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The View from Jamestown”

From the Wall Street Journal:

A new round of negotiations has been scheduled in the dispute between shipping companies and dock workers at ports along the East Coast.

Federal mediators announced the new talks on Thursday. They are scheduled for the week of Sept. 17.The longshoremen’s contract expires at the end of September, and some retailers have already begun re-routing ships in anticipation of a possible strike.

Key issues in the labor dispute include overtime rules and royalty payments to longshoremen based on container weight.The U.S. Maritime Alliance, which represents shippers, says union members are taking advantage of loose overtime rules and driving up shipping costs. The longshoremen’s union says a small minority are being singled out to unfairly characterize the whole membership.


Chemical Industry News

The American Chemistry Council (ACC) US Chemical Production Index rose by 0.2% in October following an upwardly revised 0.3% increase in September. Chemical production rose in all regions except the Mid-Atlantic, Northeast, and West Coast, which declined. Compared to October 2011, total production in all regions was down by 0.2%, following a 0.2% decline in September. Comparing revised figures for the first nine months of 2012 with the same period a year ago, chemical production was up 0.1% nationally with only the Ohio Valley region ahead on a year-to-date basis.

The ACC’s Chemical Activity Barometer (CAB,) for December showed no change over the last month. This followed four consecutive monthly increases in the CAB. The chemicals industry generated about $760 billion last year. The ACC reported that 96% of manufactured goods are touched by chemistry.

The ACC will issue updated Responsible Care product and safety codes next year. Sven Ryall, chair of the Responsible Care board committee stated that they were moving forward rather than waiting for government action.

The president of the European Chemistry Council recently stated that Europe’s Registration, Evaluation, and Restriction of Chemical Substances (REACH) program threatens competitiveness by diverting resources from innovative research.

DuPont has begun to focus more on its food and agriculture products, while reducing emphasis on its paint business. More than a third of the company’s profit last year came from paint ingredient titanium dioxide (TiO2), and demand can be volatile. DuPont has invested heavily in the seed business, encountering stiff competition from Monsanto.

Mexichem will no longer pursue a proposed joint venture with Petroleos Mexicanos (Pemex) that would have expanded capacity at a Pemex vinyl chloride monomer plant.

PPG Industries expects to finalize early in 2013 the merger of its spun-off chemicals business with Georgia Gulf. Georgia Gulf CEO Paul Carrico credited low cost natural gas with giving Gulf Coast choro-vinyls a strong market position.

Starting in 2013, bio-based fuel will help power three Dow Automotive Systems plants in Midland, MI. This is expected to reduce CO2 emissions by as much as 8,000 MT/year.

Louisiana is granting Sasol more than $135 million in incentives to build an ethane cracker in the state. It was reported that the package included tax incentives, property funding, and worker training. The project is expected to generate 1250 permanent jobs.

The long-expected EPA standards for soot emissions were released on December 14. They tighten limits on soot pollution from sources as varied as power plants, diesel engines, and burning wood. The new standards limit annual average soot emissions by the end of the decade. Individual states will be responsible for deciding how to cut emissions of the fine particulates.

The Occupational Safety and Health Administration (OSHA) will use sets of 15 questions in process safety assessments for chemical facilities. The questions will vary and will not be available to the public.

A federal appeals court on December 20 rejected an industry-backed request that it reconsider its decision to uphold Obama administration greenhouse gas regulations.

Sabic will open four technology centers in 2013, one each in India and China and two in Saudi Arabia.

US chlor-alkali operating rate for November was reported at 83% of capacity, up 3% from October.

On December 14 President Obama signed into law a bill to remove Cold War era restrictions on trade with Russia and to establish permanent normal trade relations with Moscow. The action became necessary after Russia joined the World Trade Organization.

In a move towards “insourcing,” a number of companies are moving the manufacture of many products back to the US. GE, Whirlpool and Otis have moved offshore manufacturing back to this country. Even Wham-O is bringing Frisbee making from China to California.

The third quarter GDP growth in Great Britain was recently revised to 0.9% from a previous estimate of 1.0%

Unemployment in the eurozone rose to a new record high of 11.7% in October, up from 10.4% a year earlier. Spain was reported at 26.2%. The lowest unemployment rates were recorded in Austria (4.3%), Luxembourg (5.2%), Germany and the Netherlands (5.4%).

