Chemical Industry News June

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The American Chemistry Council (ACC) US Chemical Production Index declined by 0.1% in April 2013 following a downwardly revised 0.5 % increase in March. Compared to April 2012, chemical production rose in all regions by 0.5% following March’s 0.3% year to year increase. Comparing the first four months of 2013 to those of 2012, total chemical production rose 0.6% nationally.

The ACC’s Chemical Activity Barometer (CAB) rose by 0.1% in May, following a revised 0.4% decrease in April. The year over year monthly moving average showed an increase of 3.1% compared with May 2012.

Senator Frank Lautenberg, D-NJ, a long-term proponent of reforms for the Toxic Substances Control Act (TSCA) passed away on June 3. He was credited for his leadership in establishing bipartisan approach to TSCA reform.

The EPA recently proposed two new rules regarding the use of formaldehyde in composite wood products. A response from the Formaldehyde Panel of the ACC noted that while regulatory goals are consistent with safe use, formaldehyde is a necessary ingredient in thousands of essential materials.

President Obama plans to reveal a package of separate actions in July focused on curbing US greenhouse gas (GHG) emissions. This appears to be an alternative to the proposed Keystone XL project, a $5.3 billion pipeline that would carry tar-sands oil from Canada to US refineries. It’s anticipated that the package will include final rules from the EPA limiting GHG emissions from new power plants. The State Department continues to assess the impacts of the pipeline; a final review is expected in weeks.

The ACC presented its Responsible Care Company of the Year award to Eastman Chemical Company, Solvay America, Inc., and Niacet Corporation in recognition of superior environmental, health, safety, and security performance.

Eastman Chemical is investing $1.6 billion in expansion of its Kingsport, TN facility which is expected to create an additional 300 jobs.

Linde North America plans a $200 million expansion at its La Porte, TX operation with start-up expected in the first quarter of 2015.

NOVA Chemicals is building a one billion pound per year linear low density polyethylene plant in Joffre, Alberta Canada in order to take advantage of low cost natural gas feed stock. Cost is estimated at $1 billion with start-up in late 2015.

BASF is considering investing $13 billion in the Asia-Pacific region, to include increased R&D activities.

Chevron Phillips Chemical is reported set to increase its ethylene manufacturing capacity at its Sweeny, TX facility. Annual output increase is estimated at 200 million pounds. CPChem is also investing in a $5 billion Gulf Coast project.

Kuwait’s state-owned Petrochemical Industries Co. (PIC) announced that it had reached a final settlement of $2.2 billion with Dow Chemical Co. as compensation for PIC pulling out of a petrochemicals joint venture. Dow said on its website that payment had been received.

Fluor Corp. has been awarded contracts for the engineering and construction of several new Dow Chemical Company facilities in Freeport, TX. This is part of Dow’s planned $4.0 billion Freeport expansion.
Total is considering the construction of an ethane cracker in Texas that would be connected with an existing cracker at Port Arthur co-owned with BASF.

Mitsui and Co. announced on May 15 that it will establish a joint venture with Celanese Corp. to manufacture methanol at the Celanese plant in Clear Lake, TX. Plant capacity is estimated at 1.3 million tons/year. Mitsui’s share of the production will be sold mainly in the US, while Celanese will use the material in the production of methanol derivatives.

Methanex CEO John Floren recently said that his company expects methanol demand to increase at an annual rate of 7.6% through 2016 or four million tons a year and that his company’s goal is to add 3 million tons of new capacity.

US chlor-alkali operating rate for April 2013 was reported at 87% of capacity, a drop of 4% from a month earlier. However, European operating rates dropped to 67.8% during the same period.

On May 10, ExxonMobil stated that ethylene production at its new one million MT/year cracker in Singapore was expected in a few weeks.

Chinese industrial output growth for May was 9.2% above May 2012. From 1990 to 2013 China’s industrial production growth averaged 13.3%.

Doubts are beginning to grow about whether China can pass the US to become the world’s largest economy in this century. A number of large ambitious projects have been delayed and growth appears to be slowing.

European bisphenol A (BPA) makers and users have shown concern over legislation that could restrict the use of BPA in European food packaging. The French government has banned BPA from food contact starting in 2015. There is concern that other countries will follow suit. The situation is similar to the ongoing issue in the US.

