&P 1500 Composite Chemicals S&P 1500

PRICE-TO-BOOK VALUE (in multiples)

110

140

170

200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

S&P 1500 Composite Chemicals Index S&P 1500

Source: S&P Global Market Intelligence.

BOOK VALUE PER SHARE (aggregate value weighted per share, $, last 12 months)

Return on Common Equity  As earnings fell in 2009, return on equity (ROE) fell to well below 10.0% in late 2009, but quickly rose from 2010 through 2013, reaching more than 17.5% at the end of 2010 as earnings levels recovered following the recession. ROE then trended upward, eventually reaching more than 19.0% in late 2013. S&P Global Market Intelligence thinks the drop in oil prices and the strength of the US dollar had a negative effect on the industry’s ROE in 2014 and the first half of 2015, lowering the value to 18.3% in the second quarter of 2015. A strong rebound in returns has been observed since, with ROE reaching more than 21.0% in the fourth quarter of 2015.

 S&P Global Market Intelligence thinks returns on common equity will continue to rise in 2016, before stabilizing. Over the long term, we see returns benefiting from share repurchases and improving earnings.

28 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

RETURN ON COMMON EQUITY (last 12 months, in percent, quarterly)

S&P 1500 Composite Chemicals Index S&P 1500

Source: S&P Global Market Intelligence.

Capital Markets

Materials Sector  Materials M&A transactions involving S&P 1500 companies as target, buyer or seller saw deal value rise to $136.2 billion in 2015 from $51.5 billion in 2014.

 Last year’s biggest deal involved The Dow Chemical Co. entering into a definitive agreement to acquire E. I. du Pont de Nemours and Co. in a merger of equals transaction valued at $72.8 billion on December 11, 2015. As per the terms of the transaction, Dow shareholders will receive a fixed exchange ratio of 1 share of DowDuPont for each Dow share, whereas DuPont shareholders will receive a fixed exchange ratio of 1.282 shares in DowDuPont for each DuPont share. This transaction accounted for over half of the deal value for announced materials sector M&A deals in 2015.

 The top deal in 2014 was Germany’s Merck KGaA entering into a definitive agreement to acquire Sigma-Aldrich Corp. for $17 billion in cash on September 22, 2014. The deal accounted for about one-third of the deal value for announced materials deals in 2014.

 Materials M&A deal count for those transactions involving S&P 1500 companies increased to 145 in 2015 from 124 in 2014.

 The high point for materials M&A during the cycle reviewed above was in 2006 when 224 deals occurred.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 29

110

130

150

170

190

210

230

110

130

150

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

MATERIALS M&A TRANSACTIONS*

Transaction Amount (left scale) Number of Deals (right scale)

$, Billions Count

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Completion Rate

Percent

*Involving S&P 1500 companies as target, buyer, or seller.

Source: S&P Global Market Intelligence.

 In 2015, a typical M&A transaction announced in the materials sector was valued at about 1.5x revenue, compared with 2.0x in 2014.

 Based on a target’s 12-month trailing EBITDA, a typical materials sector M&A deal involving S&P 1500 companies was valued at 10.1x in 2015, down from 13.5x in 2014.

 The completion rate for materials M&A deals announced and finalized in the same calendar year slipped to 70% in 2015, from 84% in 2014.

30 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

0.00

0.75

1.50

2.25

3.00

3.75

4.50

5.25

6.00

6.75

2004 2005† 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

MATERIALS M&A VALUATION RATIOS*

TOTAL ENTERPRISE VALUE-TO-REVENUE MULTIPLE

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

*Involving S&P 1500 companies as target, buyer, or seller. †Data in the signified year is zero.

Source: S&P Global Market Intelligence.

TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE

Chemicals Industry  In 2015, deal value for announced M&A transactions in the chemicals industry involving companies in the S&P 1500 totaled $109.2 billion, a steep increase from $44.1 billion in 2014.

 The largest M&A transaction announced in the chemicals industry in 2015 was Dow Chemical Co. entering into a definitive agreement to acquire E. I. du Pont de Nemours and Co. in a merger of equals transaction for $62.4 billion in stock on December 11. In 2014, the largest announced M&A deal involved Germany’s Merck KGaA entering into a definitive agreement to acquire Sigma-Aldrich Corp. for $17.0 billion in cash on September 22.

 Deal count for M&A activity in the chemicals industry involving S&P 1500 companies totaled 69 in 2015, down from 76 deals announced in 2014, which was the highest number of deals since the 78 announced in 2011.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 31

105

116

100

120

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CHEMICALS M&A TRANSACTIONS*

Transaction Amount (left scale) Number of Deals (right scale)

$, Billions Count

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Completion Rate

Percent

*Involving S&P 1500 companies as target, buyer, or seller.

Source: S&P Global Market Intelligence.

 Based upon deal value relative to a target’s value, chemicals industry M&A average valuation reached 1.6x revenue in 2015, down from an average of 2.2x for deals occurring in 2014. Last year’s biggest deal, The Dow Chemical and E.I. du Pont transaction, was valued at 2.1x revenue, while the $17 billion purchase of Sigma-Aldrich by Merck KGaA in 2014 was valued at 6.0x revenue.

 Based on a target’s 12-month trailing EBITDA, a typical chemicals industry M&A transaction involving a S&P 1500 company as buyer, seller, or target was valued at 12.4x in 2015, down from 13.1x for deals announced in 2014.

 The completion rate based upon chemicals industry M&A transactions announced and finalized in the same calendar year drifted lower in 2015 to 69.2%, from 80.5% in 2014.

32 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CHEMICALS M&A VALUATION RATIOS*

TOTAL ENTERPRISE VALUE-TO-REVENUE MULTIPLE

2004 2005 2006 2007 2008 2009† 2010 2011 2012 2013 2014 2015

TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE

*Involving S&P 1500 companies as target, buyer, or seller. †Data in the signified year is zero.

Source: S&P Global Market Intelligence.

PRIVATE PLACEMENT TRANSACTIONS (top transaction in terms of size for the past six months)

ANNOUNCED DATE

CLOSED DATE

TARGET BUYERS / INVESTORS

SIZE ($M)

11/6/15 12/4/15 LSB Industries Security Benefit 260

Source: S&P Global Market Intelligence.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 33

BUYBACK TRANSACTIONS*

(top transaction in terms of size for the past six months)

ANNOUNCED DATE

CLOSED DATE

TARGET SIZE ($M)

10/21/15 - NewMarket 500

*Cancelled transactions are not included in the results.

Source: S&P Global Market Intelligence.

RECENT M&A TRANSACTIONS

(top transactions in terms of size for the past six months)

ANNOUNCED DATE

CLOSED DATE

TARGET BUYERS / INVESTORS

SIZE ($M)

12/11/15 - E.I. du Pont de Nemours Dow Chemical 72,835

11/17/15 - Airgas Air Liquide 13,459

3/20/16 - Valspar Sherwin-Williams 11,431

10/22/15 12/23/15 MEGlobal EQUATE Petrochemical 3,200

2/29/16 - Pittsburgh Glass Works LKQ 635

12/10/15 4/13/16 EG Systems Trugreen Holding 200

1/27/15 - Santa Vitoria Acucar e Alcool Dow Chemical 200

11/23/15 12/23/15 Stauber Performance Ingredients Hawkins 157

11/19/15 3/1/16 Chemours, Aniline facility Dow Chemical 140

10/20/15 12/15/15 Fluka, Hydranal and Chromasolv Brand Solvents and Inorganics

Honeywell Fine Chemicals 119

2/1/16 2/1/16 Albion Laboratories Balchem 112

2/3/16 2/3/16 Kraton Performance Polymers, compounding business

PolyOne 72

12/9/15 12/9/15 Magenta Master Fibers PolyOne 22

Source: S&P Global Market Intelligence.

REGISTRATIONS AND OFFERINGS

(top transactions in terms of size for the past six months)

ISSUER REGISTRATION FILED

OFFER DATE*

PRIMARY TRANSACTION FEATURES

SECURITIES ISSUED SIZE ($M)

Monsanto 4/13/16 - Shelf Registration Common Stock, Composite Unit, Corporate Debt (Non-Convertible), Options, Preferred Stock (Non- Convertible), Rights, Warrants

6,000

Dow Chemical 2/18/16 - Shelf Registration Common Stock 2,424

Dow Chemical 2/18/16 - Shelf Registration Common Stock 960

Praxair 2/4/16 2/4/16 Fixed-Income Offering Corporate Debt (Non-Convertible) 615

International Flavors & Fragrances 3/7/16 3/7/16 Fixed-Income Offering Corporate Debt (Non-Convertible) 549

Rayonier Advanced Materials 2/26/16 - Shelf Registration Common Stock, Composite Unit, Corporate Debt (Non-Convertible), Preferred Stock (Non- Convertible), Rights, Warrants

500

Ecolab 1/11/16 1/11/16 Fixed-Income Offering Corporate Debt (Non-Convertible) 400

Ecolab 1/11/16 1/11/16 Fixed-Income Offering Corporate Debt (Non-Convertible) 399

Dow Chemical 10/28/15 - Shelf Registration Common Stock 355

Intrepid Potash 3/2/16 - Shelf Registration Common Stock, Corporate Debt (Non-Convertible), Preferred Stock (Non-Convertible), Warrants

300

Praxair 2/4/16 2/4/16 Fixed-Income Offering Corporate Debt (Non-Convertible) 281

*Offer date is only available for a given transaction if a prospectus has been filed with the SEC for that transaction.

Source: S&P Global Market Intelligence.

34 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

ACTIVIST STAKES

(latest annual, arranged by value owned, in $, millions)

E. I. du Pont de Nemours S&P 500 Index 2,681 4.8

Dow Chemical S&P 500 Index 1,606 2.7

Monsanto S&P 500 Index 1,593 4.1

Air Products and Chemicals S&P 500 Index 1,455 4.7

CF Industries Holdings S&P 500 Index 646 8.9

PPG Industries S&P 500 Index 534 1.8

Praxair S&P 500 Index 526 1.6

Source: S&P Global Market Intelligence.

COMPANY NAME

INDEX CONSTITUENTS

ACTIVIST INVESTORS (PERCENT OWNED)

ACTIVIST INVESTORS (VALUE OWNED)

 Of the 45 companies in the S&P 1500 chemicals industry, only seven have activist investor ownership stakes of more than $500 million.

CASH BALANCE LEADERS

(latest annual, in $, millions)

Dow Chemical S&P 500 Index 6,012 6,633 12,645

E.I. du Pont de Nemours S&P 500 Index 5,302 895 6,197

LyondellBasell Industries S&P 500 Index 3,320 2,080 5,400

Mosaic S&P 500 Index 2,210 931 3,140

PPG Industries S&P 500 Index 1,187 459 1,646

CF Industries Holdings S&P 500 Index 810 809 1,619

Air Products & Chemicals S&P 500 Index 247 1,343 1,590

Monsanto S&P 500 Index 1,101 147 1,248

Ashland S&P MidCap 400 Index 1,113 69 1,182

Sigma-Aldrich S&P 500 Index 1,067 16 1,083

Source: S&P Global Market Intelligence.

COMPANY NAME

INDEX CONSTITUENTS

LONG-TERM INVESTMENTS

TOTALTOTAL CASH & SHORT-TERM INVESTMENTS

 Total corporate cash held by S&P 1500 chemicals industry companies was at $43.4 billion in 2015; The Dow Chemical Co. and DuPont accounted for a combined 49%.

 Of the 45 companies in the S&P 1500 chemicals industry, only 10 have cash balances of more than $1 billion.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 35

INDUSTRY TRENDS

Globalization, consolidation, and regulation are among the many trends and issues affecting the US chemicals industry. Prior to the current retrenchment, the rise in energy prices during the past decade posed risks to the industry’s long-term competitiveness.

Chemicals: A Basic Industry

The chemicals industry in the US comprises a wide array of companies that, in total, produce more than 70,000 different chemical substances. These products range from commodity raw materials used in other industries, to finished consumer products such as medicines and soap. The industry makes commodity and specialty chemicals, pharmaceuticals, and consumer products such as detergents and personal care items.

US chemicals makers account for about 15% of total world chemicals production, more than any other individual nation, according to the American Chemistry Council (ACC), an industry association. Chemicals comprise one of the largest industries within the US economy, employing about 804,000 people domestically, with facilities located in every state. The US Census Bureau estimates that total chemicals shipments (including pharmaceuticals) from US producers in 2016 through March were valued at $191.7 billion. Excluding pharmaceuticals, chemicals shipments were valued at $140.3 billion.

TOP FIVE US CHEMICAL PRODUCERS

(arranged by 2015 sales, in $, millions)

2014 2015 2014 2015

Dow Chemical Dec 58,167 48,778 9,337 9,596

ExxonMobil Dec 56,393 40,744 4,315 4,418

DuPont Dec 28,406 25,130 5,032 4,243

PPG Industries Dec 15,360 15,330 2,237 2,424

Monsanto Aug 15,855 15,001 8,574 8,182

*Includes within and outside US sales; Covers all segments.

Sources: S&P Global Market Intelligence; Company reports.

COMPANY NAME

FISCAL YEAR END

SALES* OPERATING PROFITS

The chemicals industry supports about 25% of US gross domestic product (GDP). The total US chemicals industry is an $801 billion enterprise, with gross chemical exports amounting to 14% of the total US exports, according to ACC estimates. The ACC expects the US chemical industry to post record trade surpluses by 2020, due to strong overseas demand.

Total US chemical output rose 3.6% in 2015 amid improving economic fundamentals, according to ACC’s December 2015 “Year-End 2015 Chemical Industry Situation and Outlook.” Chemical production is expected to increase further by 2.9% and 4.4% in 2016 and 2017, respectively, with an estimated 4.0% average annual increase during the second half of the decade, outpacing the US economy. For the next several years, a strong production trend is expected amid a surge of new capacity, according to the report. From 2010 through 2015, over 261 new projects were announced, with a total value of more than $158 billion; 34.0% of these projects were already complete or under construction as of December 15, 2015. Amid headwinds in the global

36 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

economy, US chemical exports dropped to $185.9 billion in 2015, from $191.3 billion in 2014. However, significant recovery is projected; chemical exports are expected to reach $195.9 billion 2016 and $248.9 billion by 2020. Meanwhile, imports increased to $206.6 billion in 2015 from $196.5 billion in 2014, and are expected to increase further to $217.0 in 2016.

Chemicals companies range in size from large corporations, such as The Dow Chemical Co. ($48.8 billion in sales in 2015), to small producers with just a handful of employees. Product lines can be diversified or narrow, and geographic exposure ranges from local and regional to multinational. While overseas sales constitute a growing share of US chemicals company revenues, the 10 largest chemicals producers in the S&P Composite 1500 Chemicals Sub-Industry Index derive close to half of their revenue streams from domestic sales.

Competitive Landscape

In the chemicals industry, heavy capital and technology requirements present high barriers to entry. Potentially large safety and environmental liabilities also may discourage companies from entering the industry. In addition, chemicals customers may have to test and approve any new products or applications offered to them; this can involve considerable costs in both time and resources. In turn, the customers (which are often manufacturers themselves) might need to seek approval from their own customers. This need for testing thus creates another barrier to new competition, because chemicals consumers are often reluctant to change suppliers or alter their raw materials.

Within the industry, the competitive landscape varies by product line. For example, there are many petrochemical producers but few manufacturers of phosphate fertilizers. Technology requirements are among the factors that determine the degree of competition within a given product line. How complex and expensive is the technology needed to make the product, and can it be purchased or licensed from others? Distribution is another factor; for products that are costly to transport, distant companies are at a competitive disadvantage. Still another factor is the availability and proximity of the necessary raw materials, such as mineral ores, energy, and primary chemicals.

The number of competing companies appears to be declining in many chemicals product categories. The amount of capital needed is growing because of high technology, quality controls, and environmental standards. In addition, consolidation among chemicals customers has resulted in those customers demanding suppliers that are larger and more geographically diverse, and can satisfy more of their product needs on a worldwide basis.

Chemicals companies are thus under pressure to consolidate to meet greater capital and customer requirements. Companies that are now halting the production of certain lines are often those that cannot commit the capital or the research and development (R&D) expenses necessary to remain competitive. Others may wish to focus their resources on other businesses.

Lower Gas Costs Improve US Competitiveness

Energy prices are currently below their record highs seen in the middle of 2008, thus reversing the severe cost headwinds that the chemicals industry had experienced for the previous several years. Importantly, the greater decline in US natural gas prices versus global crude oil prices has improved the cost competitiveness of the US petrochemical industry versus other global regions. The

INDUSTRY SURVEYS CHEMICALS / MAY 2016 37

improved costs position is also making the US more attractive for the construction of new petrochemicals capacity (described in more detail below).

On February 11, 2016, the West Texas Intermediate (WTI) crude oil benchmark fell to $26.19 per barrel, the lowest settlement since May 1, 2003 at $26.05 per barrel. The decline is attributed to the record commercial crude inventories in Cushing, Oklahoma reaching near 65 million barrels as of February 5, 2016. On May 9, 2016, the WTI benchmark was at $43.45 per barrel. In 2008, the price for the WTI benchmark set an all-time high, exceeding $145 per barrel in July. The natural gas price, using the Henry Hub benchmark, was $2.01 per million British thermal units (MMBtu) as of May 9, 2016, down from $2.78 a year earlier, and still well below the highs seen in mid-2008. With warmer-than-normal temperatures during most of the winter, and with inventories and production remaining high, the US Energy Information Administration (EIA) expects prices to be at relatively low levels in 2016. The low gas prices are beneficial for the cost competitiveness of the chemicals industry.

As of March 2016, based on data from the economic consulting firm IHS Inc., the EIA, and Bloomberg, S&P Global Market Intelligence forecast that oil (WTI) would average about $36.93 per barrel in 2016 and $43.01 in 2017. These prices would be down from the average of $48.74 per barrel in 2015 and $93.26 per barrel in 2014.

Lower natural gas costs versus crude oil has improved the feedstock cost competitiveness of the US petrochemicals industry versus other global regions such as Europe, thus helping boost the US industry exports. A vast majority of ethylene produced in the US is derived from natural gas, while in Western Europe a large majority of ethylene is produced from petroleum derivatives such as naphtha or gas oil. The production of olefins (ethylene, propylene, and butadiene) from ethane feedstock derived from natural gas also generates a higher percentage of ethylene versus its co- products than does naphtha.

The ratio of oil prices to natural gas (Henry Hub) prices since 2007 has been above seven, especially since January 2009 when, for a brief time, it fell to just below seven. The ratio was about 21:1 on May 9, 2016. The chemical industry’s competitive advantage from shale gas in the US and the structural challenges faced by Western Europe and Japan, will help the US recapture it global market share, according to ACC’s December 2015 “Year-End 2015 Chemical Industry Situation and Outlook”.

While overall energy trends should remain favorable for the industry overall compared with 2008, each company’s cost trends for energy and raw materials will vary, depending on the specific raw materials purchased and the terms included in their individual supply contracts.

Business Environment Seeing Healthy Growth

The business environment for the chemicals industry in 2016 will remain healthy and the chemical manufacturing segment will continue to expand, in S&P Global Market Intelligence’s view. Importantly, the low US natural gas prices relative to global crude oil prices has improved both the energy and feedstock cost of the US petrochemicals industry versus other global regions, such as Europe, thereby helping boost US industry exports; higher industry sales and profits are therefore expected this year.

Economic growth will likely continue at a moderate pace in 2016 on the back of uncertain global economic environment. As of March 2016, S&P Global Market Intelligence forecast that US

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economic activity, as measured by real GDP, would grow 2.3% in 2016, 2.5% in 2017, and 2.4% in 2018. Real GDP grew 2.4% in both 2015 and 2014, 1.5% in 2013, and 2.2% in 2012.

INDUSTRIAL PRODUCTION INDEXES

(2012=100)

2000 2005 2009 2010 2011 2012 2013 2014 2015 2016*

Total index 96.1 100.2 89.6 94.5 97.3 100.0 101.9 104.9 105.2 103.4

Manufacturing 95.6 101.4 88.5 94.2 97.2 100.0 101.1 102.5 103.6 103.1

Nondurables 107.8 110.5 97.7 99.8 99.9 100.0 100.0 99.4 101.1 100.6

Chemicals & products 96.2 109.3 98.1 101.3 101.3 100.0 96.6 95.8 98.0 99.3

Basic chemicals 92.9 101.4 85.7 99.7 97.2 100.0 100.2 98.9 101.5 103.5

Alkalies & chlorine† 70.7 116.1 60.8 80.1 81.8 80.4 79.8 83.8 81.0 NA

Inorganic chemicals 119.6 126.7 83.6 96.4 94.9 100.0 89.3 90.1 90.0 89.1

Industrial organic chemicals 84.9 91.8 84.3 100.1 97.9 100.0 103.0 101.4 105.0 108.6

Synthetic materials 112.0 111.6 84.9 98.2 95.8 100.0 100.5 98.2 100.4 102.6

Manmade fibers 161.8 119.1 71.9 96.0 103.8 100.0 97.7 96.4 95.4 97.9

Plastic materials 101.9 108.5 85.3 97.6 94.8 100.0 100.4 98.5 100.7 103.9

Paints, coatings & adhesives 127.9 127.8 90.6 98.3 97.8 100.0 103.3 107.4 101.2 102.1

Soaps & toiletries 81.0 105.4 102.0 103.5 112.2 100.0 89.3 89.1 92.3 93.2

Agricultural chemicals 95.5 102.6 89.7 93.5 88.5 100.0 116.1 109.6 112.6 116.4

*Data through January. †Data for 2015 is until March.

Source: Federal Reserve Board.

INDEX

Product Line Review

Chemical production in the US has been on an upward trend since December 2008, albeit at a very slow pace, according to data from the ACC. After bottoming at 65.7% in December 2008, the industry’s monthly operating rate generally increased, reaching 73.2% in December 2015, according to the Federal Reserve. In March 2016, the operating rate for the chemicals industry stood at 74.0%. Following is a review of major product lines for 2015.

 Petrochemicals. Producers of ethylene, the largest-volume petrochemical, posted new highs in monthly production rates during the second half of 2015, according to Petral Consulting Co., a firm that tracks US ethylene production data from the results of monthly surveys. In June 2015, the production rate was 161 million pounds per day, while in December, a higher rate of 166 million pounds per day was recorded. Production of ethylene totaled 57.1 billion pounds in 2015, up 6.5% from 53.6 billion pounds in 2014, and higher than the 49.7 billion pounds production low in 2008. A decline in ethylene production for two or three months in the first half of 2016 is expected due to planned turnarounds, according to Oil & Gas Journal.

In 2015, the weekly average for ethylene margins fell to a five-year low, reflecting the drop in spot ethylene due to lengthened supply from cracker expansions, according to ICIS Chemical Business, a weekly trade publication. For the week ended December 25, 2015, ethylene margins dropped 61%, year over year, to $0.13 per pound, tracking the 57% year-over-year drop in spot ethylene prices during the week.

