U.S. Chemical Output Nudges Up in October: Recovery Intact – November 26, 2014 – Zacks.com

U.S. chemical production continues its gaining streak with output rising for the tenth straight month in October with gains witnessed across all regions – according to the latest monthly report from the American Chemistry Council (ACC). This provides further evidence that the industry has sailed out of troubled waters and remains very much on the road to recovery in the second half.

 

The Washington, DC-based chemical industry trade group, last week, noted that the U.S. Chemical Production Regional Index (CPRI) went up 0.6% in October after a 0.6% gain a month ago. The U.S. CPRI, which is measured using a three-month moving average, was created by Moore Economics to track chemical production in seven regions nationwide. It is comparable to the Federal Reserve’s industrial production index for chemicals.

 

The October reading showed a rise in chemical output in all seven regions with Ohio Valley racking up the highest gain of 0.7%. Production in the Gulf Coast, where key building block materials are produced, were up 0.6% on a monthly comparison basis in the reported month. Production rose 0.5% across Midwest and Southeast while Mid-Atlantic, Northeast and West Coast saw a 0.3% gain.

Output from the U.S. manufacturing sector, the largest consumer of chemical products, were essentially flat in October after eight straight months of gains, impacted by a slowdown in motor vehicles production. The sector is a major driver for the chemical industry which touches around 96% of manufactured goods.

 

Within the manufacturing sector, production rose in several chemistry end-user markets including aerospace, construction materials, machinery, computers and electronics, plastic products, rubber products, paper, structural panels and apparel.

 

As seen in September, chemical production was once again mixed across the segments in the reported month. Gains across organic chemicals, other inorganic chemicals, synthetic dyes and pigments, industrial gases, consumer products, pesticides, coatings, adhesives and pharmaceuticals were partly masked by declines in chlor-alkali, plastic resins, fertilizers and synthetic fibers.

 

Overall chemical production moved up 3.5% year over year in October with all regions scoring gains.

 

The U.S. chemical industry, a more than $800 billion enterprise, is heavily linked to the overall condition of the nation’s economy. It has been consistently leading the U.S. economy’s business cycle due to its early position in the supply chain.

 

The chemical industry is finally clawing its way back after going through a rough patch in 2013. With the U.S. economic recovery picking up pace, the first three quarters of 2014 showed encouraging demand trends for chemicals and continued healing across end-use markets such as commercial construction and electronics.

 

While some industry-specific challenges and slow economic recovery in Europe remain roadblocks, the chemical industry is expected to continue to recuperate through the balance of 2014, invigorated by cost benefits from a shale gas bounty in the U.S., strength across agriculture and automotive markets, and significant shale-linked capital investment.

The shale gas boom is expected to drive investment on plants and equipment in the U.S. Chemical makers including majors like BASF (BASFY), Dow Chemical (DOW – Analyst Report), DuPont (DD – Analyst Report), ExxonMobil Chemical – a part of Exxon Mobil (XOM – Analyst Report) – and LyondellBasell Industries (LYB – Analyst Report) are ramping up investment on shale gas-linked projects to take advantage of ample natural gas supplies which is expected to boost capacity and export over the next several years.

The ACC expects national chemical production to move up 2.5% in 2014 and further rise to a 3.5% gain next year, backed by strong agricultural market fundamentals, healthy demand from light vehicles market and a recovery in the housing market.

The ACC envisions strong capital spending in the coming years, stemming from new investments in petrochemicals and derivatives. Strength across agriculture and automotive markets in North America and healthy demand in emerging geographies represent tailwinds for the chemical industry.

via U.S. Chemical Output Nudges Up in October: Recovery Intact – November 26, 2014 – Zacks.com.