Unemployment across the seventeen European Union countries that use the euro hit a high of 12.2% in April, up from 12.1% in March. Among the member states, the lowest rates were Austria at 4.9%, Germany at 5.4% and Luxembourg at 5.6%. The highest were Greece, Spain, and Portugal at 27%, 26.8%, and 17.8 respectively.

For the first quarter, the eurozone economy shrank for a record sixth calendar quarter. This is the longest recession since records began in 1995.

The EU plans to impose punitive duties on imports of biodiesel; 7 – 11% for fuel from Argentina and 0 – 10% from Indonesia. The EU says that these countries are selling the product at unfairly low prices.

Russia’s SIBUR is expected to make a final decision whether to proceed with its planned 1.5 million MT/year ethylene cracker by the end of this year.

The Dow Chemical Company and Union Pacific said on June 7 that they have published a new report on a cooperative agreement that began in 2007 to improve rail safety and security. The project is a public-private partnership involving Dow, Union Pacific, Union Tank Car Co., the Federal Railroad Administration, Transport Canada, and the US Transportation Security Administration. The focus was to develop the next generation railroad tank car; there are new cars coming into service now.

Carload rail volume was up 2% annually in May on major US railroads. Intermodal volume was up 3.0% compared with the same period last year. Petroleum products shipments were up 41.8%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage decreased 0.2% in April after increasing an adjusted 0.9% in March.

Shale oil and gas-related:

According to a report from the Energy Information Administration, technically recoverable oil and natural gas reserves in the US have increased by 35% compared with figures from 2011.

Affordable and abundant US natural gas supplies resulted in 97 announced chemicals and plastics projects totaling $71.7 billion in potential new investment, according to a recent ACC report. By 2020 these projects could lead to the creation of 46,000 chemical industry jobs, plus 264,000 jobs in supplier industries, and another 226,000 jobs in communities where workers spend their wages.

As a result of the shale gas boom, North Dakota showed a GDP increase of 13.4% in 2012.
The CEO of America’s Natural Gas Alliance, Marty Durbin, said that the continued expansion of natural gas in the market doesn’t require a major new policy on climate change as reductions in emissions have come about without regulation.

According to a study by the Empire Center for New York State Policy, if New York emulated Pennsylvania by using hydraulic fracturing (fracking) to gain access to vast amounts of shale gas, it would add $8 billion in income for upstate New Yorkers.

The public comment period for the Interior Department’s proposed fracking rules issued on May 16 will be extended for sixty days, it was announced on June 6. A spokesman from the American Petroleum Institute said that such an extension will allow for study of the new rules and to compare them with existing individual state policies. There are industry concerns that the new rule could slow production as well as damage state and local economies.

The Economy

The Congressional Budget Office reported that the federal government incurred a budget deficit of $627 billion from October 2012 through May 2013 (the first eight months of fiscal 2013), almost $220 billion less than the shortfall recorded for the same period last year. The CBO’s updated estimates indicate a fiscal year deficit of $642 billion. The US Treasury Department reported that on June 13, 2013 the federal debt was $16.74 trillion. The national debt has increased an average of $3.81 billion per day since September 2007.
April personal income decreased by $5.6 billion, or less than 0.1% compared to March. Consumer spending decreased 0.2% in April. In March, personal income increased $36.2 billion or 0.3%.

The US government debt held by foreign entities is in excess of $5.7 trillion, with China holding $1.25 trillion of it, or approximately 20% 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. Japan is a close second, holding $1.1 billion.

The Bureau of Economic Analysis revised estimate of the first quarter 2013 Gross Domestic Product showed an increase of 2.4%, that is from the fourth quarter of 2012 to the first quarter of 2013. Revised fourth quarter real GDP increased 0.4%. In the third quarter, real GDP increased 3.1%. 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 3.7% or $146.1 billion in the first quarter of 2013 to a level of $16,010 billion. In the fourth quarter current dollar GDP increased 1.3% or $53.1 billion.

The Conference Board’s Leading Economic Index increased 0.6% in April to 95.0 (2002=100) following a 0.2% increase in March and an increase of 0.4% in February.

The Conference Board Consumer Confidence Index which had improved in April increased again in May. It stands at 76.2 (1985=100) up from an adjusted 69.0 in April.