Spot prices for ethylene averaged $0.44 per pound in 2012, up 60% from 2011. Margins continued to improve through 2013, according to Oil & Gas Journal. In the first quarter of 2014, ethylene prices averaged $0.54 per pound. However, unplanned cracker outages resulted in 8%– 12% of capacity lost from March to November 2014, which pushed spot prices of ethylene to record highs of $0.76–$0.77 per pound level in the second half of September 2014. In December

INDUSTRY SURVEYS CHEMICALS / MAY 2016 39

2014, US ethylene contracts fully settled at a 53-month low, tracking the $0.10–$0.11 per pound average decline in spot prices amid declining global energy markets. After remaining relatively stable during the first half of 2015, ethylene spot prices declined in four out of six months in the second half of the year. As production is expected to be lower during the first half of 2016, ethylene spot prices are projected to remain between $0.19 and $0.21 per pound, according to Petral Consulting.

 Plastics. Industry production for the major plastic resins reached 78.2 billion pounds in 2015, up 2.9% from the prior-year period, according to the ACC. Year to date through February, production increased 7.6%, year over year, to 13.4 billion pounds. Industry production of major resins declined 12% in 2008 (the lowest annual amount since 2001). In 2015, sales and captive use of major plastic resins rose 3.8%, year over year, to 78.4 billion pounds. In the first two months of 2016, sales and captive use of major plastic resins increased 6.0% to 13.0 billion pounds, compared with the same period in 2015.

Plastics resin prices have moved up from the recession lows seen in the early part of 2009. In 2015, the average producer price index (PPI) for plastic resins stood at 228, down 11.3% from 257 in 2014. Through April 2016, the average index stood at 214, down 9.0% from the year- earlier period. (For more details on the Chemicals PPI, see the “Key Industry Ratios and Statistics” section of this Survey.)

In the fourth quarter of 2015, the average polyethylene (PE) margin fell to its lowest point since late 2012, declining $0.04 per pound compared with the prior quarter, according to ICIS. On the other hand, polypropylene (PP) margins soared in full-year 2015, although they declined slightly toward the end of the year. Last year, the average PP margins were at their highest levels since 2000, which could be attributed to the 54% drop in refinery-grade propylene (RGP) prices in 2015. RGP accounts for around 60% of the polymer-grade propylene (PGP) production, the feedstock for making PP. Integrated contract PP margins (naphtha) were estimated to have doubled in 2015, on the back of a 44% drop in costs and a 9% decline in co-product credits.

 Chlor-alkalis. Industry production of chlorine was up 1.2% year over year in 2015, according to the Chlorine Institute, an industry trade association, while the output of co-produced caustic soda fell slightly by 0.2% compared with 2014. The product line started to recover in 2010 from its lows at the end of 2008, according to the Chlorine Institute. Industry contract caustic soda prices, which reached almost $1,000 a ton in the fourth quarter of 2008, fell to as low as $150 in the third quarter of 2009. Caustic soda prices are set on an ECU basis. (An ECU is a ton of chlorine with the commensurate amount of caustic soda).

Olin Corp., the company with the largest chlor-alkali capacity globally, reported lower chlor- alkali and vinyls income last year amid lower volumes and product prices, albeit slightly offset by the contributions of the The Dow Chemical Co.’s US chlor-alkali and vinyl, global chlorinated organics, and global epoxy businesses acquisition in October 2015. Olin’s income for chlor-alkali products and vinyls dropped 11.2% to $115.5 million in 2015, from $130.1 million in 2014. The company’s average price reached a record high of $765 per ton in the first quarter of 2009, before falling over the next two quarters, due to lower caustic soda prices, to a low of $375 per ton in the third quarter of 2009.

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Globalization

The chemicals industry’s modern production facilities and access to raw materials permit relatively low-cost production. However, a steep rise in natural gas prices in recent years (until falling off in late 2008) reduced some of the US chemicals industry’s competitive advantages. Historically, the industry had performed well in international trade, and its trade balance, which had been negative from the early part of the past decade, turned positive in 2009. From a peak surplus of $20.5 billion in 1995, the industry had its first deficit in many years ($5.0 billion) in 2002, followed by a larger deficit of $9.5 billion in 2003. The deficit narrowed to $2.3 billion in 2009, the smallest deficit since 2001, according to the US Department of Commerce. The deficit stems from relatively large pharmaceutical imports. While the trade balance continued to improve in 2010, when it rose to $7.7 billion, it fell in 2011 to a deficit of $0.9 billion due to the Eurozone crisis, which resulted in lower demand from European countries. The trade balance rose to $1.9 billion in 2012 and $3.3 billion in 2013. In 2014, a deficit of $4.6 billion was reported, followed by a larger trade deficit of $20.2 billion in 2015. As of February 2016, the trade balance was at a $3.5 billion deficit.

CHEMICAL TRADE BALANCE

(in $, millions)

EXPORTS IMPORTS TRADE BALANCE TOTAL EXCLUDING CHEMICALS

2016* 30,185 33,677 (3,492) (112,144) (108,652)

2015 196,008 216,181 (20,174) (736,019) (715,845)

2014 203,077 207,713 (4,636) (727,152) (722,516)

2013 198,799 195,472 3,327 (689,929) (693,256)

2012 198,062 196,189 1,873 (730,448) (732,321)

2011 197,432 198,379 (947) (725,448) (724,501)

2010 181,039 173,315 7,724 (635,363) (643,087)

2009 153,357 151,073 2,284 (503,582) (505,866)

2008 174,231 176,825 (2,594) (816,199) (813,605)

2007 154,297 155,359 (1,062) (808,763) (807,701)

2006 135,051 142,776 (7,724) (827,971) (820,247)

2005 119,524 128,388 (8,864) (772,373) (763,509)

2004 109,612 112,944 (3,332) (654,832) (651,501)

2003 91,546 101,051 (9,504) (532,351) (522,847)

*Data through February.

Source: US Department of Commerce.

YEAR CHEMICALS US TRADE BALANCE

Foreign trade and investment have become increasingly important to the US chemicals industry, as demand from chemicals markets in developing Asian, Middle Eastern, and Latin American countries is growing faster than in Europe and the US due to higher birth rates, improving living standards, and industrialization. Total global chemicals shipments, excluding pharmaceuticals, rose at a compound annual growth rate (CAGR) of 10.2% from 2003 through 2013, faster than the 5.2% growth in US shipments. Including pharmaceuticals, growth of US imports outpaced growth in US exports from 1995 through 2005, but the US balance of trade in chemicals has stabilized since, remaining about evenly balanced, with total imports about the same as total exports. The ACC in their “Year-End 2015 Chemical Industry Situation and Outlook” report sees production moving up 2.9% in 2016 and 4.4% in 2017, from 3.6% in 2015. The US had a trade deficit on chemicals amounting to $20.7 billion in 2015 due to the 2.8% year-over-year decline in

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exports last year. However, exports are expected to improve to $195.9 billion in 2016 and $248.9 billion by 2020.

With access to plentiful and affordable natural gas supplies, high profit margins, and low cost of capital, the US is becoming an attractive location for global chemicals industry investment, according to the ACC. From 2010 through early December 2015, more than 261 new chemicals production projects in the US were announced, valued at over $158 billion. Capital spending in the US chemicals industry surged 18.4% to $42.6 billion in 2015; it is expected to grow more than 7.0% annually on average through 2018, and is projected to reach $55.3 billion by 2020, according to the ACC.

New Petrochemical Plants in the Planning Stages

The US has become more attractive for the construction of new petrochemicals capacity due to increased global cost competitiveness of US feedstocks (primarily ethane), combined with increased chemicals industry production levels. In early 2011, a number of companies announced plans to either expand existing or build new ethylene facilities, which would be the first for the US since before the turn of the century.

 The Dow Chemical Co. In April 2011, Dow, the largest US chemicals company in terms of sales and the largest producer of ethylene in North America, announced plans to increase its ethylene and propylene production and to integrate its US operations into feedstock opportunities available from increasing supplies of US shale gas. Dow’s plans included restarting an ethylene cracker at its St. Charles operations site in Louisiana by the end of 2012 (it began production on time in December 2012). In November 2015, Dow mechanically completed its propane dehydrogenation (PDH) unit in Freeport, Texas and is currently finishing the commissioning of the plant. The PDH facility has a capacity of 750,000 tonnes per year, and will be using propane to make propylene.

The company is also planning the construction of a new, world-scale ethylene plant, in Freeport, Texas, for start-up in the second quarter of 2017; the plant was more than 40% complete as of March 2016. In addition, Dow is completing an ethylene cracker ethane feedstock flexibility at the company’s Louisiana operations site, which is expected to start operations in the second half of 2016.

In October 2011, Dow and the Saudi Arabian Oil Co. (Saudi Aramco) formed a joint venture, Sadara Chemical Co., to build and operate a fully integrated chemicals complex in Jubail. The facility started its polyethylene production in December 2015.

 Chevron Phillips Chemical Co. This company, equally owned by Chevron Corp. and ConocoPhillips, is one of the world’s largest producers of olefins and polyolefins. In December 2011, the company announced plans to construct world-scale ethane cracker and ethylene derivatives facilities in the US Gulf Coast region. The company’s existing Cedar Bayou facility in Baytown, Texas, would be the location of the new ethylene unit. The company entered into an agreement with Shaw Energy and Chemicals to design a 1.5 million-metric-tons-per-year ethane cracker facility. Chevron Phillips Chemical will use its proprietary technologies to construct two new polyethylene plants, each with an annual capacity of 500,000 metric tons, located on a site near its Sweeny facility in Old Ocean, Texas. The company received environmental approvals in August 2013 and started construction in April 2014. Chevron Phillips Chemical expects the facilities to be operational by 2017. In June 2013, the company announced plans to increase the production capacity of ethylene at its Sweeny facility to 90,000 metric ton per year, which was completed in December 2014.

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In June 2014, Chevron Phillips Chemical announced the start-up of the world’s largest 1-hexene plant in its existing Cedar Bayou Chemical Complex in Baytown, Texas. The plant is capable of producing 250,000 metric tons per year. In addition, the company announced on June 30, 2014 that it had received approval from the Board of Directors and obtained the necessary environmental permit for its 100,000 metric-ton-per-year expansion of its normal alpha olefins (NAO) production capacity at its Cedar Bayou plant. The expansion was completed in 2015. On December 18, 2014, the company announced its plan to build a polyethylene pilot plant at its facility in Bartlesville, Oklahoma. Construction began in 2015 and is expected to be completed in 2017. In March 2016, Chevron Phillips Chemical announced that it had reached its final investment decision to expand its low viscosity polyalphaolefins (PAO) capacity at its Cedar Bayou plant in Baytown, Texas by 20%. The expansion aims to meet the increasing demand for high-performance lubricants on automotive and industrial applications, while improving safety and efficiencies, as well as reducing waste generation of its existing PAO unit. The feedstocks for this project will be provided by the newly expanded NAO capacity at the company’s Cedar Bayou plant. Construction began in April 2016, and it is expected to be completed by mid-2017.

 LyondellBasell Industries N.V. In May 2011, the company, the second-largest North American maker of ethylene, said it was working on projects to shift the mix of ethylene production at its Channelview, Texas, facility (3.8 billion pounds of capacity) by 500 million pounds more to ethane feedstock. The company has also announced plans to expand ethylene capacity at its plant in La Porte, Texas, by 850 million pounds, which will increase capacity at that plant to 2.5 billion pounds per year. The company commenced construction at La Porte in the first quarter of 2013. The 850 million-pound-per-year ethylene expansion in the La Porte facility was completed toward the end of the third quarter of 2014. At the same time, the company began work to expand its existing methanol facility in Channelview to produce 260 million gallons of methanol per year, which was completed in the fourth quarter of 2013.

In its third-quarter 2014 earnings call, the company announced that it was continuing construction of an ethylene expansion at its Channelview, Texas, facility, and that it had completed its La Porte facility expansion in the third quarter and a 200 million-pound-per-year polyethylene expansion of its Matagorda, Texas, facility in the first quarter of 2014. In April 2014, the company received a permit issued by the Environment Protection Agency to commence the construction of its ethylene expansion in Corpus Christi, Texas. Meanwhile in August 2014, LyondellBasell announced plans to build a world-scale propylene oxide (PO)/tertiary butyl alcohol (TBA) plant on the US Gulf Coast, with an annual capacity of 900 million pounds of PO and 2 billion pounds of TBA and its derivatives. The preliminary timetable indicates that the plant could be operational in early 2020. In the third quarter of 2015, LyondellBasell announced that it has completed the 250 million-pounds-per-year ethylene expansion at its Channelview, Texas facility, while the company’s 800 million-pounds-per-year expansion at its site in Corpus Christi, Texas is expected to be completed in the third quarter of 2016.

 Westlake Chemical Corp. In April 2011, this smaller company announced an expansion program to increase the ethane-based ethylene capacity of its two ethylene plants (total existing capacity of 2.5 billion pounds annually) in Louisiana. The first plant expansion, completed in the first quarter of 2013, increased capacity by approximately 230 million to 240 million pounds per year. The expansion of the company’s Petro 1 ethylene unit at its Lake Charles site is expected to be completed in the second quarter of 2016, with an additional 250 million pounds of ethylene capacity.

In October 2012, the company announced that it is converting the feedstock for its Calvert City, Kentucky, ethylene plant from propane to ethane and increasing the plant’s ethylene capacity to 630 million pounds per year from the current 450 million pounds. In early 2013, the company

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awarded contracts to construction company Technip to begin work. The ethylene feedstock conversion was completed in April 2014. In January 2016, Westlake announced its approval to expand the ethylene capacity at Calvert City by 70 million pounds per year, which is scheduled to be completed in the first half of 2017. Combined with other capacity expansions, the company’s Calvert City operations are expected to have a total capacity gain of 100 million pounds per year.

 Royal Dutch Shell plc. In early June 2011, the Shell Chemicals business of this international oil company announced plans to build a world-scale ethylene plant, with integrated derivative units, in the Appalachian region of the US, using feedstock from Marcellus Shale play natural gas. A polyethylene plant was a leading option as a derivative plant. This is apparently the first announcement about a plant to be built in the Marcellus region.

In August 2013, the company started accepting bids for supply of ethane and received confirmation from a few suppliers for its proposed ethylene plant. In November 2014, Shell Chemical purchased Horsehead zinc smelter in Beaver County, Pennsylvania, to build a new plant on the property. It is expected that the ethane cracker will be completed in 2019 with capacity of 1.5 million mt/year of ethylene, 500,000 mt/year of gas-phased high-density polyethylene, 500,000 mt/year of slurry HDPE, and 500,000 mt/year of linear low-density polyethylene.

In February 2016, Royal Dutch Shell’s subsidiary, Shell Chemical LP started construction of its $717-million alpha olefins (AO) expansion project at its Geismar, Louisiana facility. The three- year expansion project is expected to boost the site’s production capacity by 425,000 tonnes per year to an estimated 1.3 million tonnes per year, starting in early 2018. Then in March 2016, the company announced a final investment decision with China National Offshore Oil Corp. (CNOOC) to expand their existing 50:50 joint venture, CNOOC and Shell Petrochemical Co. (CSPC), in Huizhou, Guangdong Province, China. The project includes the construction of a new ethylene cracker and ethylene derivatives units, which can double the current capacity to more than one million tonnes per year. Using Shell’s proprietary technology, CSPC is expected to produce 150,000 tonnes of ethylene oxide per year, 480,000 tonnes of ethylene glycol per year, and 600,000 tonnes of high quality polyols per year—increasing the volume of its product range to around two million tonnes per year.

Consolidation

Over the past 11 years, the chemicals industry has witnessed extensive consolidation. When companies merge, the surviving larger company can reduce costs in areas such as overhead, selling, and manufacturing. It also can achieve greater efficiencies in procurement and establish best practices for manufacturing and logistics.

Most transactions are relatively small, involving individual product lines or plants. Companies seeking growth within industry sectors may make acquisitions to achieve production or marketing efficiencies. Those that are divesting businesses usually do so because they want to exit certain geographic regions, are unwilling or unable to make the investments needed to remain competitive, or because they want to focus on other businesses with better sales growth opportunities.

In December 2015, Dow Chemical and E. I. du Pont de Nemours and Co. announced that they had entered into a definitive agreement to combine the companies in an all-stock merger of equals. The combined company will be called DowDuPoint. The parties intend to pursue a tax-free separation of the combined company into three independent, publicly traded companies covering businesses in agriculture, material science, and specialty products, subject to regulatory and board

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approval. In S&P Global Market Intelligence’s view, the merger is the largest deal ever for the chemicals industry.

Environmental Regulations Take Hold

The chemicals industry, which is subject to numerous environmental regulations, has made great strides in improving its environmental performance. Tighter restrictions on emissions of harmful compounds have forced chemicals producers to incur sizable costs in compliance and to develop techniques to reduce, treat, handle, and dispose of hazardous waste.

To improve its public image and to avoid even more onerous regulation, the industry has developed a self-regulatory system known as the Responsible Care Program, an international effort that began in Canada and that is managed by the International Council of Chemical Associations (ICCA). Under the program, member companies voluntarily commit to continuous improvement of health, safety, and environmental performances. The program establishes codes for management practices in six areas: community awareness and emergency response, pollution prevention, process safety, distribution, employee health and safety, and product stewardship.

TSCA Modernization Act The Toxic Substances Control Act (TCSA), passed in 1976, oversees the safety of chemical products and provides the Environmental Protection Agency (EPA) with authority to review and regulate chemicals in commerce. The regulation has never been updated, resulting in loss of confidence and pressure on individual state legislatures. After several years of attempting to reform the TCSA, the US House of Representatives passed H.R. 2576, the TSCA Modernization Act of 2015, on June 23, 2015. On December 17, 2015, the senate passed S. 697, the Frank R. Lautenberg Chemical Safety for the 21st Century Act, which also includes updates for the TCSA.

Toxic Waste Emissions Reduced Whether through its own initiative or due to governmental regulations, the chemicals industry has made a considerable dent in its toxic waste emissions. It moved from the largest emitting industry in the US, in 1988—the first year in which data were collected—to the third largest in 2009, far outstripping the average reduction achieved by other industries.

The Toxics Release Inventory (TRI) is a publicly available database from the US EPA that contains information on toxic chemical releases and other waste management activities. It was created as part of the Emergency Planning and Community Right-to-Know Act of 1986. This law requires certain companies to report the amount and kinds of toxic chemicals released into the environment, according to a list specified by the EPA.

Firms regulated under the TRI include manufacturers (including chemical) with industries that fell under Standard Industrial Classification codes 20 through 39, and, as of 1998, seven nonmanufacturing industries, including chemicals wholesalers. Since 1991, these industries also have had to report waste management and pollution prevention activities. The TRI also provides the public with information on chemical releases and transfers at the local, state, and national levels. Beginning in 2007 for the 2006 reporting year, facilities were required to use North American Industry Classification System (NAICS) codes in place of the Standard Industrial Classification (SIC) codes previously used on TRI reporting forms.

Total releases (i.e., discharges on-site and off-site) for all TRI industries in 2014 were 3.9 billion pounds from 21,783 facilities, according to the latest available TRI (released in January 2016, with data for 2014). Toxic releases by the chemicals manufacturing industry in 2014 totaled about 476

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million pounds, down 5.7% from 2013. Between 2003 and 2014, the chemicals industry’s toxic releases were reduced 14.2%.

The largest emitting industry in 2014 was the metal & mining industry, which released 1.8 billion pounds (45% of the total). Other industries with significant emissions were electric utilities (13%), chemicals (12%), primary metals (9%), paper (5%), and food/beverages/tobacco (4%). In most years, the chemicals industry has reported the largest amount of production-related chemical wastes released of any manufacturing industry covered by the TRI.

Total domestic releases for all reporting facilities (manufacturing and nonmanufacturing) in 2014 increased 6%, to 3.9 billion pounds, mostly due to decreases in on-site land disposal in the metal mining segment. The number of facilities reporting declined 12% from 2003 to 2014, although it has remained around 21,700 since 2010.

Further Expansion of the TRI Beginning with the reporting year in 2000, the EPA lowered the reporting thresholds for certain persistent bioaccumulative toxic (PBT) chemicals already reported under the TRI, and it added certain other PBT chemicals to the TRI list. PBT chemicals remain in the environment for long periods, are not readily destroyed, and build up or accumulate in body tissue. Mercury and chlordane are examples of PBT chemicals. In October 1999, the EPA noted that, at the previous reporting thresholds, facilities that manufacture or use PBT chemicals were not reporting many of these chemical releases. For the reporting year in 2001, the thresholds were lowered for lead and lead compounds.

Greenhouse Gas Controls A major potential regulatory and legislative change that could affect the chemicals industry is the current “climate change” proposals, including global talks and proposed US regulations designed to reduce greenhouse gases (GHG) such as carbon dioxide and methane. Ahead of a United Nations summit on climate change in Copenhagen in mid-December 2009, the Obama Administration had proposed reductions in US emissions of GHG.

The EPA announced on December 7, 2009, that six GHGs threaten the public health and welfare of the American people. This “endangerment finding” will allow the EPA, under the Clean Air Act, to develop new regulations to control the emissions of these gases. Shortly after a 2007 decision by the US Supreme Court confirming the EPA’s authority, Congress mandated that the EPA publish a rule requiring mandatory reporting of GHG emissions. On May 13, 2010, the EPA announced its final GHG Reporting Rule, which covers facilities and manufacturers responsible for an estimated 70% of GHG emissions in the US. In a September 2009 ruling, the EPA announced that the related recordkeeping would begin in 2010, while annual reporting would commence in 2011. The EPA recommended the use of the “best available control technology” (BACT). On January 11, 2012, the EPA published the GHG Reporting Program database, which provides the first comprehensive nationwide GHG emissions data for the US in 2010.

Total GHG emissions for the chemicals industry totaled 176.5 million metric tons carbon dioxide equivalent in 2014 (latest available), according to the EPA. The 2014 level was up 1.2% from 2013. Non-fluorinated chemicals accounted for 93.6% of total chemical GHG emissions, while the rest came from fluorinated chemicals.

GHG Regulations In 2011, the EPA’s proposed GHG regulation saw protest on several fronts that delayed the implementation of the rule. First, in early April, the Republican-controlled US House of

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Representatives passed a bill to prevent the EPA from moving forward with regulations that limit GHG emissions. However, in June 2011, the US Supreme Court upheld the authority of EPA to regulate GHG emissions, thereby giving the EPA a clear boost to proceed forward. However, the controversial GHG regulation rules for power plants continue to be delayed amid stiff opposition. At a House hearing in February 2012, EPA Administrator Lisa Jackson said that the agency remains hopeful the rules will come “early this year.” Rules for existing power plant greenhouse emissions were proposed in 2014 and for new power plant greenhouse emissions in 2013. On August 3, 2015, President Obama and EPA announced the Clean Power Plan, which will be the first set of national standards to address carbon pollution from power plants, while maintaining energy reliability and affordability.

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HOW THE INDUSTRY OPERATES

The chemicals industry is one of the largest industries in the US. Chemical companies convert raw materials derived from oil, natural gas, metals, minerals, and air into more valuable products used in industrial and consumer markets. Manufacturing facilities are located in every state and employ some one million workers. The products reviewed in this Survey include both commodity and specialty chemicals.

Commodities include basic inorganics (inorganic chemicals, chlor-alkalis, and industrial gases), organic chemicals (ethylene, propylene, benzene, and their derivatives), plastics, and fertilizer materials. Most are generally high-volume products with little product differentiation from one manufacturer to the next. Commodity chemicals operations are characterized by limited research and development (R&D) spending and a strong emphasis on reducing feedstock, energy requirements, and labor costs through engineering process improvements.