China has announced the completion of the world’s longest high-speed rail line, a stretch of 2,298 kilometers (1,428 miles.) The new line will help China to reach its goal of having 18,000 kilometers of high speed railway by 2015.

China’s export growth in November slowed to a much lower than expected 2.9%, to $179.38 from $177.5 billion. A record monthly level of $186.4 billion was reported in September.

Chinese manufacturing accelerated in November as a non-official index jumped to a 13 month high, indicating that the Chinese economy gained momentum.

A Chinese group, International Lease Finance Corp, purchased 80.1% of American International Group Inc. (AIG)’s plane leasing operation for $4.23 billion. This is the nation’s largest acquisition of a US company.

The Association of American Railroads announced that mixed carload traffic on major US railroads for the week ending 12/15 declined 3.8% year over year. Intermodal volume was up 8% compared with the same week last year.

The American Trucking Association reported that tonnage increased 3.7% in November, after falling 3.7% in October. Year-to-date, tonnage was up 2.8% compared with the same period last year.

Environment, Health, Safety and Sustainability

Shale Oil and Gas-related:

Dow Chemical Co. applied for a federal permit to build the company’s biggest ethylene plant, driven by low cost natural gas. The proposed cracker, to be built in Freeport, TX would have annual capacity of 1.5 million tons/year. Construction is estimated to begin in January 2014 at a total cost of $1.7 billion, with start-up in 2017.

New York Governor Andrew Cuomo’s administration will delay a decision on whether to overturn a four year ban on hydraulic fracturing (fracking.) The Department of Environmental Conservation (DEC) filed a notice for a 90 day extension.

The first barrel of ethane from the Bakken field will go to Nova Chemicals’ Joffre, Alberta facility to be converted to polyurethane next year.

There are huge shale deposits outside North America that global energy companies want to tap. However, developers are running into obstacles as they try to reproduce the US experience. Among the reasons for the slow pace are government ownership of mineral rights, lack of infrastructure, and environmental concerns.

The Economy:

      According to an article in The Washington Post, if President Obama and the Congress fail to reach a deal to avoid hundreds of billions of dollars of tax hikes and federal spending cuts,(the “fiscal cliff”) many Americans will see less money in their paychecks in the first week of the New Year.

      The Congressional Budget Office reported that the federal government incurred a budget deficit of $292 billion for the first two months of the fiscal year 2013, $57 billion more than the number recorded in October and November of last year. The US Treasury Department reported that on December 24, the federal debt was $16.35 trillion. It was $5.7 trillion in 2001.

The US government debt held by foreign entities is a record $5.4 trillion, with China holding $1.15 trillion of it, or slightly more than 21% of all the debt owned by foreign entities. In January 2009 the US government owed $3.07 trillion to foreign entities. China remains the top creditor, although Chinese holdings are down 9% year over year. Japan is a close second.

The Bureau of Economic Analysis reported the advance estimate of third quarter 2012 Gross Domestic Product growth at a revised annual growth rate of 3.1%, that is, from the second quarter to the third quarter. In the second quarter, real GDP increased 1.3%. Current-dollar GDP, the market value of the nation’s output of goods and services, increased at a rate of 5.9% or $225.4 billion in the third quarter to a level of $15,811.0 billion. In the second quarter current dollar GNP increased 2.8% or $107.3 billion.

The Conference Board’s Leading Economic Index declined 0.2% in November to 95.8 (2004=100) following a 0.3% increase in October and a 0.4% increase in September.

The Conference Board Consumer Confidence Index which had increased in October, improved again in November. It stands at 73.7 (1985=100) up from an adjusted 73.1 in October.

The Institute for Supply Management’s Manufacturing Index contracted in November following two months of modest growth. The index for November registered 49.5%, a decrease of 2.2% from October’s reading of 51.7%, indicating contraction in manufacturing for the fourth time in the last six months. A reading below 50% indicates that the manufacturing economy is generally retracting. The Non-Manufacturing Report for November was 54.7%, 0.5% higher than the 54.2% registered in October and still indicating continued growth.

In November, retail and food services sales adjusted for seasonal variations were $412.4 billion, an increase of 0.3% from October and 3.7% above November 2011. Total sales for the September through November 2012 period were up 4.3% from the same period a year ago.

“US holiday retail sales this year were the weakest since 2008. This year’s shopping season was disrupted by bad weather and consumers’ rising uncertainty about the economy.”

