U.S. Chemical Production Rises for 8th Straight Month – September 23, 2014 – Zacks.com

U.S. chemical output rose on a monthly basis in August with gains witnessed across all regions barring Gulf Coast that saw flat production – according to the latest monthly report from the American Chemistry Council (ACC). This marked the eighth consecutive monthly production gain.

 

The Washington, DC-based chemical industry trade group recently said that the U.S. Chemical Production Regional Index (CPRI) gained 0.5% in August after a 0.4% rise a month ago, manifesting that the industry remains on the road to recovery in the second half.

 

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 August reading showed a rise in chemical output in six of the seven regions with Northeast scoring the highest gain of 0.8%. Production in the Gulf Coast, where key building block materials are produced, was flat on a monthly comparison basis in the reported month. Production rose 0.5% across Midwest and Ohio Valley while both Mid-Atlantic and West Coast saw a 0.6% gain. Southeast recorded a 0.4% rise.

 

Output from the U.S. manufacturing sector, the largest consumer of chemical products, moved up 0.5% in August on a three-month moving average basis after a 0.6% rise a month ago. The sector is a major driver for the chemical industry which touches around 96% of manufactured goods.

 

Within the manufacturing sector, gains were witnessed in several chemistry end-user markets including motor vehicles, aerospace, appliances, construction materials, machinery, fabricated metal products, computers and electronics, plastic and rubber products, structural panels and textiles.

 

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

 

Overall chemical production went up 1.8% year over year in August with gains recorded across all regions.

 

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.

 

With the U.S. economy getting its groove back, the first half of 2014 showed encouraging demand trends for chemicals and continued recovery across end-use markets such as commercial construction and electronics after being in a rut for the most part of 2013.

 

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 boom in the U.S., strength across agriculture and automotive markets, and significant shale-linked capital investment.

 

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 ratcheting 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, aided by strong agricultural market fundamentals, healthy demand from light vehicles market and a recovery in the housing market.

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