Specialty chemicals (or “specialties”) are generally made from basic chemicals, and, because they are designed for specific applications and/or customers, they may be produced in small volumes. Specialties are sold largely based on their performance attributes and are often critical components of the end products in which they are used. They require higher R&D spending and incur a greater amount of marketing and customer service costs than do commodity chemicals. Products include paints and coatings, pesticides, adhesives and sealants, catalysts, and plastics additives. (For reasons of space, we provide details on only the paint and coatings segment in this Survey.)

The manufacturing, automobile, agriculture, and housing sectors are the chemicals industry’s largest customers. The chemicals industry competes with, and is a supplier to, such industries as metals, glass, wood, and paper. Chemicals products compete with other materials based on price and performance characteristics.

The main factors driving the chemicals industry’s revenues are volume growth and pricing. Profits are driven mainly by a combination of product mix, raw material costs, capacity utilization, and operating efficiency. Changes in financing and in sales and marketing costs can also have a significant impact on profits.

Industry Characteristics

The chemicals industry is cyclical in nature. The industry is capital intensive, its production methods consume considerable amounts of energy, and its means of distribution are varied. The industry overall is heavily regulated. Each of these traits is examined in this section.

Cyclicality The chemicals industry’s overall health is closely tied to the US and global economies, as reflected in the movements of gross domestic product (GDP), personal consumption expenditures, retail sales, and currency exchange rates. The manufacturing, automobile, housing, and agricultural sectors are the largest markets for chemicals producers. These businesses are cyclical, so the chemicals industry is also highly cyclical in nature.

Adding to the industry’s cyclicality are imbalances in supply and demand caused by capacity additions. Certain areas of the industry in which large capacity additions are commonly made—

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such as the production of commodity inorganic chemicals, petrochemicals, and plastics—can experience sharp price swings in response to changing supply and demand conditions.

However, specialties differ. Because they are largely used in final customer products and applications, or used to improve manufacturing processes and/or the quality of end products, these specialized niche products are generally less subject to cyclical demand than are commodity chemicals. Pricing volatility is also less dramatic, because these products are differentiated, and major changes in industry supply/demand balances do not occur. Capacity additions for specialties are commonly small or designed for unique products, and thus can be done relatively quickly to closely match demand growth.

Capital Intensity The chemicals industry is relatively capital intensive, with aggregate capital spending of $42.6 billion in 2015, according to the American Chemistry Council (ACC), an industry trade association. The ACC expects strong capital spending in the coming years—rising 7% annually on average through 2018, and projected to reach $55.3 billion by 2020.

The cost of adding a new facility for high-volume commodity chemicals can amount to hundreds of million dollars. These high capital levels reflect the large plant sizes needed to achieve economies of scale that permit the efficient manufacturing of chemicals products. Other factors include the complex nature of technology used in plants and equipment; ancillary investments in utilities, storage, and distribution systems; and the high levels of expensive, sophisticated safety and environmental protection equipment required for today’s chemicals facilities.

The specialty chemicals industry is less capital intensive than the commodity chemicals industry. Manufacturing plants for specialty chemicals are usually small to medium in size and cost from a few million dollars to several tens of millions of dollars. However, specialty chemicals companies may need many manufacturing or distribution sites for the large number of unique, low-volume products that their customers require.

Both commodity and specialty chemicals firms must maintain capital budgets for the continual upgrading and replacement of existing plants. Facilities periodically undergo extensive modernization programs, often resulting in the expansion of rated capacity potential.

Long lead times are normal for the construction of new facilities—especially for commodity products—because larger plants are needed. Local authorities must be notified, in order to obtain zoning and environmental approvals, and plants must be designed, constructed, and put into operation. Thus, it is difficult for a chemicals company to make short-term changes in capital spending and for capacity to match major changes in demand.

Energy Intensity The chemicals industry is highly energy intensive, accounting for about 5.9% of US energy consumption for use both as fuel and power and as raw materials in 2014 (latest available). Natural gas and oil comprise the bulk of the industry’s energy consumption, with the remainder mainly consisting of electricity and coal. The industry is the nation’s largest user of natural gas, accounting for 8.4% of annual US consumption in 2014. Much of the petrochemicals industry is concentrated along the US Gulf Coast, where petroleum and natural gas are readily available.

The EIA’s Annual Energy Outlook 2015 reported that the industrial sector’s energy consumption is expected to grow the fastest among all other sectors, largely due to the anticipated growth of demand from the bulk chemicals industry. The expected increase in consumption from the bulk

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chemicals industry is due to the increased domestic supply of natural gas, hydrocarbon gas liquids (HGL) and petrochemical feedstocks. The value of bulk chemicals is expected to grow from $288 billion in 2013 to $429 billion in 2025. After 2025, shipments are projected to grow at a slower rate to $454 billion in 2040.

Energy costs amounted to about $98.5 billion in 2014 (latest available), or around 12.3% of the value of chemicals industry shipments, according to the ACC. Of the chemicals industry’s total energy consumption, energy inputs used for raw materials accounted for 49.7% by volume (71.3% by value) in 2014, with the rest used for fuel and power. Companies purchase much of their energy needs under long-term contracts, which help to reduce sensitivity to fluctuations in spot market prices for oil and natural gas. For manufacturers of some products, such as petrochemicals, energy consumption for both fuel and raw materials accounts for the majority of the total cost of production.

Distribution Methods Vary Chemical manufacturing facilities are located in every state, but almost two thirds of US chemicals production is concentrated in 10 states. The chemicals industry has a wide range of customers; thus distribution methods play a key role in the industry.

The chemicals industry shipped about 859 million tons of chemicals and products (including consumer products and drugs) within the US in 2014 (latest available), according to the ACC. The ACC estimates that the total cost of transportation for the chemicals industry was $47.2 billion in 2014. Transportation costs accounted for about 5.9% of the value of total chemicals industry shipments in 2014.

About 53.9% of all chemicals and products tonnage in 2014 was shipped by truck. Trucking is most widely used for small-volume packaged products, as well as for industrial gases and consumer products, such as pharmaceuticals and detergents.

Rail is the most common means of shipping commodity chemicals such as chlorine, fertilizers, bulk petrochemicals, and inorganic chemicals, although waterborne transport moved at a higher percentage share in 2014. Railroads accounted for 20.5% of tonnage in 2014. Waterborne transport moved 21.5% of chemicals tonnage in 2014, mainly for shipping of large-volume commodity chemicals.

Other modes of transportation include pipelines, rail/truck intermodal, and air cargo. Pipelines accounted for 3.2% of volume in 2014, mainly for short-distance transportation of industrial gases and petrochemicals such as ethylene. In some regions, suppliers commonly connect directly to their customers’ plants by pipeline.

Basic Chemicals

The basic chemicals group includes inorganic chemicals, chlor-alkalis, and industrial gases. The majority of basic chemicals are produced from mineral ores or brines, atmospheric gases, or gases created as a byproduct or co-product of various manufacturing processes, such as primary metal production, petroleum refining, and coal processing.

Basic chemicals are used both as building-block materials and as processing aids and catalysts in the production of other chemical and nonchemical products. The largest consumers of basic chemicals are companies within the industrial and agricultural sectors.

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Inorganic Chemicals Inorganic chemicals—including sulfur, sulfuric acid, and titanium pigments—comprise the bulk of basic chemicals production. This segment supplies building-block inorganic chemicals, catalysts, and reagents used in other products.

 Sulfur. The US is the world’s largest producer and consumer of sulfur. The US Geological Survey (USGS), a division of the US Department of the Interior, estimates that 11.0 million metric tons of sulfur (all forms) was used domestically in 2015; domestic sources provided 69% of the total supply, while Canada supplied the majority of imports.

The bulk of sulfur produced in the US is from numerous companies that recover it during oil refining and natural gas processing, with a smaller amount produced as byproduct sulfuric acid derived from nonferrous metal smelters. The Frasch process, in which hot water is used to melt and remove sulfur from underground reserves, was the dominant method of producing sulfur in the US until the early 1980s. The last remaining Frasch mine in the US was closed in August 2000.

About 90% of sulfur used domestically in 2015 was consumed in the form of sulfuric acid, according to the USGS. By far the largest-volume inorganic chemical, sulfuric acid is used directly or indirectly in a wide variety of industrial processes, primarily as a chemical reagent. Its predominant end use is in the production of fertilizer.

Sulfuric acid is manufactured primarily through the oxidation of sulfur. Phosphate fertilizer companies are the largest producers. A small amount is derived as a byproduct of metal ore smelting and from the regeneration of acid previously used as catalysts in petroleum refining or chemical processing.

 Titanium dioxide. A white pigment, titanium dioxide is the largest-selling inorganic pigment; its US market was $3.0 billion in 2015. Titanium pigment is made from titanium through one of two discrete processes: sulfate treatment and chloride treatment. The USGS estimated worldwide titanium dioxide capacity at about 7.2 million metric tons in 2015, with US capacity at 1.1 million metric tons of chloride process. US production in 2015 was estimated at 1.2 million tons, down 7.9% from 2014.

In 2015, about 60% of US titanium dioxide demand came from the paint and coatings industry, which uses it for white pigmentation. The other major end uses are plastics (20% of demand) and paper (12%). The remaining 8% of consumption included catalysts, ceramics, coated fabrics and textiles, floor coverings, printing ink, and roofing granules, according to USGS.

There are four producers of titanium dioxide in the US: E.I. du Pont de Nemours and Co. (the world’s largest producer), Tronox Inc., Cristal Global (the former Millennium Inorganic Chemicals Inc., which was acquired by a unit of Saudi Arabia’s National Industrialization Co. in 2007), and Louisiana Pigment Co. LP (a joint venture of Kronos Worldwide Inc. and Huntsman Corp.).

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PRODUCTION OF MAJOR INORGANIC CHEMICALS

(product shipments, in $, millions)

2006 2007 2008 2009 2010 2011 2012 2013 2014* 1-YR. 5-YR.

Chlorine and alkalies 5,798 5,982 7,002 5,258 5,706 7,065 NA NA NA NA NA

Chlorine, compressed or liquified 2,382 2,215 1,404 1,175 1,597 1,761 1,194 1,042 1,102 5.8 (7.2)

Industrial gases 8,246 8,973 9,858 7,149 6,876 6,980 7,155 6,971 6,926 (0.6) 0.1

Carbon dioxide 522 545 629 569 569 607 596 607 702 15.5 4.3

Nitrogen 1,391 1,246 1,349 1,183 1,105 1,090 1,011 1,032 1,055 2.2 (0.9)

Oxygen 1,012 980 1,058 786 637 591 590 580 601 3.6 (1.1)

Argon and hudrogen 2,582 2,928 3,399 2,160 1,772 1,849 1,773 1,820 1,796 (1.3) 0.3

Inorganic dyes and pigments 4,755 5,358 5,068 4,073 4,634 5,155 NA NA NA NA NA

Titanium dioxide 3,273 3,437 3,378 2,794 3,136 3,510 5,110 5,331 4,951 (7.1) 9.6

Fertilizer materials

Nitrogenous fertilizer 4,623 6,734 9,297 7,328 7,588 9,257 9,997 8,918 8,543 (4.2) 2.4

Synthetic ammonia, nitric acid,

and ammonium 3,628 4,524 6,517 5,031 5,458 6,735 7,340 6,952 6,474 (6.9) 3.5

Phosphatic fertilizer 4,923 7,429 10,617 7,951 8,726 10,179 11,537 13,894 12,596 (9.3) 7.6

Phosphoric acid 1,085 1,353 2,022 1,353 1,676 2,249 2,249 2,216 2,153 (2.8) 5.1

Superphosphates and other

phosphatic fertilizers 3,502 4,918 7,136 5,275 5,501 6,211 6,922 8,787 7,790 (11.3) 7.2

*Latest available.

Source: US Census Bureau.

CHEMICAL PRODUCTION AVERAGE ANNUAL

PERCENT CHANGE

Chlor-Alkalis The chlor-alkali subgroup includes chlorine and caustic soda (sodium hydroxide) and other alkalis such as soda ash (sodium carbonate).

 Chlorine and caustic soda. Chlorine and caustic soda are co-products of salt brine electrolysis; the chlorine-to-caustic soda output ratio is about 1.0:1.1. Because chlorine gas is a dangerous product that is expensive to store, demand for chlorine usually fuels chlorine–caustic soda production. Chlorine is affected by economic change more quickly than is caustic soda; thus, when demand for chlorine increases or ebbs, its co-product caustic soda can be in long or short supply. Domestic chlorine production in 2014 (latest available) was 10. 7 million tons, compared with 10.3 million tons in 2013, according to the ACC. Caustic soda output was 11.4 million tons in 2014, up from 10.8 million tons in 2013. Both products in 2013 were modestly above their 2008 production levels. The industry’s record chlorine output was 12.8 million tons in 2000.

Pricing is based on the electrochemical unit (ECU)—a ton of chlorine with the commensurate amount of caustic soda. Leading producers are Olin Corp., Occidental Petroleum Corp., PPG Industries Inc., Formosa Plastics Corp., and Georgia Gulf Corp. Chlorine is used largely to make polyvinyl chloride plastics and a variety of chemicals including titanium pigment. Industrial uses include pulp bleaching and paper production, water and sewage treatment, and metal extraction.

About half of caustic soda output is used in the production of other chemicals, and about 25% is used in pulp and paper manufacturing. Other important markets for caustic soda are soaps and detergents, textiles, water treatment, aluminum, and petroleum and gas processing.

 Soda ash (sodium carbonate). Soda ash is the largest alkali in terms of volume in 2014 (latest available), according to the ACC. The US had been the world’s biggest source of soda ash, with annual capacity of 14.5 million metric tons (including idled capacity), until 2003, when China surpassed it. Production in 2015 increased to 11.7 million metric tons, the same level as in 2014 and up 1.7% from 11.5 million metric tons in 2013 and 5.4% from 11.1 million metric tons in

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2012. In the US, soda ash is extracted mainly from trona, a natural vitreous mineral that is mined in Wyoming.

Companies operating in Wyoming include FMC Corp., General Chemical Corp., OCI Chemical Corp., and the Solvay Chemicals Inc. joint venture between Solvay Group SA of Belgium and Asahi Glass Co. of Japan. In March 2008, Tata Chemicals Ltd., part of India-based Tata Group, acquired the soda ash business of General Chemical Industrial Products Inc., for $1.0 billion, making Tata Chemicals the world’s second-largest soda ash company. Outside of the US, most soda ash is not mined, but produced via the high-cost Solvay synthetic process.

Domestic demand had been relatively stable since the late 1990s, at a little over six million metric tons annually, until the recent recession. Glass manufacturing is the largest US market for soda ash, accounting for 47% of US consumption in 2015, as estimated by the USGS. Other uses of soda ash are chemicals production (30%), soap and detergents (7%), distributors (6%), flue gas desulfurization and miscellaneous uses (4% each), pulp and paper manufacturing, and water treatment (1% each). Exports recovered in 2010 to a record 5.4 million metric tons, and continued to increase year-over-year to 6.7 million metric tons in 2015.

Industrial Gases

Industrial gases are produced primarily by air separation; that is, they are extracted from the atmosphere. Examples of gases produced in this manner are nitrogen, oxygen, argon, and the rare gases. Some gases, including hydrogen, acetylene, and carbon dioxide, are co-products or byproducts of other processes.

The major industrial gas producers in the US are Praxair Inc., Air Products and Chemicals Inc., Airgas Inc., American Air Liquide Holdings Inc. (a unit of France-based L’Air Liquide SA), and the German company The Linde Group. In September 2006, Linde acquired the BOC Group PLC of Great Britain, which also produced industrial gases in the US.

In the dominant cryogenic air separation process, air is cooled and pressurized until it becomes a liquid, with the various gases extracted through fractional distillation. However, non-cryogenic production technologies are a growing source of nitrogen and oxygen. The two key non-cryogenic systems are membrane separation and pressure swing adsorption. Facilities based on either of these systems tend to be significantly smaller than cryogenic plants, and thus can be located directly on a customer’s site. Due to their lower capital and energy requirements, these two methods produce gases at a much lower cost—as much as 50% less than the traditional cryogenic method.

These lower costs have spurred the development of new applications for industrial gases, opening up new gas markets in which cryogenic gases would be uneconomical. Non-cryogenic methods also are taking some existing small-volume business away from cryogenically produced gases, freeing up much-needed cryogenic production capacity.

Organic Chemicals

Organic chemicals are substances that contain the element carbon. Their main sources are crude oil and natural gas. Organics include aliphatics, aromatics, and methanol, which can be further processed into intermediates and solvents. End products include plastics as well as synthetic rubbers and fibers, detergents, pharmaceuticals, adhesives, inks, dyes, and explosives. The

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distinctions among these classifications are often blurred, with certain basic and intermediate chemicals frequently sold as end products.

Production of major organic chemicals in the US rose almost every year from 1990 through 2000, reflecting both a growing economy’s increased demand for derivative products and rising industry capacity. Since then, however, production for many products has been erratic, due to two economic recessions and recoveries, very high natural gas prices, and hurricane-related plant shutdowns and transportation disruptions.

PRODUCTION OF SELECTED ORGANIC CHEMICALS

(in thousands of metric tons)

2005 2011 2012 2013 2014* 1-YR. 10-YR.

Aniline 965 935 965 1,050 895 (14.8) (0.8)

Benzene 6,645 5,765 5,335 5,430 5,270 (2.9) (2.3)

1,3-Butadiene 2,045 1,675 1,445 1,405 1,365 (2.8) (4.0)

Cumene 3,510 3,135 3,140 2,510 2,595 3.4 (3.0)

Ethylbenzene 5,250 4,065 4,325 4,625 4,565 (1.3) (1.4)

Ethylene 23,975 24,410 24,025 25,035 24,660 (1.5) 0.3

Ethylene dichloride 11,260 8,460 8,145 8,375 8,310 (0.8) (3.0)

Ethylene oxide 3,220 2,785 2,820 2,525 2,535 0.4 (2.4)

Propylene 15,865 14,290 13,170 13,250 13,265 0.1 (1.8)

Styrene 5,040 3,960 4,205 4,465 4,400 (1.5) (1.3)

o-Xylene 6,295 6,295 5,770 5,030 4,795 (4.7) (2.7)

*Latest available.

Source: American Chemistry Council.

CHEMICAL PRODUCTION AVERAGE ANNUAL

PERCENT CHANGE

From 2001 to 2003, production of many chemicals products was below peak levels because of an economic slump and the adverse impact of very high natural gas prices on the competitiveness of the US petrochemical industry. In 2004, production returned to prior peak levels in response to stronger market demand, but dropped again in 2005, largely because of lost Gulf Coast production caused by hurricane-related plant shutdowns and transportation disruptions. Industry output partly recovered in 2006 and 2007, but then fell once more in 2008 and 2009 due to a combination of lost production following hurricane-related facilities shutdowns in 2008 and the economic recession. Production recovered since 2011, but remained below record levels.

Aliphatics Also called olefins, aliphatics are straight-chain hydrocarbons. Ethane, propane, and butane from natural gas are treated using the “steam-crack” process (the cracking of feedstocks done in the presence of steam) to yield varying percentages of ethylene, propylene, and butadiene. These three substances are the most important aliphatics, as they are the building blocks for most organic chemicals and synthetic materials.

Major producers of aliphatics include LyondellBasell Industries, Dow Chemical, ExxonMobil Chemical Co. (a unit of Exxon Mobil Corp.), Chevron Phillips Chemical Co. LLC, Royal Dutch Shell PLC (formerly Royal Dutch/Shell Group), INEOS Group Ltd., Formosa Plastics, and Westlake Chemical Corp.

 Ethylene. This is the largest-volume organic chemical produced in the US, with long-term shipment growth estimated at about 3%–4% a year. US production in 2014 (latest available) was

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24.7 million metric tons, down 1.5% from the prior year, according to the ACC. The record of 25.7 million metric tons was reached in 2004. Demand for plastics (polyethylene, polyvinyl chloride, and polystyrene) accounts for about three quarters of final ethylene demand. Other important uses are for the manufacture of antifreeze, synthetic fibers and rubbers, solvents, and detergents.

 Propylene. Propylene is the No. 2 organic chemical in terms of volume, at 13.27 million metric tons in 2014 (latest available), up 0.1% from 13.25 million metric tons in 2013, but down from a record 16.5 million metric tons in 2007. The chemical’s largest market, at about 50%, is for the manufacture of polypropylene resin. It is also used to make derivative chemicals such as acrylonitrile, propylene oxide, cumene, and isopropanol. In turn, those chemicals are needed to make acrylic fibers, phenolic resins, acrylonitrile-butadiene-styrene (ABS) resins, polyurethane resins and coatings, unsaturated polyester plastics, and solvents. They are also used as blending agents in gasoline.

Aromatics Aromatics, including benzene, toluene, and the xylenes, are derived primarily from petroleum refining and from olefin operations that use steam cracking. Some aromatics are produced from coal tar. Important chemical end uses of aromatics are for the manufacture of plastic resins, fibers, and rubber. Aromatics also can be added to gasoline to increase its octane rating.

A large percentage of aromatics are produced through petroleum refining, so the economies of aromatics production are linked to those of gasoline production. Aromatics’ prices are thus closely tied to the demand for and the price of crude oil and gasoline. As a result, prices for aromatics are among the most volatile of any chemical group.

 Benzene. Benzene is the simplest aromatic compound, in terms of chemical composition, and the most widely used. Benzene output in 2014 (latest available) totaled 5.3 million metric tons, according to the ACC. Major end uses include styrenic plastics (polystyrene and ABS), phenolic resins, polycarbonate and epoxy resins, polyurethanes, nylon, synthetic rubbers, and detergents. The largest producers include ExxonMobil Chemical, LyondellBasell, BP PLC, Koch Industries Inc., Dow Chemical, Chevron Phillips Chemical, and Royal Dutch Shell.

 Benzene derivatives. With 4.4 million metric tons produced in 2014 (latest available), styrene is one of the most widely produced derivatives of benzene. Its primary market is polystyrene production (more than 60% of total consumption). Styrene is also used in the production of styrene-butadiene rubber and latex, ABS resins, unsaturated polyester resins, and other plastics. Major producers are LyondellBasell, INEOS NOVA LLC (the styrenics joint venture between NOVA Chemicals Corp. and INEOS Group), Americas Styrenics LLC (a joint venture between Dow Chemical and Chevron Phillips Chemical), and Cos-Mar Inc. (a joint venture between TOTAL SA and Saudi Basic Industries Corp., or SABIC).

Phenol, another common benzene derivative, is employed primarily in the production of bisphenol-A (used in polycarbonate engineering plastics and epoxy resins) and phenolic resins (used in adhesives). Other phenol derivatives are caprolactam (nylon resins) and aniline (polyurethanes). Phenol is generally produced from cumene; its co-product is acetone (acrylic plastics). Major phenol producers are Sunoco Inc., Royal Dutch Shell, INEOS Group, Dow Chemical, and Georgia Gulf.

Plastics Plastics are polymers that are combined with additives and other ingredients—stabilizers, colorants, flame retardants, and reinforcing agents—and then shaped or molded into a solid state

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under heat and pressure. Plastics are produced directly or indirectly from such organic chemicals as ethylene, propylene, butadiene, and benzene. Plastics output may be formed into pellets, flakes, granules, powders, liquid resins, sheeting, or film.