According to the trade group International Council of Shopping Centers, retail sales for the fiscal month of December will accelerate to 4.0 to 4.5%, keeping the holiday (November-December) forecast of 3% on track.

Privately owned housing starts in November of 861,000 were 3.0% below          the revised October estimate of 888,000 and were 21.6% above the November 2011 rate of 708,000. Single family housing starts in November were at a rate of 565,000 or 4.1% below the revised October figure of 589,000. New home sales fell 0.3% in October, to a seasonally adjusted annual rate of 368,000, while September’s sales pace was revised from 389,000 to 369,000. This was 17.2% above the October 2011 estimate of 314,000.

The National Association of Realtors reported that sales of existing homes increased 5.9% in November to a seasonally adjusted annual rate of 5.04 million from October’s adjusted level of 4.76 million, and are14.5% higher than the 4.4 million rate of November 2011. The national median existing home prices rose in November, up 10.1% from a year earlier. The association has reported that non-American buyers accounted for $82 billion in home sales last year. More than $7 billion of that is by the Chinese, who are the second largest foreign home buyers after Canadians. The Chinese purchase high-end multimillion dollar homes and pay cash.

New orders for manufactured durable goods in November, up six of the last seven months, increased $1.6 billion or 0.7% to $220.9 billion. This followed a 1.1% October increase.

November unfilled orders for manufactured durable goods, up for five of the last six months, increased $1.1 billion or 0.1% to $984.4 billion. This followed a 0.3% October increase.

Consumer Price Index for all urban consumers declined 0.3% in November on a seasonally adjusted basis, following an increase of 0.1% in October and a 0.6% increase in September. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.8 % before seasonal adjustments. The gasoline index fell 7.4% in November, which more than offset increases in other areas.

The Producer Price Index for finished goods declined 0.8% in November, seasonally adjusted, following a decrease of 0.2% in October, and an increase of 1.1% in September. On an unadjusted basis, prices for finished goods increased 1.5 % for the twelve months ended November 2012, the smallest advance since a 0.5% increase for the twelve month period ended July 2012.

Interest rate: Prime at 3.25%, unchanged since 12/16/08.

Inflation: Inflation rate in November reported at 1.8%. The October rate was 2.2%, September rate was 2.0% and the August rate was 1.7%. Average rate of 2.0% is projected for 2012.

Industrial production increased 1.1% in November, after having declined 0.7% in October, increased 0.2% in September, and fallen 1.4% in August. The gain in November is estimated by the Federal Reserve to have largely resulted as recovery from Hurricane Sandy. The largest estimated storm-related effects included reductions in the output of utilities, chemicals, and food. At 96.6% of its 2007 average, total industrial production in October was 1.7% above its year-earlier level. Capacity utilization for total industry increased 0.7% to 78.4%, a rate1.9% below its 1972 – 2011 average.

Unemployment: The November 2012 rate edged down to 7.7% as reported by the Bureau of Labor Statistics. The number of unemployed persons changed little at 12.0 million. The BLS stated that the long-term unemployed, i.e., jobless for 27 weeks and over was little changed at 4.8 million. Those individuals accounted for 40.1% of the unemployed. North Dakota continued to lead the nation with the lowest state unemployment rate in October of 3.1%, and Nevada was again reported the highest at 10.8%. The Federal Reserve announced on December 20 that it would hold interest rates near zero until it hit the target of 6.5% unemployment.

Trade Deficit: For October 2012 the goods and services deficit increased to $42.2 billion from September figure of $40.3 billion as exports decreased more than imports.

Crude Oil: Present WTI spot price ~$87/bbl and holding, compared to ~$90+/bbl a year earlier.  OPEC has reported that world oil demand is expected to decline in 2013.

Natural Gas:  Henry Hub spot price closed on December 19 at $3.25/MMBTU. January 2013 contract reported up at $3.82/MMBTU. Working natural gas in storage is greater than last year and remains above the five year average

The US dollar trading at 84.7 Japanese yen; $1.32 = euro. The British pound sterling = $1.61. Canadian dollar trading at US$1.008

Current US gold price quoted at $1661.00/ounce compared to the record price of $1920/ounce in September, 2011.

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The Chemical Company
P.O. Box 436
44 Southwest Ave.
Jamestown, RI 02835
Phone: (401) 360-2800

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