The Institute for Supply Management’s May Manufacturing Index registered 49.0%, a decrease of 1.7% from April’s number of 50.7%, indicating contraction in manufacturing for the first time since November 2012 and only the second time since July 2009. The Non-Manufacturing Report for May was 53.7%, or 0.6% higher than the 53.1% reported for April, reflecting growth for 46 consecutive months.

In May, retail and food services sales adjusted for seasonal variations were $421.1 billion, an increase of 0.6% from April and 4.3% above May 2012. March through May 2013 sales were up 3.7% from the same period a year ago.

Privately owned housing starts in April of 853,000 were 16.5% below the revised March estimate of 1,021,000 but were 13.1% above the April 2012 rate of 754,000. Single family housing starts in April were at a rate of 610,000 or 2.1% below the revised March figure of 623,000. New single home sales in April were at a seasonally adjusted annual rate of 454,000. This was 2.3% above the revised March rate of 444,000 and 29.0% above the April 2012 estimate of 352,000.

The National Association of Realtors reported that sales of existing homes rose in April to the highest level in close to 3½ years. Existing home sales increased 0.6% to a seasonally adjusted annual rate of 4.97 million units. Realty Trac reported that foreclosure sales fell 22% in the first quarter compared to the same period a year ago.

Census Bureau report stated that the share of Americans who own their homes was 65% in the first quarter, down from 65.4% a year earlier and the lowest level since the third quarter of 1995. Investors are buying single family homes and renting them out to capitalize on demand from families unable to qualify for mortgages.

New orders for manufactured durable goods in April increased $7.2 billion or 3.3% to $222.6 billion. This increase, up two out of the last three months, followed a 5.9% decrease in March.
April unfilled orders for manufactured durable goods increased $2.7 billion or 0.3 % to $996.2 billion. This followed a decrease of 0.5% in March.

Consumer Price Index for all urban consumers decreased 0.4 % in April on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.1 % before seasonal adjustments. Food index, unchanged in March, rose 0.2% in April. A sharp decrease in the gasoline index was the primary cause for the decrease in the all items index.

The Producer Price Index for all finished goods increased 0.5 % in May, seasonally adjusted, following decreases of 0.7% in April and 0.6% in March. On an unadjusted basis prices for finished goods increased 1.7 % for the twelve months ended in May 2013.

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

Inflation: Inflation rate in April reported at 1.1%. The March rate was 1.5%, February rate was 2.0%, and January rate was 1.6%. The average rate of 2.1% was reported for 2012. It is expected to rise slightly in 2013 to approximately 2.3%.

Industrial production was unchanged in May, having decreased 0.4% in April and increased 0.4% in March after having increased 1.1% in February. For the first quarter as a whole, output increased at an annual rate of 5.0%, the largest gain since the first quarter of 2012. At 98.7% of its 2007 average, total industrial production in May was 1.6% above its year-earlier level. Capacity utilization rate for total industry decreased to 77.6%, a rate 0.2% below the level of a year earlier, and 2.6% below its 1972 – 2012 average.

Unemployment: The May 2013 rate was little changed at 7.6%, and has shown little movement since September 2012. The number of unemployed persons was reported at 11.8 million, basically unchanged. The Bureau of Labor Statistics stated that the long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.4 million in May. Those individuals accounted for 37.3% of the unemployed. Over the past twelve months, the number of long-term unemployed has declined by one million. North Dakota continued to lead the nation with the lowest state unemployment rate in March of 3.3%; Nevada was reported highest at 9.6%, Illinois, Mississippi, and California close behind.

The goods and services deficit increased to $40.3 billion in April, from a revised March number of $37.1 billion January as imports increased more than exports.

Crude Oil: Present WTI spot price ~$98/bbl, compared to ~$100+/bbl a year earlier. OPEC outlook continues to show a slight reduction in demand in 2013.

Natural Gas: Henry Hub spot price closed on June 12 at $3.74/MMBTU. July 2013 contract reported at $3.77/MMBTU. Working natural gas in storage is lower than last year and the five year average.
The US dollar trading at 94.1 Japanese yen; $1.32 = euro. The British pound sterling = $1.57. The Canadian dollar trading at US$1.01.

Current US gold price: Quoted at $1381.40/ounce, down from $1463.60/ounce approximately one month earlier. The record price of $1920/ounce was recorded in September, 2011.

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