There are two kinds of plastics: thermoplastics, which can be resoftened to their original condition by heat, and thermosets, which cannot be resoftened. Thermoplastics have accounted for more than 90% of total plastics production in recent years, given the ability of thermoplastic to be recycled and lower production costs.

There are numerous plastics producers, with many focusing on just one or two product lines. Among the leading US plastics producers are LyondellBasell, Dow Chemical, ExxonMobil Chemical, Chevron Phillips Chemical, and Occidental Petroleum.

A large portion of plastics demand comes from the packaging and consumer markets, two segments that tend to be fairly recession-resistant. In 2015, the largest market for plastics was packaging, such as bags, bottles, and food containers. These items accounted for 34% of all plastics use, according to the ACC. (Figures for plastics were supplied by the American Plastics Council, which is part of the ACC.) Consumer and institutional goods, such as kitchenware, toys, sporting goods, and medical products, comprised the second-largest market (20%). Exports was the third-largest market (19%), followed by building and construction—for structures, pipes, conduits, and fittings (16%), followed by transportation (4%), furniture and furnishings (2%), electronic appliances and electronic components (2%), industrial and machinery (1%), and all other uses (2%).

The volume of industry sales and production (both measured in pounds) grew in most years for the past two decades. During this period, increases were achieved in most years. S&P Global Market Intelligence thinks that much of the long-term growth in plastics came from their use as substitutes for natural materials—including wood, glass, paper, and metals—in applications such as packaging, durable goods, and personal care products.

PRODUCTION OF PLASTIC MATERIALS & RESINS

(in thousands of metric tons)

2005 2011 2012 2013 2014* 1-YR. 10-YR.

Nylon resins 568 502 541 562 590 5.0 0.4

Polyethylene

Low density† 3,558 3,042 3,123 3,139 3,227 2.8 (1.0)

Linear low density† 5,395 6,089 6,098 6,284 6,286 0.0 1.5

High density‡ 7,328 7,765 8,046 8,119 7,944 (2.2) 0.8

Polypropylene 8,149 7,447 7,406 7,452 7,461 0.1 (0.9)

Polystyrene resins 2,855 2,482 2,675 2,650 2,838 7.1 (0.1)

Polyvinyl chloride and

copolymers 6,922 6,548 6,345 6,973 6,821 (2.2) (0.1)

*Latest available.†0.940 density and below. ‡Density above 0.940.

Source: American Chemistry Council.

AVERAGE ANNUAL

PERCENT CHANGE

PRODUCT PRODUCTION

Thermoplastics The five largest-volume thermoplastics are polyethylene, polyvinyl chloride, polypropylene, polystyrene, and polyester plastics.

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 Polyethylene. The thermoplastic polyethylene (PE)—including high-, low-, and linear low- density polyethylene—is the largest-volume plastic on a combined basis. Packaging is the largest market for PE, followed by consumer and institutional products, exports, and other. Major PE producers in the US are ExxonMobil Chemical, Dow Chemical, LyondellBasell, Chevron Phillips Chemical, Westlake Chemical, and INEOS Group.

 High-density polyethylene (HDPE) is the largest-volume polyethylene. Its primary uses include blow moldings (mainly for bottles and containers), films and sheets for packaging and bags, injection moldings (pails, crates, and tubs and containers), pipes and conduits, and extruded products.

 Linear low-density polyethylene (LLDPE) has been the fastest-growing polyethylene for many years and is the second-largest volume polyethylene plastic. LLDPE can be produced with less pressure and at lower temperatures than are required by traditional low-density polyethylene (LDPE) resin production processes. As a result, production costs and energy requirements for LLDPE are lower than for low-density polyethylene. In addition, LLDPE film is stronger than LDPE film.

Most LLDPE is made in “swing” plants (that are also capable of making HDPE). Major uses of LLDPE include film products (bags and liners, along with packaging and stretch/shrink-wrap films), extruded products (including sheet and pipe and conduit), injection molding, and rotomolding resins.

 Low-density polyethylene (LDPE) is the smallest volume polyethylene plastic, and it experienced modest fluctuations from 1999 to 2014 (latest available). Major end uses include films and sheets (mainly for packaging, bags, and liners), extrusion coatings, extruded products (including wire and cable), and injection moldings.

 Polypropylene. Polypropylene (PP) is the plastic resin with the second-largest volume. It took that position in 1999, after more than 10 years as the fastest-growing resin, with demand propelled by broadening applications in the automotive, durable goods, and textile markets. The major end markets for PP are packaging, consumer and institutional products, furniture/furnishings, transportation, and exports, according to the ACC. Leading polypropylene producers in the US are LyondellBasell, ExxonMobil Chemical, INEOS Group, Total, Braskem S.A., and Formosa Plastics.

The leading domestic product uses for PP include injection moldings (for packaging, consumer products, transportation, and appliances), fiber and filaments (primarily for nonwoven textiles and carpets), and films and sheets.

 Polyvinyl chloride. Polyvinyl chloride (PVC) is the third-largest plastic in terms of volume. Demand is highly dependent on housing and construction-related markets, which account for about 70% of domestic consumption. Construction uses include pipes, siding, window and doorframes, fencing, and decking. Major PVC producers are Sintech Inc., Occidental Petroleum, Georgia Gulf, and Formosa Plastics.

Extrusion—in which plastic is shaped into a hard form by being pushed through a die—is the primary end use for PVC. Other important end uses include calender (or pressed) items for packaging films and sheets and for flooring; molded bottles and pipefittings; and coatings for flooring, textiles, and paper.

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 Polystyrene. The leading domestic markets for polystyrene (PS) are consumer and institutional products, and packaging, including foodservice ware, according to the ACC. Other leading PS markets are building and construction, electrical/electronic products (including appliances), and exports. Major producers in the US are the INEOS NOVA joint venture, Styron LLC (the former styrenics unit of Dow Chemical), and Total.

 Polyester plastics. Polyester plastics consist largely of polyethylene terephthalate (PET) resins, which are typically used in beverage and food containers. The major producers of PET in the US are Wellman Inc., Nan Ya Plastics Corp., Invista BV (a unit of Koch Industries), DAK Americas, and Italy’s Mossi & Ghisolfi Group.

Thermosets This category includes phenolics, polyester resins, epoxies, urea, and melamine, which are considered relatively mature products. Demand for these low-volume products is closely tied to the highly cyclical building and construction markets, which generally account for about two thirds of demand.

Fertilizers

Fertilizers are substances or mixtures that contain one or more of the major plant nutrients and sometimes secondary and/or trace nutrients. They are added to soil to replace essential nutrients depleted by crops.

The main nutrients are phosphorus (in the form of ammonium phosphates and superphosphates derived from phosphate rock), nitrogen (supplied as anhydrous ammonia and urea), and potassium (supplied as potash). Secondary and trace nutrients include calcium, magnesium, sulfur, iron, copper, and zinc.

Fertilizer Markets Fertilizer markets are both seasonal and volatile. Demand is a function of grain prices, government farm programs, the acreage and mix of crops planted, weather patterns, farming practices, and the value of the US dollar. Population growth and dietary trends play important roles as well.

The cultivation of corn is the largest single use of fertilizer in the US, at about 46% of total consumption in 2010 (latest available), according to the US Department of Agriculture (USDA). Wheat is a distant second (9%), followed by soybeans (7%), cotton (3%), and other crops (35%).

The US farm economy is generally mature, as is the domestic fertilizer market. Fertilizers are already widely used in the growth of important crops, such as corn and soybeans. Thus, year-to- year changes in fertilizer demand reflect the level of planted acreage and application rates. These, in turn, are affected by grain prices, government farm policies, and weather conditions. More recently, the rapid growth in the production of biofuels initiatives, including ethanol, has been driving a boost in grain and oilseed use globally.

In May 2016, the USDA, in its World Agricultural Supply and Demand Estimates, suggested that the total planted area for eight major crops reached 354.8 million acres in 2015 (including 103.1 million acres of feed grains, 82.7 million acres of soybeans, and 54.6 million acres of wheat). In May 2016, the USDA estimated that the total planted area would reach 357.8 million acres this year.

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Industry producers estimate that US farmers, in response to historically high and volatile prices in 2008, reduced their use of potash and phosphates (in terms of nutrient tons) by 30% and 14%, respectively, in the fertilizer year that ended June 30, 2009. However, as farmers increased applications rates to replenish soil nutrients, demand in the year that ended June 30, 2011 (latest available) were in line with 2010 levels, with the use of phosphates up 2% and potash marginally declining 1%. Industry producers and analysts forecast a continued recovery in use in 2014, healthy crop prices, and protection of revenue through crop insurance. The USDA estimated in October 2015, that corn plantings would drop by 2.2 million acres to 88.4 in 2015, and soybean production would drop by 0.1 million acres to 83.3 million acres in 2015.

Global demand for nutrients in 2016 will likely be comfortably above the depressed levels seen in 2008 and 2009, reflecting increased plantings resulting from tight global supply/demand fundamentals for grains and other crops. Yet S&P Global Market Intelligence thinks that demand in 2016 will be down moderately from 2015, due to the reduced acreage for the eight major crops and the drop in corn acreage.

Based on data compiled from Agrium Inc., Mosaic, and Potash Corp., which S&P Global Market Intelligence uses as a proxy for the fertilizer market, potash shipments decreased slightly by 0.1% to 19.9 million metric tons in 2015, from 19.0 million metric tons in 2014. Shipments of phosphates for the proxy group of companies were down 1.9% to 16.4 million metric tons in 2015, from 16.7 million metric tons in 2014. Shipments of nitrogen for the proxy group of companies (excluding Mosaic) decreased 0.8% to 9.6 million metric tons in 2015, from 9.7 million in 2014. Over the next three decades, the growth in fertilizer use in developing countries is expected to slow to 1.1% annually, which will be a continuation of the current slowdown experienced, according to the Food and Agriculture Organization of the United Nations (FAO).

In 2014, potash shipments of the proxy group increased to 19.0 million metric tons, from 17.0 million metric tons in 2013. Shipments of phosphates for the proxy group of companies were down to 21.8 million metric tons in 2014, from 22.5 million metric tons in 2013. Shipments of nitrogen for the proxy group of companies (except Mosaic) were almost flat at 7.6 million metric tons in 2014. In March 2014, CF Industries completed the sale of its phosphate business to Mosaic.

Nitrogen Nitrogen is the largest-volume nutrient. It must be reapplied via fertilizer each year because it is absorbed by crops or escapes from the soil through leaching, volatilization, or erosion and runoff. As a result, nitrogen-based fertilizer typically sees more stable demand, on a per-acre-planted basis, than does either phosphate or potash.

Produced from natural gas, ammonia is the simplest form of nitrogen fertilizer and is the primary raw material for the production of enhanced nitrogen fertilizers, such as urea and ammonium nitrate solutions. Approximately 88% of domestic ammonia consumption in 2015 was for fertilizer use, according to USGS.

Domestic ammonia production in the past decade has remained below the production levels of the late 1990s, as very high and volatile prices in the past decade for natural gas have caused a large percentage of capacity to be periodically idled or, in some cases, permanently closed. Domestic production in 2009 of 7.7 million tons was 44% less than in 1998, as US ammonia producers operated at about only 72% of capacity in 2009. With a drop in domestic production, imports in 2009, were 31% higher than in 1998, replacing an even larger market share. US ammonia producers operated at 80% of capacity and net imports rose 12% since 2009 despite the increases in ammonia production. Apparent consumption in 2015 rose to 13.3 million tons from 12.3

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million tons in 2009. However, the share of imports between 2011 and 2015 remained between 31% and 38%.

The USGS, in its annual Minerals Commodity Summaries 2016 for nitrogen, noted that a long period of low and stable natural gas prices in the US has spurred companies to upgrade existing plants and plan for new nitrogen projects. In the next four years, it is projected that about 5.0 million tons of annual production capacity will be added in the US. Global ammonia capacity is expected to increase as well by 15% during the next four years, as new capacity is expected in Africa, Asia, Easter Europe, and Latin America, with the largest growth expected in China and Russia.

The US was one of the world’s leading producers and consumers of ammonia in 2015, according to USGS. The major US nitrogen fertilizer producers are CF Industries (including Terra Industries acquired in 2010), Koch Industries, Potash Corp., and Agrium Inc. From 2011 to 2014, Trinidad and Tobago supplied about 59% of imported nitrogen fertilizer by value; Canada, Russia, and Ukraine supplied most of the remainder.

Phosphates The US is the world’s largest consumer and importer of phosphate rock and the largest processor and exporter of phosphate chemicals converted from phosphate rock. In 2006, China surpassed the US as the world’s leading producer of phosphate rock. The USGS estimates that fertilizer accounts for over 95% of annual domestic demand of phosphate rock, which totaled 27.6 million metric tons in 2015. Animal feed supplements and industrial and consumer applications accounted for the balance of demand; there is now no exporting of phosphate rock. A small amount of rock is imported (accounting for about 6.7% of demand), virtually all from Morocco and Peru; the bulk is used by three phosphoric acid producers.

Phosphate rock is combined with sulfuric acid to yield phosphoric acid, which is then further processed into fertilizers such as diammonium phosphate. All phosphate rock mining companies are vertically integrated with one or more fertilizer plants, usually located near the mine. The largest US phosphate fertilizer producer is Mosaic Co., followed by Potash Corp. of Saskatchewan Inc.

About 45% of the wet-process phosphoric acid produced in 2015 was exported by the US in the form of upgraded granular diammonium and monoammonium phosphate (DAP and MAP), and merchant-grade phosphoric acid. US marketable phosphate rock production in 2015 increased 9.1% to 27.6 million metric tons. US phosphate rock used in 2015 fell 2.7% to 28.3 million metric tons.

Potash The term potash generally applies to naturally occurring potassium salts. About 85% of the potash consumed in the US is used for fertilizer. The balance is sold to the animal feed and nonagricultural markets, where it is used in the manufacture of chemicals, glass, and soaps, and as an ice melt and a water softener.

Potash is mined primarily from deposits of potassium salts. Canada is by far the world’s largest producer, followed by Russia, Belarus, China, Germany, Israel, Jordan, Chile, and the US. Increased global consumption in recent years had tightened supplies after many years of oversupply; most producers had operated at full capacity from 2004 through 2008, but demand fell sharply in 2009. In 2012, demand fell to 5.0 million metric tons before rising to 5.2 million tons and 5.8 million tons in 2013 and 2014. In 2015, demand fell to 4.7 million tons due to high inventories and anticipation of lower prices during the fourth quarter, according to USGS. S&P Global Market Intelligence expects global demand to shrink somewhat in 2016.

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Canada represents about 85% of North American potash capacity. The three main Canadian producers are Potash Corp. (the largest in terms of capacity), Mosaic (which owns the potash business of the former IMC Global), and Agrium. Canadian production of potash is centered in Saskatchewan, with a small amount mined in New Brunswick.

Most of the Canadian potash is exported. These exports are largely channeled through Canpotex Ltd., a jointly owned export consortium of the three main Saskatchewan producers. In 2015, a significant portion of Canpotex shipments went to Asian and Latin American countries. S&P Global Market Intelligence thinks the global growth markets of the future are nations with limited or no indigenous potash production, such as Brazil, India, and China. The US is the world’s largest consumer and importer of potash. Imports accounted for 85% of the 4.7 million metric tons of potash consumed domestically in 2015, according to USGS. Canada supplied 84% of US imports.

In July 2013, Russian potash producer Uralkali announced that it was leaving the Belarusian Potash Co. (BPC) joint venture to form its own marketing unit under the name Uralkali Trading Co. The move led to a decline in global potash prices to about $300 per ton in April 2014, from $400 per ton, where they remained until late in 2014. The company increased potash sales to 12.1 million tons in 2014 from 10.0 million tons in 2013, by diversifying into different markets, such as China, India, and Brazil. It is one of the two biggest potash producers in the world.

Paints and Coatings

Used to create a protective and/or decorative layer, paints and coatings are among the industry’s major product categories. The substances used to make them include resins, solvents, additives, pigments, and, in some products, a diluent. They fall into three broad categories: architectural coatings, product coatings for original equipment manufacturers, and special-purpose coatings.

Paint The US paint industry is generally considered mature. Longer-term unit growth is expected to average about 1% to 2% annually.

The leading US and global paint makers include AkzoNobel, PPG Industries Inc., Sherwin- Williams Co., Axalta Coatings Systems (owned by private equity firm Carlyle Group), RPM International Inc., BASF AG, Valspar Corp., and Masco Corp. (Behr brand). Many of these companies have a broad paint product mix, consisting of both architectural and industrial lines.

The paint industry is under pressure to reduce emissions of volatile organic compounds (VOCs) from paints and to limit the consumption of solvents. Solvents are the dispersion media for the solids—primarily pigments and binders—that are used in paint. Particular attention has been focused on the emissions of VOCs and solvents in original equipment and industrial applications.

Manufacturers have introduced a number of alternatives to conventional high-solvent paints. These include high-solids/low-solvent products and waterborne and solventless paints and coatings. Manufacturers also have developed new paint and process techniques to increase application efficiency. Ironically, these techniques have led to a decline in paint and solvent consumption, lowering the industry’s unit growth rate (traditionally reported in gallons), especially in the original equipment and special-purpose paints categories. The industry’s coatings segment consists of four main product categories, described below.

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COATINGS AND ALLIED PRODUCTS

(in $, millions)

2014* 10,219 6,996 5,732 1,534 1,812 26,293

2013 9,992 7,295 5,331 1,604 1,606 25,828

2012 9,009 6,350 4,844 1,427 1,546 23,176

2011 8,713 6,182 4,316 1,242 1,086 21,538

2010 8,645 5,447 4,087 1,212 967 20,358

2009 7,991 4,606 3,634 1,298 906 18,436

2008 8,699 5,334 4,412 1,422 1,243 21,109

2007 9,132 5,644 4,666 1,404 1,384 22,230

2006 9,242 5,756 4,381 1,520 1,621 22,518

2005 8,875 6,092 4,154 1,508 1,531 22,160

2004 9,046 5,484 3,887 1,541 1,346 21,305

2003 7,787 5,581 3,620 1,246 1,265 19,500

2002 7,821 5,244 3,296 1,359 1,516 19,236

*Latest available.

Source: US Census Bureau.

TOTALYEAR ARCHITECTURAL COATINGS

PRODUCT COATINGS

SPECIAL-PURPOSE COATINGS

MISC. ALLIED PAINT PRODUCTS

OTHER PAINT AND COATING PRODUCTS

 Architectural coatings. These are general-purpose paints, varnishes, and lacquers used on residential, commercial, institutional, and industrial structures. Sold through wholesalers and retailers, they are classified as stock or shelf goods. The architectural coatings market is mature, with long-term growth projected at about 1%–2% per year. Sales generally reflect the level of home redecorating, maintenance, and repair, as well as sales of existing homes, construction of new homes, and, to a lesser extent, commercial and industrial construction. The architectural coating segment faces competition from alternative materials, such as aluminum and vinyl siding, interior wall coverings, wood paneling, and glass.

 OEM coatings. Formulated to customer specifications, original equipment manufacturer (OEM) coatings are applied to original equipment during manufacturing. The category also includes powder coatings (about 10% of category, which also appears to be understated), which are dry, solventless coatings. OEM coatings are used on such durable goods as automobiles, trucks, appliances, furniture and fixtures, metal containers, and building products, as well as industrial machinery and equipment.

 Special-purpose coatings. These coatings, which can be classified as stock or shelf goods, are formulated for special applications or environmental conditions, such as extreme temperatures, exposure to chemicals, or corrosive conditions. Major markets include industrial construction and maintenance, automotive and machinery refinishing, marine, highway and traffic markings, aerosol paints, metallic paints, and roof coatings.

 Others. The industry also makes miscellaneous products that include paint removers, thinners, cleaners, wood fillers and sealants, and putty and glazing compounds.

Heavy Government Regulation

The chemicals industry transforms raw materials—many of which can be dangerous—into other products, using complex methods that can generate solid and liquid wastes as unwanted byproducts. Consequently, the chemicals industry is subject to a large number of state and federal laws and regulations involving public health, worker safety, and environmental protection.

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The major federal laws affecting the US chemicals industry are the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA, also known as the Superfund program), and the Toxic Substances Control Act. These laws are administered by various agencies, with the Environmental Protection Agency (EPA), the Department of Labor, and the Food and Drug Administration among the key federal overseers.

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KEY INDUSTRY RATIOS AND STATISTICS

 Industrial production indexes. Reported by the Federal Reserve Board in the middle of each month for the previous month, these indexes measure the output of the US manufacturing, mining, and utility industries. (Since December 2002, these industries have been based on the North American Industrial Classifications System, or NAICS.) Production indexes are reported for the chemicals industry as well as for the major subgroups. Although subject to revision, the indexes indicate industry production trends.

 Capacity utilization/operating rates. Capacity utilization (or operating) rates, which measure actual output as a percentage of total potential capacity, are a key barometer of an industry’s health as well as market conditions for a particular product. Because chemicals manufacturing plants have sizable fixed costs, higher volume spreads these costs over a greater number of units, thus improving profit margins.

The Federal Reserve Board calculates operating rates for the US chemicals industry each month as part of its report on industrial production indexes.

 Railcar loadings. The Association of American Railroads, a trade association representing the major North American freight railroads, reports weekly total traffic in carloads for the major US railroads and by various markets, including chemicals. The railcar loadings data are the best real- time indicator of industry activity—especially for commodity chemicals and polymers—but they are fairly erratic and do not account for the majority of industry shipments.

 Inventory-to-sales ratio. This ratio, reported monthly by the US Department of Commerce, compares the level of an industry’s inventory with its monthly sales. It measures how long it would take to sell inventories at the current sales rate. Changes in the ratio can indicate possible adjustments to future production as suppliers attempt to match output with final demand.

PRODUCER PRICE INDEXES (1982=100)

1995 2000 2005 2010 2011 2012 2013 2014 2015 2016*

All commodities 124.8 132.7 157.4 184.7 201.1 202.2 203.4 205.3 190.5 182.1

Industrial commodities 125.5 134.8 160.2 187.0 202.0 202.1 203.0 204.2 188.9 180.4

Chemicals and allied products 142.5 151.0 192.0 246.7 275.2 276.6 279.2 280.9 266.4 260.4

Industrial chemicals 128.4 129.1 188.5 269.2 324.7 306.9 301.2 289.0 242.5 222.0

Inorganic chemicals 117.2 108.9 141.4 253.2 300.9 298.2 281.1 270.3 269.7 255.6

Organic chemicals 130.9 134.3 203.2 274.0 331.6 309.6 306.1 293.5 237.9 216.0

Paints and allied products 141.0 156.3 190.7 237.5 256.3 281.4 277.8 275.8 269.7 263.3

Drugs and pharmaceuticals 210.9 257.4 298.3 383.4 398.2 417.6 440.1 466.9 499.0 527.4

Fats & oils, inedible 126.9 70.1 146.9 244.3 344.9 336.9 302.6 252.8 205.0 194.8

Agricultural chemicals and

chemical products 130.1 124.5 153.0 203.4 245.6 249.4 241.2 236.3 231.8 218.4

Plastic resins & materials 143.5 141.6 193.0 210.1 229.7 235.2 245.3 257.0 228.2 213.5

Other chemicals and allied

products 130.6 137.2 150.9 175.6 183.5 188.9 190.8 193.8 194.2 194.6

*Data through March.

Source: US Bureau of Labor Statistics.

INDEX

 Producer price indexes. Reported by the US Department of Labor each month, these indexes track changes in selling prices for various US products at the manufacturing level. The producer price indexes (PPIs) indicate trends in selling prices for the overall chemicals industry and for

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various product lines. They also indicate changes in raw material costs for companies, such as specialty chemicals firms, which consume chemicals in the manufacturing of their own products.

 International trade. The US Department of Commerce reports monthly statistics for chemicals exports and imports.

 Industry income statements and balance sheets. The US Census Bureau reports quarterly net income and balance sheets for major manufacturing industries, classified according to NAICS codes. These reports give a good indication of an industry’s financial health.

CHEMICAL INDUSTRY REVENUES & INCOME

(in $, b illions)

2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015

Revenues 865.2 884.6 861.1 288.6 272.0 234.9 342.5 382.3 399.6 234.1 230.4 226.7

Depreciation & amortization 26.4 27.0 26.3 10.4 10.1 9.6 9.4 9.8 9.2 6.6 7.1 7.5

Other operating costs & expenses 734.8 746.5 726.1 257.0 237.7 204.4 280.0 316.3 333.3 197.7 192.5 188.4

Income (or loss) from operations 104.0 111.1 108.7 21.1 24.1 20.9 53.1 56.2 57.0 29.8 30.8 30.8

Nonoperating income 77.5 83.5 59.9 13.7 7.9 4.6 44.8 60.0 43.3 19.0 15.7 12.0

Income before taxes 154.0 165.7 137.7 28.1 25.3 18.7 82.8 99.5 82.2 43.1 40.8 36.9

Income taxes 25.8 35.6 22.1 6.9 6.2 4.2 10.1 18.8 7.7 8.8 10.6 10.2

Income after taxes 128.1 130.1 115.6 21.2 19.2 14.5 72.7 80.7 74.5 34.3 30.3 26.7

Taxes as a % of pretax income 16.8 21.5 16.0 24.6 24.4 22.5 12.2 18.9 9.4 20.4 25.9 27.7

Source: US Census Bureau.

OTHER CHEMICALSBASIC CHEMICALS, RESINS & SYNTHETICS

PHARMACEUTICALS AND MEDICINES

ITEM TOTAL CHEMICALS

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HOW TO ANALYZE A COMPANY IN THIS INDUSTRY

When analyzing a chemicals company, one should take into account such factors as economic and end-market conditions, the nature of the company’s product lines (such as commodity or specialty), and any issues that may be unique to the company.

The level of demand for a company’s products is determined in large part by economic conditions. These include growth in gross domestic product (GDP) and/or industrial production, as well as conditions in important end markets. (For more information on factors that influence the entire industry, see the “Key Industry Ratios and Statistics” section of this Survey.)

Some companies are more markedly affected by changing economic conditions than others, due to the nature of their customers or product applications. For example, synthetic rubbers are used largely in automobile tires and parts. Because automobile sales vary over the course of a business cycle, demand for synthetic rubber also will vary. In contrast, some chemicals and plastics are used extensively in household goods and packaging applications, which experience relatively stable demand throughout an economic cycle.

Product Line Fundamentals

Various questions about a company’s product lines need to be considered. What kinds of chemicals does the company produce? Is the company’s product mix commodity or specialty in nature? How sensitive are those products to the business cycle? What is the outlook for industry capacity additions or reductions in those product lines? How great is the company’s ability to pass on raw material cost increases to customers? To what extent is the company forced to pass any manufacturing or raw material cost savings on to customers? Is the company changing or improving its product mix?

Commodity Versus Specialty Basic, or commodity, chemicals are generally produced in large volumes, and there is little product differentiation between one manufacturer and another. Companies that manufacture commodity products have little control over selling prices during economic downturns or periods of excess supply.

Specialty chemicals are products designed for specific applications and/or customers; thus, they may be made in small volumes. Companies with products that sell more on performance attributes have greater control over prices, and thus have more stable profit margins than do commodity producers. Selling prices for specialties tend to be set by their value in use, not by costs, giving their manufacturers greater control over prices than is exercised by makers of commodity chemicals. Specialty chemicals require higher research and development (R&D) spending and incur a greater amount of marketing and customer service costs than do commodity chemicals.

Scrutinizing Supply Changes in industry capacity in a company’s product line should be assessed. Industry capacity changes can greatly influence a product’s selling prices and profit margins. Generally, changes in industry capacity play a greater role for commodities than for specialties.

To take advantage of economies of scale, commodity chemicals are usually produced in larger facilities than are specialties. Commodity producers have sizable fixed costs, which must be spread over many units of production for the firm to make a profit. Thus, capacity additions or

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reductions can significantly affect a commodity chemical’s balance of supply and demand, influencing capacity utilization rates, prices, and profit margins.

In the case of new supply, a commodity chemicals producer that has brought the new capacity on- stream will attempt to sell its new supply. In addition, other producers will try to maintain their existing volumes in the face of the new competition. Consequently, all producers may be forced to reduce selling prices to win or maintain customers. It is common, however, for suppliers to obtain long-term supply agreements from customers, which help to stabilize production volumes. In addition, given the large capital requirements for new production facilities, suppliers often line up customers for some or all of the output of a new facility before beginning construction.

When falling demand leads to excess supply, chemicals producers may reduce selling prices to maintain volumes. The lower prices and/or volumes can cause certain facilities to operate at a loss, in which case their owners may reduce capacity to cut their losses. The product’s supply/demand situation should then move closer to equilibrium; depending on the situation, its supply may even be permanently reduced.

As economic growth or new applications increase demand for a product, excess capacity is used up. Eventually, a product’s supply and demand come into balance. Producers can then stabilize or even increase selling prices. If rising demand leads to tight capacity and significantly higher prices, producers are encouraged to add new capacity. Thus, the business cycle repeats itself.

In the analysis of specialty chemicals companies, industry capacity changes generally play a small role. Again, because specialty chemicals are largely sold based on their performance attributes, and because their demand is relatively stable, industry supply/demand balances exert less influence over selling prices and profit margins than is the case with commodities. Capacity additions for specialties are commonly small or are designed for unique products; either way, they can be completed relatively quickly. Thus, specialty chemicals companies can readily make short-term changes in capital spending and capacity in response to significant changes in demand.

Company Characteristics

When analyzing a company, consider its specific characteristics, such as geographic reach, acquisition strategy, and new products.

Geographic Reach The extent of a company’s geographic reach is important in that it can diversify risk. A broad international mix of customers helps to reduce a company’s exposure to an economic downturn in any one country, and thus to smooth its sales and earnings trends.

Geographic expansion may provide growth opportunities. The countries of the Asia-Pacific region, Latin America, and Eastern Europe have higher potential economic growth rates than do US and Western European economies, which are more mature. However, the cost of such expansions—in terms of capital spending, acquisitions, product development, or marketing—may hurt near-term financial results. Changes in currency exchange rates also will affect results.

Acquisition Strategy A company’s acquisition strategy must be taken into account. Companies that perceive limited growth opportunities in existing markets or products may see acquisitions as the main avenue to growth. When assessing such a company, the investor needs to ask several questions.

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How does the company’s management allocate capital to internal growth and acquisition-based external growth? What are its acquisition criteria? How does management address the conflict between investments that serve to reduce cyclical exposure and those that sharpen the company’s focus on current markets and customers? Are the company’s acquisitions closely related to its existing businesses, or is the company diversifying its product mix? Is the company’s diversification strategy consistent with its core competencies?

New Products All chemicals companies introduce new products, but specialty chemicals producers must do so continually. Questions to ask include the following: At what rate is the company releasing new products? Are customers accepting those products? Is the company improving its product mix by introducing higher-margin goods? Is the company’s response to customer demand being driven by changes in final consumer preferences, government regulations, or technology? Is it maintaining or increasing its market share? This latter question is often hard to answer in the specialty chemicals industry, since information on individual products is often lacking and most segments have few public competitors.

Looking at the Income Statement

When looking at the income statement, six key items to review are sales, operating margins, special items, interest expense, net income, and earnings per share (EPS).

Sales A natural place to begin a financial analysis of a chemicals company is with its sales figures. Changes in sales are largely due to fluctuations in sales volume, selling prices, product mix, and currency exchange rates. Acquisitions and divestitures also play a part.

When evaluating any period of less than one year (such as one quarter, six months, or nine months), compare it with the same period in prior years. This neutralizes such variations as holidays, normally scheduled plant shutdowns, or seasonal cycles in end markets such as agriculture. If possible, look at sales for ongoing businesses or product lines to eliminate the impact of acquisitions and divestitures.

For an indication of emerging business trends, look at sequential changes in sales. Sequential trends can reveal early signs of changes in selling prices or demand. For example, if industry conditions worsen throughout the year and selling prices remain low compared with the preceding year, it could lead to a negative analysis for the near term. However, if sequential trends reveal that prices have begun to turn up, they would support a more positive outlook.

Compare changes in sales with the company’s historical growth rates and the rates of its competitors. Are the company’s sales growing or declining, and why? Are its core markets or product lines growing faster or slower than in the past? Is it becoming more efficient in its use of resources to generate sales? Is it adding new capacity or introducing new products, gaining or losing market share? [Note: market share in the chemicals industry is often hard to determine because of a lack of information for many individual products.]

The investor may wish to consider other questions as well. Are the company’s customers themselves losing or gaining market share? Could the factors that account for any deviation from historical trends reverse quickly? (Such factors might include selling prices, currency exchange rates, or temporary situations involving production plants, key customers, or the competition.)

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Does the company have enough capacity to sustain future growth? How long would it take and how much would it cost to build additional capacity?

Operating Margins Operating margins are calculated by taking a company’s sales figure and subtracting costs of labor, raw materials, energy and utilities, and plant operations, and depreciation of plant and equipment. Also subtracted are expenses for selling, marketing, administration, and R&D. The resulting operating profit is divided by the sales figure to derive the operating margin.

In general, costs for raw materials, manufacturing, and depreciation account for a larger percentage of total costs for a commodity chemicals company than they do for a specialty company. Operating margins over a business cycle are generally more volatile for commodities than for specialties, due to more rapid changes in selling prices, raw material costs, and production levels. Even relatively small changes in selling prices and production levels can dramatically alter margins for commodity chemicals. Changes in raw material costs also can widen or narrow margins. Operating margins for specialty chemicals are usually relatively stable over a business cycle, due to the low volatility in production levels and selling prices. Therefore, margins normally do not vary significantly from one year to the next.

Changes in the cost of various commodity chemicals and other raw materials can materially affect margins for specialty chemicals, as their selling prices may not change or may lag changes in costs. Therefore, during periods of robust demand for commodity chemicals, higher raw material costs can result in a margin squeeze for specialty products. In times of weak demand, margins can widen. In either case, the impact will vary by specialty product and company.

A company’s margins and expenses for any given year should be compared with prior years and with those of similar firms. Does the company appear to be controlling its expenses? Is it efficient in its use of assets, personnel, and other resources compared with its competition? Does the income statement reflect unusual expenses that may not occur again?

Other factors that may change margins for a chemicals company are the costs associated with businesses recently acquired or divested, major new plant construction or maintenance programs, environmental cleanup projects, and an unusual number of new product introductions. Technology improvements for manufacturing processes initially incur some costs but may reduce costs and improve profit margins in the long term.

Special Items Companies may report special or nonrecurring charges or gains for various reasons. Nonrecurring items may include gains or losses from the sale of assets, costs associated with a major acquisition, or charges for the expected costs of restructuring a business line or the overall company.

Restructuring charges taken by a company can relate to downturns in a certain chemicals market or the overall industry, or to conditions specific to the company. Such restructuring costs may include employee severance, plant closings, or the write-down of assets such as plants and equipment, inventories, and goodwill for a previously acquired product or business. Normally, these actions lead to lower future expenses in areas such as personnel and depreciation.

Interest Expense Despite the industry’s capital intensity, interest expense is normally less important in an analysis of a chemicals company than are the factors discussed earlier. The industry is generally profitable, with a positive cash flow.

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Acquisitions and divestitures, as well as changes in capital spending and the pace of stock repurchases, can result in a company seeing higher or lower debt and interest expense than in prior years. The change in interest expense could be temporary, as a company might plan to return to prior debt levels. Alternatively, it could be a permanent change, if the company intends to leverage its balance sheet more or less than in the past.

The use of debt for acquisitions or new production capacity could result in new sources of future sales and earnings. Stock repurchases boost a company’s future EPS.

Net Income Net income is the bottom line: the profit or loss remaining after all expenses and income taxes are paid. To get the best idea of a company’s true earnings, look at net income for a company’s ongoing businesses before special items. For example, while a company’s net income may be growing because of acquisitions, its other businesses could have earnings problems. Changes in accounting methods—such as for inventory valuations, depreciation schedules, and assumption of pension costs—can also affect net income comparisons.

A company’s net profit margin (net income divided by sales) should be compared with historical levels and with other companies’ net margins. Changes in net margins indicate whether a company is using its resources more or less efficiently than in past years and in comparison with other companies. Other factors, such as rapid changes in selling prices and/or raw material costs, also can affect net margins. Again, for reasons discussed earlier in this section, earnings and margins are more volatile for commodity companies than for specialty companies.

Earnings per Share Earnings per share (EPS) should be adjusted for nonrecurring items to obtain accurate comparisons with prior years. Investors naturally like to see a company’s EPS growth accelerate from year to year. However, changes in the number of shares used in calculating EPS—if the company issues new shares or buys back outstanding shares—can result in EPS growth that is slower or faster than net income. In recent years, many chemicals companies have been repurchasing stock. The potential impact on a company’s EPS from the conversion of any outstanding stock options should also be considered. If converted into new stock, such options can have a significant impact on EPS.

Balance Sheet Data

Investors should look at a company’s balance sheet to determine its financial strength or potential problems. Changes in the working capital ratio—the ratio of current assets to current liabilities— will show whether the company is using more or less cash than usual for normal operations and whether the business has a potential liquidity problem. A buildup in accounts receivable as a percentage of sales may indicate problems with customers’ bill payments, while growth in the inventory-to-sales ratio can foretell a slowdown in production levels or asset write-offs.

The capital structure of the balance sheet should be examined. Specialty chemicals companies tend to have lower debt-to-capital ratios than do commodity companies, reflecting lower capital requirements. The chemicals industry’s long-term debt-to-total capitalization ratio was 49.9% in 2014 (latest available), according to the ACC. A debt analysis should also include the earnings-to-fixed-charges coverage ratio, which is the number of times interest expense is earned by operating profits.

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Return on equity (ROE)—net income divided by equity—indicates the company’s earnings power. Increases in a company’s ROE may indicate improved utilization of financial resources or debt leverage, or a reduction in its equity level.

It Is Not Easy Being Green For most chemicals companies, one major potential liability that may not be fully recorded on the balance sheet is the future cost for environmental remediation of existing plants or hazardous waste sites. When a company can reasonably determine its probable liability for the partial or full cleanup of a particular site, it makes a reserve against earnings in that amount. Total reserves for environmental remediation costs may be found in the company’s notes to financial statements, although the extent of disclosure varies by company.

If changing environmental regulations result in additional potential costs—or if new liability is determined for additional sites—the company may need to set aside new reserves, reducing reported earnings. The notes to a company’s financial statements may also indicate its annual expenses for operating and maintaining environmental facilities, as well as capital outlays for environmental equipment.

Cash Flow

Given that the commodity chemicals industry is quite capital intensive, any company analysis should include an examination of cash flow. Cash flow analysis reveals how a company’s cash is generated and how much of it is available from normal operations to fund capital expenditures, make acquisitions, distribute as dividends, or repay debt.

In its simplest definition, cash flow is net income plus depreciation and amortization (D&A) expenses. D&A are non-cash charges—that is, companies deduct them as expenses, but they require no cash outlays. A broader definition of cash flow includes changes in working capital (current assets minus current liabilities), because these changes can consume—or free up—cash.

Cash flow as a percentage of revenues and cash flow as a percentage of assets are ratios that indicate how much cash flow is generated by each dollar of a company’s revenue or assets. Cash flow analysis will show whether a company can fund unusual expenses or capital projects from internally generated sources or if it will need to borrow to pay for them. New chemicals facilities can cost several hundred million dollars. A careful analysis will also indicate whether the dividend can be raised or is under pressure for cutting or elimination to help conserve cash. The availability of cash flow above normal needs would let the company repay debt or repurchase common stock.

The cyclical nature of the commodity chemicals industry means that a company’s cash flow changes during a business cycle. During the down portion of the cycle, a company will trim expenses and capital outlays to conserve cash. A reduced need for working capital that results from lower sales and/or inventories will also free up cash. A severe downturn may force a company to cut or eliminate its dividend, both of which are unusual occurrences in the chemicals industry.

As cash flow rises in a business upturn, a company should be able to increase capital spending if additional capacity is needed, and to boost dividends to shareholders. At such times, a company is likely to use cash to raise its level of working capital. Major capacity expansions may also require external funds, but completion of such projects could result in the company generating free cash flow.

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Valuation Methods

Chemicals stocks generally tend to be somewhat volatile, partly reflecting the underlying cyclicality of the industry. As discussed earlier in this section, prospects for future profit growth are paramount in determining a company’s worth.

Common valuation measurements include multiples of EPS and cash flow. Keep in mind that valuations depend on various factors, including overall investor sentiment, industry and economic conditions, the level of interest rates, and the extent to which future earnings seem predictable. As is the case with other measures, valuations of a particular company should be compared with those of similar companies in the same industry. An investor should also examine a company or industry’s historical valuations relative to a benchmark price-to-earnings ratio.

For the chemicals industry, especially for commodity companies, wide swings in the valuation ratios can occur over the business cycle, as the sector’s earnings are affected by changing economic conditions, as well as by the sector going into and out of favor with investors. At the extremes of the business and earnings cycles, the valuation measures can produce results that border on the meaningless.

Caution must be exercised in the interpretation of these metrics. A company that appears cheap relative to its peers, for example, may be at certain competitive disadvantages, such as a relative lack of new product innovations, higher debt levels, or lower profit margins, to name a few reasons. As a result, other investors may place a lower valuation on the shares of such a company.

It is also important to take into account how management is performing and how well it is using the company’s capital, such as by examining the profitability on various assets, as discussed earlier in this section. A change in management can lead to an increase in the value of a company’s stock if investors perceive that steps will be taken to produce higher returns.

 P/E ratio. The most common means of valuing equities, the price-to-earnings (P/E) ratio is calculated as the share price divided by net EPS, for either the past 12 months or the projected EPS for a specified future period.

 EV/EBITDA. As an alternative to the standard P/E ratio, to eliminate distortions caused by differing tax rates and leverage, and to better evaluate a company’s operating performance, investors compare the company’s enterprise value (EV), which is a combination of net debt and stock market value, to its earnings before interest, taxes, depreciation, and amortization (EBITDA)—EV/EBITDA.

72 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

GLOSSARY

Commodity chemicals—Basic chemicals that are utilized by other chemical companies or other industries.

Fertilizers & agricultural chemicals—Largely nitrogen-based fertilizers, as well as pest and weed control products for agriculture.

Industrial gas—Produced gases for various industrial uses.

Specialty chemicals—More refined chemical products that are used in many sectors of the S&P 1500, including energy, industrials, and health care, as well as other industries in the materials sector.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 73

INDUSTRY REFERENCES

PERIODICALS

Chemical & Engineering News (C&EN) http://cen.acs.org/index.html Weekly; covers the chemicals profession and the chemicals processing industries; presents industrial, commercial, educational, and government viewpoints.

The Fertilizer RECORD http://www.tfi.org Monthly; reports on production and shipments of fertilizer products.

Fertilizers and Related Chemicals Inorganic Chemicals Paint, Varnish, and Lacquer http://www.census.gov/manufacturing/cir/index.html Quarterly US government publications providing data on production and shipments of selected products, including nitrogen fertilizer materials, phosphoric and sulfuric acid, major inorganic chemicals, and paint and coatings.

ICIS Chemical Business http://www.icis.com/chemicals Weekly; news and prices on industrial and specialty chemicals, allied products, drugs, flavors, perfumes, and plastics.

IHS Chemical Week http://www.chemweek.com Interprets news for business and technical managers in the chemicals processing industries.

Monthly Statistical Reports—Resins http://www.americanchemistry.com Monthly; provides production and sales data for the largest-volume plastic resins.

Plastics Today http://www.plasticstoday.com Monthly; covers developments in resin technology, machinery, processing techniques, and additives.

US Chlorine & Caustic Production & Shipment Report http://www.chlorineinstitute.org Monthly; reports on chlor-alkali industry production and operating rates.

TRADE ASSOCIATIONS

American Chemistry Council (ACC) http://www.americanchemistry.com Trade association representing the US chemicals industry on public policy issues; coordinates research and testing programs, and administers the industry’s environmental, health, and safety programs. Member companies account for more than 90% of US industrial chemicals capacity.

American Coatings Association (ACA) http://www.paint.org Represents paint and chemical coatings manufacturers, and their raw materials and equipment suppliers.

American Fuel & Petrochemical Manufacturers (AFPM) (formerly National Petrochemical & Refiners Association) http://www.afpm.org Gathers and disseminates historical and scientific information, and statistics pertaining to the petroleum refining and petrochemical manufacturing industries.

The Chlorine Institute http://www.chlorineinstitute.org Trade association for companies involved or interested in the production, distribution, and use of chlorine and related alkali chemicals.

CropLife America http://www.croplifeamerica.org Promotes the environmentally sound use of crop protection products; members include producers of agricultural pesticides.

The Fertilizer Institute (TFI) http://www.tfi.org Fertilizer industry trade association involved in legislative and public affairs; provides statistical information.

The Plastics Industry Trade Association (SPI) http://www.plasticsindustry.org Trade association with members that include resin suppliers, processors, distributors, and machinery builders.

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GOVERNMENT AGENCIES

US Census Bureau http://www.census.gov Agency within the US Department of Commerce; collects and provides data about the US population and the economy.

US Department of Agriculture (USDA) http://www.usda.gov Federal agency that, among many other things, tracks crop acreage and fertilizer usage.

US Department of Labor (DOL) http://www.dol.gov Federal agency that, among other things, tracks changes in employment, prices, and other national economic measurements.

US Environmental Protection Agency (EPA) http://www3.epa.gov Federal agency charged with protecting public health and the natural environment; enforces government regulations affecting air, water, and land resources.

US Geological Survey (USGS) http://www.usgs.gov Agency within the US Department of the Interior; provides the nation with information helping to describe and understand the Earth.

INDUSTRY CONSULTANTS

Cropnosis Ltd. http://www.cropnosis.com Research firm covering the crop protection industry.

Young & Partners LLC http://www.youngandpartners.com International investment banking firm focused on the chemicals and life science industries.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 75

COMPARATIVE COMPANY ANALYSIS

Operating Revenues

Million $ CAGR (%) Index Basis (2005 = 100)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2010 2005 10-Yr. 5-Yr. 1-Yr. 2015 2014 2013 2012 2011

COMMODITY CHEMICALS‡ CBT † CABOT CORP SEP 2,871.0 3,647.0 A,C 3,463.0 3,300.0 A 3,102.0 D 2,893.0 2,125.0 3.1 (0.2) (21.3) 135 172 163 155 146 CCC § CALGON CARBON CORP DEC 535.0 555.1 547.9 562.3 541.5 482.3 A,C 290.8 D 6.3 2.1 (3.6) 184 191 188 193 186 HWKN § HAWKINS INC # MAR NA 364.0 A 348.3 A 350.4 343.8 297.6 A 143.3 NA NA NA NA 254 243 244 240 KOP § KOPPERS HOLDINGS INC DEC 1,626.9 A 1,555.0 A 1,478.3 1,555.0 D 1,538.9 1,245.5 A 1,030.2 4.7 5.5 4.6 158 151 143 151 149 LYB [] LYONDELLBASELL INDUSTRIES NV DEC 32,735.0 45,608.0 44,062.0 45,352.0 D 51,035.0 41,151.0 NA NA (4.5) (28.2) ** ** ** ** NA

OLN † OLIN CORP DEC 2,854.4 A 2,241.2 2,515.0 2,184.7 A 1,961.1 C 1,585.9 2,357.7 1.9 12.5 27.4 121 95 107 93 83 TG § TREDEGAR CORP DEC 896.2 951.8 959.3 882.2 A,C 797.6 A 740.5 957.0 (0.7) 3.9 (5.8) 94 99 100 92 83

FERTILIZERS & AGRICULTURAL CHEMICALS‡ AVD § AMERICAN VANGUARD CORP DEC 289.4 298.6 381.0 366.2 304.4 229.6 189.8 4.3 4.7 (3.1) 152 157 201 193 160 CF [] CF INDUSTRIES HOLDINGS INC DEC 4,308.3 A 4,743.2 5,474.7 6,104.0 6,097.9 3,965.0 A 1,908.4 8.5 1.7 (9.2) 226 249 287 320 320 FMC [] FMC CORP DEC 3,276.5 A,C 4,037.7 D 3,874.8 D 3,748.3 3,377.9 3,116.3 2,150.2 D 4.3 1.0 (18.9) 152 188 180 174 157 IPI § INTREPID POTASH INC DEC 287.2 410.4 336.3 451.3 443.0 359.3 NA NA (4.4) (30.0) ** ** ** ** NA MON [] MONSANTO CO AUG 15,001.0 15,855.0 14,861.0 13,504.0 11,822.0 10,483.0 6,294.0 A,C 9.1 7.4 (5.4) 238 252 236 215 188

MOS [] MOSAIC CO DEC 8,895.3 9,055.8 A 7,458.1 H 9,974.1 11,112.8 9,937.8 5,305.8 5.3 (2.2) (1.8) 168 171 141 188 209 SMG † SCOTTS MIRACLE-GRO CO SEP 3,025.0 2,841.3 A,C 2,816.5 2,826.1 D 2,835.7 D 3,139.9 D 2,375.8 A,C 2.4 (0.7) 6.5 127 120 119 119 119

DIVERSIFIED CHEMICALS‡ CC § CHEMOURS CO DEC 5,717.0 6,432.0 6,859.0 7,365.0 NA NA NA NA NA (11.1) ** ** ** ** NA DOW [] DOW CHEMICAL DEC 48,778.0 58,167.0 57,080.0 56,786.0 59,985.0 C 53,674.0 46,307.0 0.5 (1.9) (16.1) 105 126 123 123 130 DD [] DU PONT (E I) DE NEMOURS DEC 25,268.0 D 34,906.0 35,935.0 D 35,043.0 D 38,437.0 A 32,134.0 27,516.0 (0.8) (4.7) (27.6) 92 127 131 127 140 EMN [] EASTMAN CHEMICAL CO DEC 9,648.0 9,527.0 A 9,350.0 8,102.0 A 7,178.0 5,842.0 A,C 7,059.0 F 3.2 10.6 1.3 137 135 132 115 102 LXU § LSB INDUSTRIES INC DEC 711.8 732.5 679.3 759.0 805.3 609.9 396.7 D 6.0 3.1 (2.8) 179 185 171 191 203

INDUSTRIAL GASES‡ APD [] AIR PRODUCTS & CHEMICALS INC SEP 9,894.9 A 10,439.0 10,180.4 A 9,611.7 A,C 10,082.0 9,026.0 A 8,143.5 A 2.0 1.9 (5.2) 122 128 125 118 124 ARG [] AIRGAS INC # MAR NA 5,304.9 A 5,072.5 A 4,957.5 A 4,746.3 A 4,251.5 A 2,829.6 A,C NA NA NA NA 187 179 175 168 PX [] PRAXAIR INC DEC 10,776.0 12,273.0 11,925.0 11,224.0 11,252.0 10,116.0 A 7,656.0 A 3.5 1.3 (12.2) 141 160 156 147 147

SPECIALTY CHEMICALS‡ ALB † ALBEMARLE CORP DEC 3,651.3 A 2,445.5 D 2,616.4 2,745.4 C 2,869.0 2,362.8 2,107.5 5.6 9.1 49.3 173 116 124 130 136 ASH † ASHLAND INC SEP 5,387.0 F 6,121.0 D,F 7,813.0 F 8,206.0 F 6,502.0 A,C 9,012.0 F 9,329.0 D (5.3) (9.8) (12.0) 58 66 84 88 70 BCPC § BALCHEM CORP -CL B DEC 552.5 A 541.4 A 337.2 310.4 291.9 255.1 83.1 20.9 16.7 2.1 665 652 406 374 351 ECL [] ECOLAB INC DEC 13,545.1 14,280.5 13,253.4 11,838.7 6,828.1 A 6,089.7 4,534.8 11.6 17.3 (5.1) 299 315 292 261 151 FTK § FLOTEK INDUSTRIES INC DEC 334.4 449.2 371.1 A 312.8 258.8 147.0 52.9 A 20.3 17.9 (25.6) 632 850 702 592 489

FUL § FULLER (H. B.) CO NOV 2,084.7 A 2,104.5 A 2,047.0 A 1,886.2 A,C 1,557.6 A 1,356.2 A 1,512.2 C 3.3 9.0 (0.9) 138 139 135 125 103 FF § FUTUREFUEL CORP DEC 299.6 341.8 444.9 351.8 309.9 219.2 NA NA 6.5 (12.4) ** ** ** ** NA IPHS § INNOPHOS HOLDINGS INC DEC 789.1 839.2 844.1 A 862.4 A 810.5 A 714.2 535.5 4.0 2.0 (6.0) 147 157 158 161 151 IOSP § INNOSPEC INC DEC 1,012.3 960.9 A 818.8 A 776.4 774.4 683.2 527.7 A,C 6.7 8.2 5.3 192 182 155 147 147 IFF [] INTL FLAVORS & FRAGRANCES DEC 3,023.2 3,088.5 2,952.9 2,821.4 2,788.0 2,622.9 1,993.4 4.3 2.9 (2.1) 152 155 148 142 140

76 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

Operating Revenues

Million $ CAGR (%) Index Basis (2005 = 100)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2010 2005 10-Yr. 5-Yr. 1-Yr. 2015 2014 2013 2012 2011

SPECIALTY CHEMICALS‡ KRA § KRATON PERFORMANCE POLYMERS DEC 1,034.6 1,230.4 1,292.1 1,423.1 1,437.5 1,228.4 NA NA (3.4) (15.9) ** ** ** ** NA MTX † MINERALS TECHNOLOGIES INC DEC 1,797.6 1,725.0 A 1,018.2 D 1,005.6 1,044.9 1,002.4 995.8 6.1 12.4 4.2 181 173 102 101 105 NEU † NEWMARKET CORP DEC 2,140.8 2,335.4 2,280.4 D 2,223.3 2,149.6 1,797.4 1,075.5 7.1 3.6 (8.3) 199 217 212 207 200 POL † POLYONE CORP DEC 3,377.6 3,835.5 3,771.2 A,C 2,992.6 2,863.5 A 2,621.9 A 2,450.6 D 3.3 5.2 (11.9) 138 157 154 122 117 PPG [] PPG INDUSTRIES INC DEC 15,369.0 A 15,410.0 A,C 15,156.0 D 15,251.0 A 14,940.0 A 13,481.0 10,239.0 4.1 2.7 (0.3) 150 151 148 149 146

KWR § QUAKER CHEMICAL CORP DEC 737.6 765.9 729.4 708.2 683.2 544.1 424.0 5.7 6.3 (3.7) 174 181 172 167 161 RYAM § RAYONIER ADVANCED MATERIALS DEC 941.4 957.7 1,046.6 1,095.4 NA NA NA NA NA (1.7) ** ** ** ** NA RPM † RPM INTERNATIONAL INC # MAY NA 4,594.5 4,376.4 4,081.5 3,777.4 3,381.8 3,008.3 NA NA NA NA 153 145 136 126 SHLM § SCHULMAN (A.) INC AUG 2,392.2 A 2,447.0 A 2,133.4 D 2,106.8 A 2,193.0 A 1,590.4 A 1,433.2 5.3 8.5 (2.2) 167 171 149 147 153 SXT † SENSIENT TECHNOLOGIES CORP DEC 1,376.0 1,447.8 D 1,467.6 1,459.1 1,430.8 1,328.2 1,023.9 3.0 0.7 (5.0) 134 141 143 142 140

SHW [] SHERWIN-WILLIAMS CO DEC 11,339.3 11,129.5 10,185.5 A 9,534.5 A 8,765.7 A 7,776.4 A 7,190.7 A 4.7 7.8 1.9 158 155 142 133 122 SCL § STEPAN CO DEC 1,776.2 1,927.2 1,880.8 A 1,803.7 1,843.1 1,431.1 1,078.4 5.1 4.4 (7.8) 165 179 174 167 171 VAL † VALSPAR CORP OCT 4,392.6 4,522.4 4,103.8 4,020.9 3,953.0 3,226.7 2,713.9 4.9 6.4 (2.9) 162 167 151 148 146

OTHER COMPANIES WITH SIGNIFICANT CHEMICALS OPERATIONS AXLL AXIALL CORP DEC 3,361.1 D 4,568.7 4,666.0 A 3,325.8 3,222.9 A 2,818.0 2,273.7 4.0 3.6 (26.4) 148 201 205 146 142 CE CELANESE CORP DEC 5,674.0 6,802.0 6,510.0 C 6,418.0 6,763.0 5,918.0 A 6,070.0 (0.7) (0.8) (16.6) 93 112 107 106 111 CMP † COMPASS MINERALS INTL INC DEC 1,098.7 1,282.5 1,129.6 941.9 1,105.7 A 1,068.9 742.3 D 4.0 0.6 (14.3) 148 173 152 127 149 HUN HUNTSMAN CORP DEC 10,299.0 11,578.0 A,C 11,079.0 A 11,187.0 11,221.0 A,C 9,250.0 C,D 12,961.6 C,D (2.3) 2.2 (11.0) 79 89 85 86 87 POT POTASH CORP SASK INC DEC 6,279.0 7,115.0 7,305.0 7,927.0 8,715.0 C 6,538.6 3,847.2 5.0 (0.8) (11.7) 163 185 190 206 227

WLK WESTLAKE CHEMICAL CORP DEC 4,463.3 4,415.4 A 3,759.5 3,571.0 3,619.8 3,171.8 2,441.1 6.2 7.1 1.1 183 181 154 146 148

Note: Data as originally reported. CAGR-Compound annual grow th rate. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year. **Not calculated; data for base year or end year not available. A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a f iscal year change.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 77

Net Income

Million $ CAGR (%) Index Basis (2005 = 100)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2010 2005 10-Yr. 5-Yr. 1-Yr. 2015 2014 2013 2012 2011

COMMODITY CHEMICALS‡ CBT † CABOT CORP SEP (336.0) 197.0 151.0 183.0 183.0 154.0 (48.0) NM NM NM NM NM NM NM NM CCC § CALGON CARBON CORP DEC 43.5 49.4 45.7 23.3 39.2 34.8 (10.5) NM 4.5 (12.0) NM NM NM NM NM HWKN § HAWKINS INC # MAR NA 19.2 18.1 17.1 21.6 20.3 8.9 NA NA NA ** 216 204 193 243 KOP § KOPPERS HOLDINGS INC DEC (71.9) (33.0) 40.5 65.7 36.9 44.3 9.9 NM NM NM (726) (333) 409 664 373 LYB [] LYONDELLBASELL INDUSTRIES NV DEC 4,481.0 4,178.0 3,864.0 2,872.0 2,147.0 10,089.0 NA NA (15.0) 7.3 ** ** ** ** NA

OLN † OLIN CORP DEC (1.4) 105.0 178.6 149.6 241.7 64.8 139.7 NM NM NM (1) 75 128 107 173 TG § TREDEGAR CORP DEC (32.1) 36.0 35.9 43.2 29.2 27.0 16.2 NM NM NM (198) 222 221 266 180

FERTILIZERS & AGRICULTURAL CHEMICALS‡ AVD § AMERICAN VANGUARD CORP DEC 6.6 4.8 34.4 36.9 22.1 11.0 19.0 (10.0) (9.7) 36.1 35 25 181 194 116 CF [] CF INDUSTRIES HOLDINGS INC DEC 699.9 1,390.3 1,464.6 1,848.7 1,539.2 349.2 (36.2) NM 14.9 (49.7) NM NM NM NM NM FMC [] FMC CORP DEC (187.4) 396.9 453.2 446.4 397.7 206.1 111.0 NM NM NM (169) 358 408 402 358 IPI § INTREPID POTASH INC DEC (524.8) 9.8 22.3 87.4 109.4 45.3 NA NA NM NM ** ** ** ** NA MON [] MONSANTO CO AUG 2,286.0 2,727.0 2,471.0 2,039.0 1,605.0 1,092.0 157.0 30.7 15.9 (16.2) 1,456 1,737 1,574 1,299 1,022

MOS [] MOSAIC CO DEC 1,000.4 1,028.6 825.9 1,888.7 1,930.2 2,514.6 (121.4) NM (16.8) (2.7) NM NM NM NM NM SMG † SCOTTS MIRACLE-GRO CO SEP 159.8 165.7 161.2 113.2 121.9 212.4 100.4 4.8 (5.5) (3.6) 159 165 161 113 121

DIVERSIFIED CHEMICALS‡ CC § CHEMOURS CO DEC (90.0) 400.0 423.0 1,057.0 NA NA NA NA NA NM ** ** ** ** NA DOW [] DOW CHEMICAL DEC 7,685.0 3,772.0 4,787.0 1,182.0 2,742.0 2,310.0 4,535.0 5.4 27.2 103.7 169 83 106 26 60 DD [] DU PONT (E I) DE NEMOURS DEC 1,889.0 3,610.0 2,849.0 2,468.0 3,474.0 3,031.0 2,053.0 (0.8) (9.0) (47.7) 92 176 139 120 169 EMN [] EASTMAN CHEMICAL CO DEC 848.0 749.0 1,165.0 436.0 657.0 425.0 557.0 4.3 14.8 13.2 152 134 209 78 118 LXU § LSB INDUSTRIES INC DEC (34.7) 19.7 55.1 58.8 84.0 29.7 5.7 NM NM NM (604) 343 960 1,023 1,462

INDUSTRIAL GASES‡ APD [] AIR PRODUCTS & CHEMICALS INC SEP 1,277.9 987.1 1,004.2 999.2 1,215.3 1,029.1 711.7 6.0 4.4 29.5 180 139 141 140 171 ARG [] AIRGAS INC # MAR NA 368.1 350.8 340.9 313.4 249.8 127.5 NA NA NA ** 289 275 267 246 PX [] PRAXAIR INC DEC 1,547.0 1,694.0 1,755.0 1,692.0 1,672.0 1,195.0 732.0 7.8 5.3 (8.7) 211 231 240 231 228

SPECIALTY CHEMICALS‡ ALB † ALBEMARLE CORP DEC 334.9 202.8 413.2 311.5 436.3 323.7 114.9 11.3 0.7 65.1 292 177 360 271 380 ASH † ASHLAND INC SEP 191.0 72.0 677.0 38.0 56.0 301.0 2,005.0 (21.0) (8.7) 165.3 10 4 34 2 3 BCPC § BALCHEM CORP -CL B DEC 59.7 52.8 44.9 40.0 38.8 33.3 11.0 18.5 12.4 13.1 545 482 410 365 354 ECL [] ECOLAB INC DEC 1,002.1 1,202.8 967.8 703.6 462.5 530.3 319.5 12.1 13.6 (16.7) 314 376 303 220 145 FTK § FLOTEK INDUSTRIES INC DEC (13.5) 53.6 36.2 49.8 31.4 (43.5) 7.7 NM NM NM (174) 694 469 645 407

FUL § FULLER (H. B.) CO NOV 88.0 49.8 95.6 68.1 89.1 70.9 61.6 3.6 4.4 76.8 143 81 155 111 145 FF § FUTUREFUEL CORP DEC 46.4 53.2 74.0 34.3 34.5 23.1 NA NA 15.0 (12.7) ** ** ** ** NA IPHS § INNOPHOS HOLDINGS INC DEC 26.3 64.5 49.5 74.2 86.5 45.2 (11.7) NM (10.2) (59.1) NM NM NM NM NM IOSP § INNOSPEC INC DEC 119.5 84.1 77.8 68.3 48.9 73.7 (122.3) NM 10.1 42.1 NM NM NM NM NM IFF [] INTL FLAVORS & FRAGRANCES DEC 419.2 414.5 353.5 254.1 266.9 263.6 193.1 8.1 9.7 1.1 217 215 183 132 138

78 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

Net Income

Million $ CAGR (%) Index Basis (2005 = 100)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2010 2005 10-Yr. 5-Yr. 1-Yr. 2015 2014 2013 2012 2011

SPECIALTY CHEMICALS‡ KRA § KRATON PERFORMANCE POLYMERS DEC (10.5) 2.4 (0.6) (16.2) 90.9 96.7 NA NA NM NM ** ** ** ** NA MTX † MINERALS TECHNOLOGIES INC DEC 107.9 90.3 86.1 74.1 67.5 66.9 53.3 7.3 10.0 19.5 203 170 162 139 127 NEU † NEWMARKET CORP DEC 238.6 233.3 242.3 239.6 206.9 177.1 42.4 18.9 6.1 2.3 563 550 572 565 488 POL † POLYONE CORP DEC 144.6 78.0 94.0 71.9 172.6 162.6 62.2 8.8 (2.3) 85.4 232 125 151 116 277 PPG [] PPG INDUSTRIES INC DEC 1,405.0 1,133.0 1,034.0 941.0 1,095.0 769.0 596.0 9.0 12.8 24.0 236 190 173 158 184

KWR § QUAKER CHEMICAL CORP DEC 51.2 56.5 56.3 47.4 43.6 31.8 1.7 40.7 10.0 (9.4) 3,032 3,347 3,338 2,808 2,581 RYAM § RAYONIER ADVANCED MATERIALS DEC 55.3 31.7 219.8 242.1 NA NA NA NA NA 74.6 ** ** ** ** NA RPM † RPM INTERNATIONAL INC # MAY NA 239.5 291.7 98.6 215.9 189.1 (76.2) NA NA NA ** NM NM NM NM SHLM § SCHULMAN (A.) INC AUG 26.8 53.0 32.8 50.9 41.0 44.1 32.1 (1.8) (9.5) (49.5) 83 165 102 159 128 SXT † SENSIENT TECHNOLOGIES CORP DEC 107.2 81.8 113.3 123.9 120.5 107.1 44.2 9.3 0.0 31.2 243 185 256 280 273

SHW [] SHERWIN-WILLIAMS CO DEC 1,053.8 865.9 752.6 631.0 441.9 462.5 463.3 8.6 17.9 21.7 227 187 162 136 95 SCL § STEPAN CO DEC 76.0 57.1 72.8 79.4 72.0 65.4 13.5 18.8 3.0 33.0 562 422 538 587 532 VAL † VALSPAR CORP OCT 399.5 345.4 289.3 292.5 (138.6) 222.1 147.6 10.5 12.5 15.7 271 234 196 198 (94)

OTHER COMPANIES WITH SIGNIFICANT CHEMICALS OPERATIONS AXLL AXIALL CORP DEC (828.4) 46.3 165.3 120.6 57.8 42.7 95.5 NM NM NM (867) 48 173 126 60 CE CELANESE CORP DEC 306.0 631.0 1,101.0 609.0 606.0 426.0 268.0 1.3 (6.4) (51.5) 114 235 411 227 226 CMP † COMPASS MINERALS INTL INC DEC 159.2 217.9 130.8 88.9 149.0 150.6 26.8 19.5 1.1 (26.9) 594 813 488 332 556 HUN HUNTSMAN CORP DEC 97.0 331.0 133.0 368.0 244.0 (14.0) 37.0 10.1 NM (70.7) 262 895 359 995 659 POT POTASH CORP SASK INC DEC 1,270.0 1,536.0 1,785.0 2,079.0 3,081.0 1,806.2 542.9 8.9 (6.8) (17.3) 234 283 329 383 568

WLK WESTLAKE CHEMICAL CORP DEC 646.0 678.5 610.4 385.6 259.0 221.4 226.8 11.0 23.9 (4.8) 285 299 269 170 114

INDUSTRY SURVEYS CHEMICALS / MAY 2016 79

Return on Revenues (%) Return on Assets (%) Return on Equity (%)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

COMMODITY CHEMICALS‡ CBT † CABOT CORP SEP NM 5.4 4.4 5.5 5.9 NM 4.7 3.5 4.9 6.1 NM 10.1 8.0 11.0 13.0 CCC § CALGON CARBON CORP DEC 8.1 8.9 8.3 4.1 7.2 6.8 8.1 7.8 4.1 7.4 10.9 12.0 11.9 6.4 10.9 HWKN § HAWKINS INC # MAR NA 5.3 5.2 4.9 6.3 NA 7.9 7.9 8.0 11.1 NA 10.2 10.3 10.5 14.8 KOP § KOPPERS HOLDINGS INC DEC NM NM 2.7 4.2 2.4 NM NM 5.2 8.7 5.3 NM NM 25.3 53.5 40.2 LYB [] LYONDELLBASELL INDUSTRIES NV DEC 13.7 9.2 8.8 6.3 4.2 19.1 16.2 15.0 12.2 8.9 60.3 40.2 32.7 26.4 19.4

OLN † OLIN CORP DEC NM 4.7 7.1 6.8 12.3 NM 3.8 6.4 5.7 10.7 NM 9.9 17.0 15.1 26.6 TG § TREDEGAR CORP DEC NM 3.8 3.7 4.9 3.7 NM 4.6 4.6 5.5 4.3 NM 9.3 9.3 11.2 7.2

FERTILIZERS & AGRICULTURAL CHEMICALS‡ AVD § AMERICAN VANGUARD CORP DEC 2.3 1.6 9.0 10.1 7.2 1.4 1.1 8.1 10.0 7.1 2.5 1.9 14.3 17.9 12.5 CF [] CF INDUSTRIES HOLDINGS INC DEC 16.2 29.3 26.8 30.3 25.2 5.8 12.6 14.1 19.3 17.4 17.0 29.9 26.7 35.4 35.8 FMC [] FMC CORP DEC NM 9.8 11.7 11.9 11.8 NM 7.5 9.4 11.0 11.3 NM 26.0 30.2 32.8 33.5 IPI § INTREPID POTASH INC DEC NM 2.4 6.6 19.4 24.7 NM 0.8 2.1 9.1 12.4 NM 1.0 2.4 9.8 13.4 MON [] MONSANTO CO AUG 15.2 17.2 16.6 15.1 13.6 10.4 12.8 12.1 10.2 8.5 30.8 26.7 20.3 17.4 14.9

MOS [] MOSAIC CO DEC 11.2 11.4 11.1 18.9 17.4 5.6 5.4 4.4 10.9 11.9 9.9 9.3 6.7 14.9 16.3 SMG † SCOTTS MIRACLE-GRO CO SEP 5.3 5.8 5.7 4.0 4.3 7.0 8.3 8.0 5.5 5.8 27.2 26.2 24.6 19.5 18.4

DIVERSIFIED CHEMICALS‡ CC § CHEMOURS CO DEC NM 6.2 6.2 14.4 NA NM 6.9 7.7 NA NA NM 11.5 13.0 NA NA DOW [] DOW CHEMICAL DEC 15.8 6.5 8.4 2.1 4.6 10.7 5.0 6.4 1.2 3.5 36.9 16.6 22.4 4.8 13.3 DD [] DU PONT (E I) DE NEMOURS DEC 7.5 10.3 7.9 7.0 9.0 4.1 7.1 5.6 5.0 7.8 16.5 24.8 22.0 27.0 39.8 EMN [] EASTMAN CHEMICAL CO DEC 8.8 7.9 12.5 5.4 9.2 5.4 5.4 9.9 4.9 10.8 22.8 20.5 34.6 18.1 37.6 LXU § LSB INDUSTRIES INC DEC NM 2.7 8.1 7.7 10.4 NM 1.7 6.6 10.8 18.8 NM 4.6 14.4 18.2 35.9

INDUSTRIAL GASES‡ APD [] AIR PRODUCTS & CHEMICALS INC SEP 12.9 9.5 9.9 10.4 12.1 7.3 5.5 5.8 6.4 8.7 17.5 13.7 14.9 16.3 21.4 ARG [] AIRGAS INC # MAR NA 6.9 6.9 6.9 6.6 NA 6.3 6.1 6.2 6.1 NA 18.4 20.8 20.7 18.0 PX [] PRAXAIR INC DEC 14.4 13.8 14.7 15.1 14.9 8.1 8.5 9.2 9.8 10.6 30.9 27.7 27.7 29.3 29.6

SPECIALTY CHEMICALS‡ ALB † ALBEMARLE CORP DEC 9.2 8.3 15.8 11.3 15.2 4.5 4.6 11.8 9.4 13.9 14.5 13.6 23.9 18.2 29.0 ASH † ASHLAND INC SEP 3.5 1.2 8.7 0.5 0.9 1.8 0.6 5.5 0.3 0.5 5.8 1.8 15.8 0.9 1.4 BCPC § BALCHEM CORP -CL B DEC 10.8 9.8 13.3 12.9 13.3 6.9 8.5 13.0 13.7 15.5 14.0 14.6 14.8 15.8 18.5 ECL [] ECOLAB INC DEC 7.4 8.4 7.3 5.9 6.8 5.3 6.2 5.2 3.9 4.0 14.1 16.4 14.4 12.0 11.9 FTK § FLOTEK INDUSTRIES INC DEC NM 11.9 9.7 15.9 12.1 NM 13.4 12.2 22.0 12.7 NM 19.3 17.9 42.7 78.6

FUL § FULLER (H. B.) CO NOV 4.2 2.4 4.7 3.6 5.7 4.5 2.7 5.2 4.5 7.5 10.0 5.5 11.2 9.2 13.3 FF § FUTUREFUEL CORP DEC 15.5 15.6 16.6 9.8 11.1 9.8 12.1 19.2 9.3 9.5 12.3 15.5 25.1 12.5 12.8 IPHS § INNOPHOS HOLDINGS INC DEC 3.3 7.7 5.9 8.6 10.7 3.8 8.7 6.7 10.4 13.2 6.6 13.9 10.9 17.7 23.9 IOSP § INNOSPEC INC DEC 11.8 8.8 9.5 8.8 6.3 11.8 9.4 11.3 11.9 8.8 21.3 18.2 21.4 20.7 15.2 IFF [] INTL FLAVORS & FRAGRANCES DEC 13.9 13.4 12.0 9.0 9.6 11.6 12.1 10.7 8.2 9.1 27.0 27.8 26.1 21.6 25.4

80 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

Return on Revenues (%) Return on Assets (%) Return on Equity (%)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

SPECIALTY CHEMICALS‡ KRA § KRATON PERFORMANCE POLYMERS DEC NM 0.2 NM NM 6.3 NM 0.2 NM NM 8.1 NM 0.5 NM NM 18.7 MTX † MINERALS TECHNOLOGIES INC DEC 6.0 5.2 8.5 7.4 6.5 3.5 4.1 7.1 6.2 5.9 12.2 10.6 10.5 9.7 9.0 NEU † NEWMARKET CORP DEC 11.1 10.0 10.6 10.8 9.6 18.9 18.2 18.8 19.6 18.4 59.0 47.0 49.7 50.3 39.7 POL † POLYONE CORP DEC 4.3 2.0 2.5 2.4 6.0 5.5 2.8 3.7 3.4 9.2 19.5 8.9 11.7 11.8 31.3 PPG [] PPG INDUSTRIES INC DEC 9.1 7.4 6.8 6.2 7.3 8.1 6.8 6.5 6.2 7.5 27.6 22.4 23.0 25.7 31.8

KWR § QUAKER CHEMICAL CORP DEC 6.9 7.4 7.7 6.7 6.4 7.6 9.0 10.1 9.1 9.1 14.0 16.3 18.3 17.9 20.3 RYAM § RAYONIER ADVANCED MATERIALS DEC 5.9 3.3 21.0 22.1 NA 4.3 2.6 21.5 NA NA NA 7.0 26.0 NA NA RPM † RPM INTERNATIONAL INC # MAY NA 5.2 6.7 2.4 5.7 NA 5.3 6.9 2.6 6.1 NA 17.9 22.6 8.3 17.7 SHLM § SCHULMAN (A.) INC AUG 1.1 2.2 1.5 2.4 1.9 1.3 3.9 2.7 4.2 3.5 4.9 10.2 6.5 9.7 7.9 SXT † SENSIENT TECHNOLOGIES CORP DEC 7.8 5.6 7.7 8.5 8.4 6.2 4.5 6.2 7.2 7.4 11.3 7.1 9.5 11.2 11.9

SHW [] SHERWIN-WILLIAMS CO DEC 9.3 7.8 7.4 6.6 5.0 18.3 14.3 11.9 11.0 8.5 113.1 62.5 42.2 38.1 28.3 SCL § STEPAN CO DEC 4.3 3.0 3.9 4.4 3.9 6.3 4.9 6.8 8.4 8.3 13.9 10.5 14.1 18.2 19.7 VAL † VALSPAR CORP OCT 9.1 7.6 7.0 7.3 NM 9.6 8.6 7.6 8.2 NM 42.8 32.4 24.7 24.0 NM

OTHER COMPANIES WITH SIGNIFICANT CHEMICALS OPERATIONS AXLL AXIALL CORP DEC NM 1.0 3.5 3.6 1.8 NM 0.8 4.3 7.0 3.5 NM 1.8 10.3 22.1 12.4 CE CELANESE CORP DEC 5.4 9.3 16.9 9.5 9.0 3.5 7.1 12.1 6.9 7.2 11.8 22.9 49.7 39.7 53.5 CMP † COMPASS MINERALS INTL INC DEC 14.5 17.0 11.6 9.4 13.5 9.7 14.3 9.7 7.1 12.8 24.6 36.1 24.7 18.7 37.5 HUN HUNTSMAN CORP DEC 0.9 2.9 1.2 3.3 2.2 0.9 3.3 1.5 4.2 2.8 6.0 17.6 7.1 21.4 14.1 POT POTASH CORP SASK INC DEC 20.2 21.6 24.4 26.2 35.4 7.2 8.6 9.9 12.1 19.3 14.8 16.7 18.3 23.4 42.1

WLK WESTLAKE CHEMICAL CORP DEC 14.5 15.4 16.2 10.8 7.2 12.0 14.6 16.3 11.5 8.3 20.9 25.5 28.5 21.3 15.9

Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 81

Debt as a % of Current Ratio Debt / Capital Ratio (%) Net Working Capital

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

COMMODITY CHEMICALS‡ CBT † CABOT CORP SEP 2.4 2.2 1.8 1.6 2.4 42.4 33.0 34.1 38.6 27.1 159.8 136.8 156.7 223.7 61.8 CCC § CALGON CARBON CORP DEC 3.8 3.9 3.4 2.4 2.4 19.3 13.9 6.7 10.9 0.3 45.8 32.4 16.1 28.2 0.7 HWKN § HAWKINS INC # MAR NA 3.1 3.2 3.2 3.1 NA 0.0 0.0 0.0 0.0 NA 0.0 0.0 0.0 0.0 KOP § KOPPERS HOLDINGS INC DEC 1.6 1.9 2.4 2.7 2.5 101.9 91.0 62.2 65.8 76.1 424.2 323.7 109.0 98.7 117.5 LYB [] LYONDELLBASELL INDUSTRIES NV DEC 2.3 2.1 2.6 2.4 2.3 46.9 40.5 29.0 25.7 25.7 141.0 108.8 63.5 59.9 62.0

OLN † OLIN CORP DEC 1.7 2.2 2.1 1.7 2.0 51.1 37.0 35.8 38.4 32.6 467.8 150.3 156.9 219.0 137.5 TG § TREDEGAR CORP DEC 1.8 2.0 1.9 1.9 2.2 26.3 25.0 22.7 22.8 21.1 111.6 105.9 127.0 111.9 94.8

FERTILIZERS & AGRICULTURAL CHEMICALS‡ AVD § AMERICAN VANGUARD CORP DEC 3.1 3.5 2.3 2.0 2.3 18.8 25.6 15.5 12.9 20.4 42.6 48.3 37.2 33.3 52.2 CF [] CF INDUSTRIES HOLDINGS INC DEC 0.9 2.7 3.2 3.0 1.7 53.0 47.7 34.4 19.0 22.7 NM 280.9 171.9 86.1 210.8 FMC [] FMC CORP DEC 2.0 1.5 1.5 1.9 2.0 50.0 42.2 42.0 38.0 38.6 134.1 112.6 120.4 86.9 82.1 IPI § INTREPID POTASH INC DEC 5.0 4.3 2.6 2.4 5.6 26.0 13.7 13.8 0.0 0.0 95.7 96.2 136.4 0.0 0.0 MON [] MONSANTO CO AUG 2.1 1.9 2.3 2.3 1.9 53.5 47.3 13.7 14.4 11.7 154.7 165.0 35.9 37.5 37.8

MOS [] MOSAIC CO DEC 2.0 3.4 2.5 3.9 3.4 26.5 24.4 19.6 6.6 7.3 180.8 100.4 62.2 19.7 21.7 SMG † SCOTTS MIRACLE-GRO CO SEP 1.5 1.7 1.7 2.3 2.1 58.0 50.7 37.2 53.7 55.9 306.6 177.4 128.8 137.9 151.1

DIVERSIFIED CHEMICALS‡ CC § CHEMOURS CO DEC 1.6 1.4 1.3 1.5 NA 91.6 0.0 0.0 0.0 NA 468.9 0.2 0.2 0.2 NA DOW [] DOW CHEMICAL DEC 2.2 2.1 2.1 2.1 1.7 38.5 44.8 37.7 47.7 43.8 122.3 148.6 129.3 163.4 187.1 DD [] DU PONT (E I) DE NEMOURS DEC 1.7 1.7 1.8 1.6 1.6 42.4 39.7 38.5 48.9 55.0 103.2 101.8 97.5 136.9 170.8 EMN [] EASTMAN CHEMICAL CO DEC 1.4 1.6 1.9 1.9 2.1 57.6 61.9 49.8 61.2 41.0 803.9 629.7 310.5 388.5 121.6 LXU § LSB INDUSTRIES INC DEC 1.7 2.7 2.6 2.4 3.4 43.3 46.3 48.7 15.3 19.1 353.7 169.4 206.3 40.3 32.3

INDUSTRIAL GASES‡ APD [] AIR PRODUCTS & CHEMICALS INC SEP 0.8 1.1 1.1 1.3 1.4 32.6 35.8 38.0 37.8 38.2 NM NM NM 631.5 463.3 ARG [] AIRGAS INC # MAR NA 1.3 1.1 1.7 1.4 NA 36.8 39.0 49.4 40.9 NA 610.1 NM 382.7 511.9 PX [] PRAXAIR INC DEC 1.4 1.1 1.1 1.1 1.0 60.6 55.3 49.7 48.6 48.4 NM NM NM NM NM

SPECIALTY CHEMICALS‡ ALB † ALBEMARLE CORP DEC 1.1 2.9 3.4 3.7 3.4 44.3 61.1 37.5 26.6 31.0 NM 100.6 100.7 67.2 78.5 ASH † ASHLAND INC SEP 2.2 2.1 1.7 1.7 1.9 51.7 44.3 37.3 42.5 44.6 186.0 157.0 257.2 241.6 221.4 BCPC § BALCHEM CORP -CL B DEC 2.5 1.9 7.8 7.0 5.7 33.1 39.2 0.0 0.0 0.0 223.0 346.8 0.0 0.0 0.0 ECL [] ECOLAB INC DEC 0.9 1.1 1.3 1.6 1.7 34.2 35.8 40.2 44.2 48.7 NM NM 499.6 311.9 296.6 FTK § FLOTEK INDUSTRIES INC DEC 2.3 2.7 2.2 2.3 3.9 5.4 7.1 11.4 12.6 55.4 21.5 22.3 47.5 41.4 102.3

FUL § FULLER (H. B.) CO NOV 2.3 2.4 2.2 2.3 2.3 42.6 37.5 33.1 37.1 20.0 148.3 122.3 108.8 105.8 52.6 FF § FUTUREFUEL CORP DEC 7.4 6.4 7.0 5.9 6.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 IPHS § INNOPHOS HOLDINGS INC DEC 2.8 4.0 5.0 4.4 3.6 38.4 21.3 24.3 27.0 26.2 110.2 47.2 51.7 57.7 53.5 IOSP § INNOSPEC INC DEC 2.2 1.9 2.6 2.0 2.2 17.4 20.7 25.4 7.2 8.0 53.6 73.5 56.7 16.7 17.2 IFF [] INTL FLAVORS & FRAGRANCES DEC 2.0 3.3 2.9 2.5 2.3 37.1 38.1 38.9 41.4 41.3 131.4 78.4 85.4 92.8 103.4

82 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

Debt as a % of Current Ratio Debt / Capital Ratio (%) Net Working Capital

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

COMMODITY CHEMICALS‡

SPECIALTY CHEMICALS‡ KRA § KRATON PERFORMANCE POLYMERS DEC 2.9 3.7 3.5 4.0 4.1 53.8 44.1 39.8 45.7 42.4 134.9 90.8 73.4 78.3 76.3 MTX † MINERALS TECHNOLOGIES INC DEC 2.5 2.6 4.5 3.1 4.0 51.9 55.3 8.1 1.1 10.3 258.8 254.6 11.8 1.6 15.8 NEU † NEWMARKET CORP DEC 2.9 3.1 3.6 3.4 3.1 55.5 45.9 37.6 51.3 29.7 96.8 67.6 53.8 81.8 50.2 POL † POLYONE CORP DEC 1.9 1.7 2.1 1.9 1.9 60.5 52.7 46.8 52.8 54.5 243.8 217.9 151.4 172.7 175.5 PPG [] PPG INDUSTRIES INC DEC 1.4 1.4 1.7 1.7 1.8 42.6 37.6 39.4 44.0 50.4 213.0 179.5 109.5 103.5 119.5

KWR § QUAKER CHEMICAL CORP DEC 2.9 2.8 2.5 2.6 2.4 17.3 17.1 4.8 9.4 15.4 33.8 33.2 8.7 17.6 30.5 RYAM § RAYONIER ADVANCED MATERIALS DEC 2.5 2.4 3.1 2.3 NA 102.0 107.1 0.0 0.0 NA 437.9 496.7 0.0 0.0 NA RPM † RPM INTERNATIONAL INC # MAY NA 2.3 2.2 2.0 2.4 NA 54.5 48.4 52.3 47.9 NA 138.2 119.6 142.9 105.8 SHLM § SCHULMAN (A.) INC AUG 1.9 1.9 2.0 1.9 2.2 59.9 38.1 28.2 25.0 24.5 242.5 85.1 55.2 51.2 43.0 SXT † SENSIENT TECHNOLOGIES CORP DEC 3.5 3.4 3.5 3.7 3.4 41.7 30.1 21.6 22.3 22.6 113.6 84.4 61.4 61.0 62.5

SHW [] SHERWIN-WILLIAMS CO DEC 1.2 1.0 1.2 1.7 1.0 68.9 53.0 38.7 47.7 29.6 371.4 NM 178.1 128.2 646.1 SCL § STEPAN CO DEC 2.5 2.3 2.3 2.1 2.1 35.7 30.9 29.1 23.5 28.7 83.4 75.7 69.3 54.2 66.9 VAL † VALSPAR CORP OCT 1.2 0.9 1.1 1.4 1.1 60.9 43.6 43.2 41.3 32.3 645.4 NM NM 239.7 NM

OTHER COMPANIES WITH SIGNIFICANT CHEMICALS OPERATIONS AXLL AXIALL CORP DEC 2.4 2.3 2.2 2.4 2.4 39.0 30.4 29.2 41.8 47.5 251.6 228.9 229.4 114.8 157.9 CE CELANESE CORP DEC 1.8 2.0 2.1 2.3 2.0 49.5 46.8 49.7 60.1 66.7 199.5 191.8 176.4 172.4 218.0 CMP † COMPASS MINERALS INTL INC DEC 3.0 3.0 2.2 2.5 1.6 50.4 45.6 42.9 45.1 38.7 211.4 133.9 148.4 155.5 172.9 HUN HUNTSMAN CORP DEC 2.0 2.2 1.9 1.9 2.2 71.3 70.1 61.3 63.1 65.5 241.3 182.5 182.0 176.4 176.1 POT POTASH CORP SASK INC DEC 0.9 0.9 1.0 1.3 1.1 25.5 22.6 20.3 23.3 29.4 NM NM NM 539.9 NM

WLK WESTLAKE CHEMICAL CORP DEC 4.2 3.7 4.1 4.4 4.8 16.6 18.2 21.1 25.8 26.8 46.2 51.9 61.4 56.5 54.9

INDUSTRY SURVEYS CHEMICALS / MAY 2016 83

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

COMMODITY CHEMICALS‡ CBT † CABOT CORP SEP NM- NM 20 - 13 22 - 14 16 - 11 17 - 8 NM 28 34 26 26 2.9 - 1.8 2.1 - 1.4 2.5 - 1.5 2.4 - 1.7 3.2 - 1.5 CCC § CALGON CARBON CORP DEC 28 - 18 25 - 20 25 - 17 42 - 28 26 - 19 24 0 0 0 0 1.4 - 0.9 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 HWKN § HAWKINS INC # MAR NA - NA 25 - 18 26 - 21 26 - 19 23 - 14 NA 42 42 41 31 2.4 - 1.8 2.3 - 1.7 2.0 - 1.6 2.2 - 1.6 2.2 - 1.3 KOP § KOPPERS HOLDINGS INC DEC NM- NM NM- NM 26 - 18 13 - 9 26 - 13 NM NM 51 30 49 0.0 - 0.0 4.4 - 2.2 2.9 - 2.0 3.3 - 2.4 3.7 - 1.9 LYB [] LYONDELLBASELL INDUSTRIES NV DEC 11 - 7 14 - 9 12 - 8 11 - 7 13 - 6 32 34 29 84 134 4.2 - 2.8 3.9 - 2.3 3.6 - 2.5 12.7 - 7.3 22.1 - 10.5

OLN † OLIN CORP DEC NM- NM 22 - 15 13 - 10 13 - 10 9 - 5 NM 60 36 43 26 5.1 - 2.3 3.9 - 2.7 3.8 - 2.7 4.3 - 3.4 5.0 - 2.9 TG § TREDEGAR CORP DEC NM- NM 26 - 15 28 - 19 20 - 9 25 - 15 NM 31 25 71 20 3.4 - 1.7 2.1 - 1.2 1.3 - 0.9 7.8 - 3.6 1.3 - 0.8

FERTILIZERS & AGRICULTURAL CHEMICALS‡ AVD § AMERICAN VANGUARD CORP DEC 70 - 42 NM- 56 29 - 18 28 - 10 18 - 10 9 100 18 17 10 0.2 - 0.1 1.8 - 0.7 1.0 - 0.6 1.7 - 0.6 1.0 - 0.5 CF [] CF INDUSTRIES HOLDINGS INC DEC 24 - 13 11 - 8 10 - 7 8 - 5 9 - 5 40 18 9 6 5 3.0 - 1.7 2.3 - 1.7 1.3 - 0.9 1.1 - 0.7 0.9 - 0.5 FMC [] FMC CORP DEC NM- NM 28 - 17 23 - 17 18 - 13 17 - 11 NM 20 16 13 11 2.0 - 1.0 1.2 - 0.7 1.0 - 0.7 0.9 - 0.7 0.9 - 0.6 IPI § INTREPID POTASH INC DEC NM- NM NM- 95 80 - 35 23 - 16 28 - 14 NM 0 0 65 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 4.1 - 2.8 0.0 - 0.0 MON [] MONSANTO CO AUG 26 - 17 25 - 20 25 - 20 25 - 18 26 - 20 41 33 32 31 37 2.4 - 1.6 1.7 - 1.3 1.6 - 1.3 1.7 - 1.3 1.9 - 1.4

MOS [] MOSAIC CO DEC 19 - 10 19 - 15 33 - 20 14 - 10 20 - 10 39 37 52 23 6 4.0 - 2.0 2.5 - 2.0 2.5 - 1.5 2.3 - 1.6 0.6 - 0.3 SMG † SCOTTS MIRACLE-GRO CO SEP 28 - 22 24 - 19 24 - 16 30 - 19 32 - 21 69 140 54 66 56 3.1 - 2.5 7.2 - 5.9 3.4 - 2.3 3.5 - 2.2 2.6 - 1.7

DIVERSIFIED CHEMICALS‡ CC § CHEMOURS CO DEC NM- NM NA - NA NA - NA NA - NA NA - NA NM 0 NA NA NA 12.7 - 2.6 NA - NA NA - NA NA - NA NA - NA DOW [] DOW CHEMICAL DEC 9 - 5 19 - 14 12 - 8 51 - 39 21 - 10 27 53 34 170 44 4.9 - 3.0 3.7 - 2.8 4.3 - 2.8 4.4 - 3.4 4.4 - 2.1 DD [] DU PONT (E I) DE NEMOURS DEC 38 - 22 19 - 15 21 - 15 22 - 16 15 - 10 82 47 58 65 44 3.7 - 2.1 3.1 - 2.4 3.9 - 2.7 4.1 - 3.0 4.4 - 2.9 EMN [] EASTMAN CHEMICAL CO DEC 15 - 11 18 - 14 11 - 8 23 - 13 12 - 7 29 29 17 36 21 2.6 - 2.0 2.1 - 1.6 2.0 - 1.5 2.8 - 1.6 3.1 - 1.8 LXU § LSB INDUSTRIES INC DEC NM- NM 49 - 34 18 - 12 17 - 9 13 - 6 NM 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

INDUSTRIAL GASES‡ APD [] AIR PRODUCTS & CHEMICALS INC SEP 27 - 21 32 - 22 24 - 18 20 - 16 17 - 13 54 65 58 53 39 2.6 - 2.0 2.9 - 2.0 3.3 - 2.4 3.3 - 2.7 3.1 - 2.3 ARG [] AIRGAS INC # MAR NA - NA 24 - 20 24 - 19 21 - 17 20 - 14 NA 45 40 36 31 2.8 - 1.7 2.2 - 1.9 2.2 - 1.7 2.1 - 1.7 2.2 - 1.6 PX [] PRAXAIR INC DEC 24 - 18 23 - 20 22 - 18 21 - 18 20 - 16 53 45 40 39 36 2.9 - 2.2 2.2 - 1.9 2.2 - 1.8 2.2 - 1.9 2.3 - 1.8

SPECIALTY CHEMICALS‡ ALB † ALBEMARLE CORP DEC 22 - 14 30 - 20 14 - 11 20 - 15 15 - 8 39 43 19 23 14 2.8 - 1.8 2.1 - 1.4 1.7 - 1.4 1.6 - 1.2 1.8 - 0.9 ASH † ASHLAND INC SEP 47 - 35 NM- 94 11 - 8 NM- NM 96 - 57 52 145 13 163 90 1.5 - 1.1 1.5 - 1.1 1.6 - 1.2 1.4 - 1.0 1.6 - 0.9 BCPC § BALCHEM CORP -CL B DEC 37 - 26 40 - 28 40 - 24 30 - 19 35 - 24 18 17 17 16 13 0.7 - 0.5 0.6 - 0.4 0.7 - 0.4 0.8 - 0.5 0.6 - 0.4 ECL [] ECOLAB INC DEC 36 - 29 30 - 24 34 - 22 30 - 24 30 - 22 40 29 30 34 37 1.4 - 1.1 1.2 - 1.0 1.3 - 0.9 1.4 - 1.1 1.7 - 1.2 FTK § FLOTEK INDUSTRIES INC DEC NM- NM 34 - 16 34 - 18 14 - 8 18 - 6 NM 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

FUL § FULLER (H. B.) CO NOV 26 - 18 53 - 37 27 - 18 26 - 17 14 - 9 29 46 20 24 16 1.7 - 1.1 1.2 - 0.9 1.1 - 0.7 1.4 - 0.9 1.7 - 1.2 FF § FUTUREFUEL CORP DEC 15 - 9 18 - 9 11 - 7 16 - 11 16 - 9 23 39 40 193 47 2.6 - 1.5 4.5 - 2.2 5.9 - 3.6 17.8 - 12.2 5.3 - 2.9 IPHS § INNOPHOS HOLDINGS INC DEC 48 - 22 21 - 15 25 - 20 17 - 13 13 - 8 147 59 64 34 23 6.7 - 3.0 4.0 - 2.9 3.2 - 2.5 2.6 - 1.9 2.9 - 1.8 IOSP § INNOSPEC INC DEC 12 - 8 14 - 10 15 - 11 12 - 9 18 - 9 12 16 15 68 0 1.6 - 1.0 1.6 - 1.2 1.4 - 1.0 7.9 - 5.7 0.0 - 0.0 IFF [] INTL FLAVORS & FRAGRANCES DEC 24 - 19 21 - 16 21 - 16 22 - 17 20 - 16 40 34 34 42 35 2.1 - 1.7 2.1 - 1.6 2.2 - 1.6 2.5 - 1.9 2.3 - 1.7

20112015 2014 2013 2012

84 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

SPECIALTY CHEMICALS‡ KRA § KRATON PERFORMANCE POLYMERS DEC NM- NM NM- NM NM- NM NM- NM 17 - 5 NM 0 NM NM 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 MTX † MINERALS TECHNOLOGIES INC DEC 24 - 14 30 - 19 24 - 15 19 - 14 19 - 12 6 8 8 6 5 0.4 - 0.3 0.4 - 0.3 0.5 - 0.3 0.4 - 0.3 0.4 - 0.3 NEU † NEWMARKET CORP DEC 25 - 18 23 - 17 19 - 13 16 - 10 14 - 8 30 26 21 157 16 1.7 - 1.2 1.5 - 1.1 1.6 - 1.1 16.2 - 9.9 2.0 - 1.2 POL † POLYONE CORP DEC 25 - 18 51 - 38 36 - 21 26 - 14 9 - 5 25 40 27 25 9 1.4 - 1.0 1.1 - 0.8 1.2 - 0.7 1.7 - 1.0 1.7 - 1.0 PPG [] PPG INDUSTRIES INC DEC 23 - 16 29 - 21 26 - 18 22 - 14 14 - 10 27 32 34 38 32 1.7 - 1.2 1.5 - 1.1 1.9 - 1.3 2.8 - 1.7 3.4 - 2.3

KWR § QUAKER CHEMICAL CORP DEC 25 - 20 22 - 15 19 - 13 15 - 10 13 - 7 32 26 23 27 27 1.7 - 1.3 1.7 - 1.2 1.8 - 1.2 2.7 - 1.8 3.9 - 2.1 RYAM § RAYONIER ADVANCED MATERIALS DEC 18 - 4 59 - 28 NA - NA NA - NA NA - NA 21 19 NA NA NA 4.9 - 1.2 0.7 - 0.3 NA - NA NA - NA NA - NA RPM † RPM INTERNATIONAL INC # MAY NA - NA 29 - 21 19 - 13 39 - 31 16 - 10 NA 56 43 119 52 NA - NA 2.7 - 2.0 3.2 - 2.3 3.9 - 3.0 5.0 - 3.3 SHLM § SCHULMAN (A.) INC AUG 59 - 34 23 - 16 32 - 22 17 - 10 20 - 12 99 44 70 42 47 2.9 - 1.7 2.8 - 1.9 3.2 - 2.2 4.1 - 2.5 3.8 - 2.3 SXT † SENSIENT TECHNOLOGIES CORP DEC 30 - 24 37 - 27 23 - 16 16 - 13 16 - 12 44 58 40 35 35 1.8 - 1.5 2.1 - 1.5 2.6 - 1.7 2.6 - 2.1 2.8 - 2.1

SHW [] SHERWIN-WILLIAMS CO DEC 26 - 19 30 - 19 26 - 21 26 - 15 21 - 16 24 25 27 25 35 1.2 - 0.9 1.3 - 0.8 1.3 - 1.0 1.7 - 1.0 2.1 - 1.6 SCL § STEPAN CO DEC 17 - 11 26 - 14 21 - 16 15 - 10 12 - 9 22 27 20 16 15 2.0 - 1.3 1.9 - 1.0 1.2 - 1.0 1.5 - 1.0 1.7 - 1.3 VAL † VALSPAR CORP OCT 18 - 14 21 - 16 23 - 18 20 - 12 NM- NM 24 25 28 25 NM 1.7 - 1.3 1.6 - 1.2 1.6 - 1.2 2.1 - 1.3 2.6 - 1.8

OTHER COMPANIES WITH SIGNIFICANT CHEMICALS OPERATIONS AXLL AXIALL CORP DEC NM- NM 75 - 52 26 - 15 14 - 6 24 - 7 NM 97 20 7 0 5.0 - 1.2 1.9 - 1.3 1.3 - 0.7 1.2 - 0.5 0.0 - 0.0 CE CELANESE CORP DEC 37 - 26 16 - 12 8 - 6 14 - 9 15 - 8 57 23 8 7 6 2.2 - 1.6 1.9 - 1.4 1.3 - 0.9 0.8 - 0.5 0.7 - 0.4 CMP † COMPASS MINERALS INTL INC DEC 20 - 15 15 - 12 24 - 17 31 - 25 22 - 14 56 37 56 75 40 3.7 - 2.8 3.1 - 2.5 3.4 - 2.4 2.9 - 2.4 2.9 - 1.8 HUN HUNTSMAN CORP DEC 62 - 23 21 - 15 45 - 29 11 - 6 21 - 8 125 36 91 26 39 5.4 - 2.0 2.5 - 1.7 3.1 - 2.0 4.1 - 2.3 4.9 - 1.9 POT POTASH CORP SASK INC DEC 25 - 11 21 - 16 21 - 14 20 - 15 18 - 11 98 77 58 23 7 8.9 - 4.0 4.7 - 3.6 4.2 - 2.7 1.5 - 1.2 0.6 - 0.4

WLK WESTLAKE CHEMICAL CORP DEC 16 - 10 19 - 10 13 - 8 14 - 7 17 - 8 14 11 9 74 7 1.4 - 0.9 1.1 - 0.6 1.1 - 0.7 10.6 - 5.3 0.9 - 0.4

20112015 2014 2013 2012

INDUSTRY SURVEYS CHEMICALS / MAY 2016 85

Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

COMMODITY CHEMICALS‡ CBT † CABOT CORP SEP (5.29) 3.04 2.34 2.87 2.80 14.84 16.45 17.80 15.96 22.83 48.00 - 30.70 61.46 - 39.41 51.72 - 32.13 44.97 - 31.70 48.77 - 22.45 CCC § CALGON CARBON CORP DEC 0.84 0.93 0.85 0.41 0.70 7.64 7.57 7.54 6.33 6.09 23.20 - 14.70 23.13 - 18.56 21.00 - 14.20 17.25 - 11.54 18.20 - 13.00 HWKN § HAWKINS INC # MAR NA 1.82 1.72 1.64 2.09 NA 16.19 15.77 14.86 13.61 44.00 - 33.94 45.13 - 32.98 44.00 - 35.29 42.93 - 31.06 47.48 - 29.05 KOP § KOPPERS HOLDINGS INC DEC (3.50) (1.61) 1.96 3.18 1.79 (17.57) (16.83) 4.18 2.89 0.71 27.40 - 15.78 45.92 - 22.52 49.99 - 34.69 40.61 - 29.30 46.14 - 23.59 LYB [] LYONDELLBASELL INDUSTRIES NV DEC 9.63 8.04 6.81 5.01 3.76 12.21 14.33 19.99 16.53 15.51 107.32 - 71.74 115.40 - 70.06 80.33 - 55.02 57.16 - 33.11 48.12 - 22.90

OLN † OLIN CORP DEC (0.01) 1.33 2.24 1.87 3.02 (2.62) 1.84 2.72 1.23 4.23 34.34 - 15.73 29.28 - 20.43 29.52 - 21.29 23.48 - 18.40 27.16 - 16.11 TG § TREDEGAR CORP DEC (0.99) 1.12 1.12 1.35 0.92 3.66 4.84 5.46 4.09 5.47 24.13 - 12.42 28.80 - 16.68 31.89 - 20.93 26.76 - 12.33 23.20 - 13.71

FERTILIZERS & AGRICULTURAL CHEMICALS‡ AVD § AMERICAN VANGUARD CORP DEC 0.23 0.17 1.22 1.32 0.80 4.77 5.55 5.26 3.92 2.57 16.06 - 9.73 24.54 - 9.50 34.97 - 21.83 37.51 - 13.00 14.77 - 7.63 CF [] CF INDUSTRIES HOLDINGS INC DEC 2.97 5.43 4.97 5.79 4.44 6.39 8.59 10.51 12.04 7.43 70.32 - 39.64 58.06 - 44.02 47.88 - 33.87 45.60 - 29.92 38.54 - 23.07 FMC [] FMC CORP DEC (1.40) 2.97 3.34 3.23 2.79 1.62 6.73 6.21 6.81 5.77 64.72 - 32.58 83.94 - 51.04 75.68 - 55.18 59.41 - 42.93 46.50 - 31.91 IPI § INTREPID POTASH INC DEC (6.94) 0.13 0.30 1.16 1.46 5.63 12.54 12.39 12.03 11.55 15.09 - 2.63 17.64 - 12.39 24.05 - 10.60 26.44 - 18.42 40.22 - 20.75 MON [] MONSANTO CO AUG 4.79 5.25 4.63 3.82 2.99 3.41 4.13 14.77 13.40 12.84 126.00 - 81.22 128.79 - 104.08 116.80 - 94.00 94.76 - 69.70 78.71 - 58.89

MOS [] MOSAIC CO DEC 2.79 2.69 1.94 4.44 4.44 22.51 24.21 22.32 27.20 23.83 53.83 - 26.96 51.25 - 40.32 64.65 - 39.75 61.98 - 44.43 89.24 - 44.86 SMG † SCOTTS MIRACLE-GRO CO SEP 2.62 2.69 2.61 1.86 1.88 (7.74) (1.65) 1.79 (0.24) (1.13) 72.26 - 58.11 63.96 - 52.38 62.57 - 42.01 55.95 - 35.49 60.62 - 39.99

DIVERSIFIED CHEMICALS‡ CC § CHEMOURS CO DEC (0.50) 2.18 2.31 5.78 NA (0.28) NA NA NA NA 22.25 - 4.58 NA - NA NA - NA NA - NA NA - NA DOW [] DOW CHEMICAL DEC 6.45 2.91 3.72 0.71 2.06 5.02 1.75 4.80 (0.48) 0.24 57.10 - 35.11 54.97 - 41.45 44.99 - 29.81 36.08 - 27.45 42.23 - 20.61 DD [] DU PONT (E I) DE NEMOURS DEC 2.10 3.94 3.07 2.63 3.73 1.57 4.39 6.67 0.12 (2.67) 80.65 - 47.11 75.82 - 59.35 65.00 - 45.11 57.50 - 41.67 57.00 - 37.10 EMN [] EASTMAN CHEMICAL CO DEC 5.71 5.01 7.57 2.99 4.70 (21.89) (26.21) (4.07) (10.18) 9.81 83.90 - 62.84 90.55 - 70.38 82.96 - 63.48 68.22 - 39.16 55.36 - 32.44 LXU § LSB INDUSTRIES INC DEC (1.67) 0.86 2.44 2.62 3.81 17.06 18.40 18.07 15.61 12.93 47.33 - 5.38 42.41 - 28.91 42.79 - 28.15 45.00 - 24.85 49.21 - 23.65

INDUSTRIAL GASES‡ APD [] AIR PRODUCTS & CHEMICALS INC SEP 5.95 4.64 4.79 4.73 5.71 26.05 25.82 22.12 19.38 22.09 158.20 - 123.66 149.61 - 102.73 114.75 - 84.04 92.79 - 76.11 98.00 - 72.26 ARG [] AIRGAS INC # MAR NA 4.93 4.76 4.45 4.09 NA 7.87 3.94 1.57 4.86 139.22 - 86.09 118.75 - 99.32 112.60 - 88.60 93.46 - 75.78 80.59 - 58.00 PX [] PRAXAIR INC DEC 5.39 5.79 5.94 5.67 5.53 2.93 6.56 9.58 11.42 9.88 130.38 - 98.55 135.24 - 117.32 130.58 - 107.69 116.93 - 100.00 111.74 - 88.64

SPECIALTY CHEMICALS‡ ALB † ALBEMARLE CORP DEC 3.01 2.57 4.93 3.49 4.82 (12.23) 13.74 15.68 16.45 13.37 64.99 - 41.37 76.28 - 51.35 70.00 - 56.64 68.51 - 50.88 71.79 - 38.02 ASH † ASHLAND INC SEP 2.81 0.94 8.64 0.49 0.72 (8.82) (5.27) (7.84) (15.81) (16.54) 132.38 - 97.58 121.35 - 88.76 97.68 - 72.11 80.84 - 56.83 69.46 - 41.11 BCPC § BALCHEM CORP -CL B DEC 1.92 1.74 1.51 1.38 1.36 (1.75) (4.93) 9.52 7.66 6.20 70.91 - 50.81 69.92 - 48.89 59.97 - 35.72 41.93 - 26.56 47.23 - 32.00 ECL [] ECOLAB INC DEC 3.38 4.01 3.23 2.41 1.95 (12.47) (12.87) (14.29) (13.19) (15.29) 122.48 - 97.78 118.46 - 97.65 108.34 - 71.99 72.79 - 57.44 58.13 - 43.81 FTK § FLOTEK INDUSTRIES INC DEC (0.25) 0.98 0.70 1.03 0.60 2.84 3.05 2.07 2.09 0.51 21.72 - 8.12 32.92 - 15.76 23.90 - 12.36 14.73 - 8.46 10.77 - 3.89

FUL § FULLER (H. B.) CO NOV 1.75 1.00 1.92 1.37 1.82 6.11 8.71 8.91 5.82 9.38 45.57 - 30.72 53.31 - 36.92 52.16 - 35.17 35.55 - 22.99 25.41 - 16.92 FF § FUTUREFUEL CORP DEC 1.06 1.22 1.71 0.83 0.85 8.99 8.21 7.58 6.24 6.98 16.08 - 9.11 22.25 - 10.57 19.09 - 11.69 13.10 - 9.01 13.99 - 7.50 IPHS § INNOPHOS HOLDINGS INC DEC 1.31 2.96 2.25 3.40 3.99 10.14 14.81 14.28 13.29 13.33 63.29 - 28.53 61.54 - 44.27 56.94 - 45.04 58.50 - 43.29 51.45 - 32.26 IOSP § INNOSPEC INC DEC 4.96 3.45 3.29 2.95 2.07 7.01 2.42 3.89 4.26 7.98 59.52 - 38.44 47.50 - 35.00 49.41 - 34.76 34.87 - 25.18 38.24 - 18.53 IFF [] INTL FLAVORS & FRAGRANCES DEC 5.19 5.09 4.32 3.11 3.30 4.29 9.49 9.42 6.70 4.89 123.08 - 97.59 105.84 - 82.91 90.30 - 67.50 67.79 - 52.05 66.29 - 51.20

86 CHEMICALS / MAY 2016 INDUSTRY SURVEYS

Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $)

Ticker Company Yr. End 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011

SPECIALTY CHEMICALS‡ KRA § KRATON PERFORMANCE POLYMERS DEC (0.34) 0.07 (0.02) (0.50) 2.85 10.37 11.97 14.01 13.29 14.07 25.22 - 16.51 28.87 - 15.52 28.26 - 18.33 31.17 - 17.61 47.89 - 14.37 MTX † MINERALS TECHNOLOGIES INC DEC 3.11 2.62 2.48 2.10 1.88 (2.40) (3.46) 22.71 20.64 19.08 74.87 - 44.91 77.95 - 48.50 60.74 - 38.24 40.00 - 28.63 35.34 - 23.08 NEU † NEWMARKET CORP DEC 19.45 18.38 18.21 17.85 15.10 31.52 32.47 41.92 27.70 38.16 483.25 - 348.38 416.52 - 309.73 341.69 - 238.00 283.48 - 172.50 204.92 - 118.83 POL † POLYONE CORP DEC 1.65 0.85 0.98 0.81 1.87 (2.79) (1.98) 0.55 (1.30) (1.70) 41.19 - 28.97 43.34 - 32.01 35.77 - 20.96 21.00 - 11.58 16.61 - 9.54 PPG [] PPG INDUSTRIES INC DEC 5.18 4.09 3.61 3.07 3.48 (3.24) (3.79) 2.11 0.71 (1.76) 118.95 - 82.93 116.83 - 85.78 95.04 - 64.10 68.39 - 41.63 48.90 - 33.22

KWR § QUAKER CHEMICAL CORP DEC 3.84 4.27 4.28 3.64 3.52 16.60 15.72 18.70 14.44 12.30 95.74 - 75.04 93.56 - 65.19 81.52 - 53.54 54.00 - 35.82 46.02 - 24.11 RYAM § RAYONIER ADVANCED MATERIALS DEC 1.31 0.75 5.24 5.78 NA (0.40) (1.46) NA NA NA 24.01 - 5.75 44.17 - 21.37 NA - NA NA - NA NA - NA RPM † RPM INTERNATIONAL INC # MAY NA 1.81 2.20 0.75 1.65 NA (3.97) (1.68) (2.81) (0.09) 51.42 - 40.11 51.97 - 37.57 41.63 - 29.11 29.60 - 22.96 26.00 - 17.20 SHLM § SCHULMAN (A.) INC AUG 0.83 1.82 1.12 1.73 1.32 (20.29) 6.37 9.47 9.66 12.44 48.96 - 28.54 42.51 - 28.67 35.53 - 24.61 29.00 - 17.75 26.42 - 16.16 SXT † SENSIENT TECHNOLOGIES CORP DEC 2.34 1.69 2.28 2.50 2.42 9.74 12.95 15.54 13.91 11.86 70.53 - 56.71 63.35 - 46.08 53.35 - 35.54 41.08 - 33.13 39.69 - 30.15

SHW [] SHERWIN-WILLIAMS CO DEC 11.38 8.95 7.41 6.15 4.22 (5.75) (4.76) 2.82 2.79 0.99 294.35 - 218.27 266.25 - 174.29 195.32 - 153.94 159.80 - 90.21 90.42 - 69.47 SCL § STEPAN CO DEC 3.34 2.51 3.22 3.71 3.44 23.69 22.61 23.14 21.01 18.06 55.67 - 37.20 66.51 - 36.34 67.20 - 52.34 55.90 - 38.05 41.83 - 31.33 VAL † VALSPAR CORP OCT 4.97 4.13 3.29 3.20 (1.47) (13.62) (8.60) (7.36) (4.25) (4.26) 90.91 - 70.58 88.36 - 66.94 74.25 - 58.97 63.35 - 38.89 40.60 - 27.44

OTHER COMPANIES WITH SIGNIFICANT CHEMICALS OPERATIONS AXLL AXIALL CORP DEC ##### 0.66 2.46 3.47 1.66 (4.07) (5.02) (4.71) 9.93 6.67 51.35 - 12.83 49.27 - 34.32 64.96 - 36.31 47.17 - 20.24 40.59 - 12.19 CE CELANESE CORP DEC 2.03 4.07 6.93 3.84 3.88 10.55 12.67 11.21 4.94 2.45 74.19 - 52.56 66.35 - 48.78 58.56 - 41.55 52.59 - 32.77 58.68 - 29.43 CMP † COMPASS MINERALS INTL INC DEC 4.70 6.45 3.89 2.65 4.46 14.73 14.25 13.78 12.25 11.34 95.68 - 71.00 97.50 - 76.61 91.88 - 64.24 81.13 - 67.16 98.10 - 62.85 HUN HUNTSMAN CORP DEC 0.40 1.37 0.55 1.55 1.03 5.23 6.41 7.33 6.66 6.18 24.64 - 9.27 29.33 - 20.35 24.74 - 16.02 17.17 - 9.75 21.52 - 8.13 POT POTASH CORP SASK INC DEC 1.52 1.83 2.06 2.42 3.60 9.79 10.42 11.09 11.31 9.00 37.60 - 16.65 38.58 - 30.09 44.13 - 28.55 48.00 - 36.73 63.97 - 38.42

WLK WESTLAKE CHEMICAL CORP DEC 4.88 5.09 4.57 2.89 1.95 23.44 20.27 16.95 13.63 12.83 79.25 - 49.26 98.44 - 53.43 61.08 - 38.35 40.24 - 20.19 33.88 - 15.63

The analysis and opinion set forth in this publication are provided by S&P Global Market Intelligence and are prepared separately from any other analytic activity of Standard & Poor’s.

In this regard, S&P Global Market Intelligence has no access to nonpublic information received by other units of Standard & Poor’s.

The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed.

INDUSTRY SURVEYS CHEMICALS / MAY 2016 87

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