Chemical Industry News – April 2013

 

Chemical Industry News

The American Chemistry Council (ACC) US Chemical Production Index declined by 0.1% in March 2013 following a revised 0.4 % increase in February. Compared to March 2012, chemical production rose in all regions by 0.9% following February’s 0.8% year to year increase. Comparing the first three months of 2013 to those of 2012, total chemical production rose 0.8% nationally.

The ACC’s Chemical Activity Barometer (CAB) slipped by 0.1% in March, following a revised 0.4% gain in February. The year over year monthly moving average showed an increase of 0.9% compared with March 2012.

The recent explosion of a fertilizer plant in Texas has caused legislators to focus on the Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards program (CFATS) and its implementation. Senator Frank Lautenberg, D-NJ has called for new legislation on chemical plant safety as a result of this incident.

The Environmental Protection Agency (EPA) chemicals office will use the risk assessments it is developing for an initial group of fourteen chemicals to evaluate, reduce, and manage risks in these and similar compounds that may already be in commerce, an EPA senior chemicals officer said on April 18.

The EPA has significantly reduced its estimate of the amount of methane emissions generated by hydraulic fracturing (fracking) operations. The agency now says that the tighter pollution controls put in place by the oil/gas industry resulted in an annual decrease of 41.6 million MT of methane emissions from1990 through 2010, or more than 850 million MT in total. During the same period production grew by close to 40%.

According to a recent EPA analysis, emissions of greenhouse gases (GHG) decreased slightly in 2011, dropping 1.6% year to year. Since 2005, levels have gone down nearly 7%. The agency cited improvements in automobile fuel efficiency, reduction of coal consumption and a relatively mild winter for this decline.

The EPA’s Office of Chemical Safety and Pollution Prevention would get $686.2 million in fiscal 2014 under the White House budget proposal.

The ACC has expressed concern about how budget cuts could affect the EPA’s permitting activities for industrial facilities, with possible delays in capital projects as a result.

In the most recent activity around BPA, on April 19 a judge in California ordered on April 19 that the chemical be removed from the state’s list of reproductive toxicants.

Methanex plans to move a second plant from Chile to Geismar, Louisiana. The two facilities will hire a total of 165 employees. Kinder Morgan Energy Partners will invest $58 million to expand its methanol storage capacity in Geismar, LA near the Methanex site.

Cytec has completed the sale of its coating resins business to Advent International, a private equity company. The price was reported as $1.13 billion.

DuPont reported that profit more than doubled in the first quarter from the year-ago period as the company shifts its focus from paint pigments to agriculture.

BASF leads other European industrial companies in US investment, driven largely by favorable natural gas prices. Since 2009, BASF has invested more than $5.7 billion in US facilities.

LyondellBasell Industries could add a polyethylene (PE) line with approximately one billion pounds annual capacity, and a PE debottlenecking project in North America. These projects are in addition to other ethylene capacity expansions in Texas and are based on abundant supply of natural gas and natural gas liquids.

US chlor-alkali operating rate for February 2013 was reported at 82% of capacity, compared with 85% a year earlier. January operating rate was 78% according to the Chlorine Institute.

Chinese first quarter GDP figures showed an increase of 7.7% year to year. This was lower than the target of 8%.

Unemployment across the seventeen European Union countries that use the euro hit a new record high of 12.0% for the first two months of 2013.

According to figures published on April 25, the number of unemployed workers in Spain and France has reached all-time highs. Spain’s unemployment rate was 27.16%. In France’s unemployment rate stands at 10.6%, with youth unemployment hitting 25%. German Finance Minister Schaeuble said he will discuss a “bilateral investment program” with his Spanish counterpart, which is hoped that will become a model for the rest of Europe. Germany’s unemployment rate was 6.9% in March.

EU exports of chemical products increased by 8% year-on-year in 2012 according to the EU statistics body Eurostat.

Russian statistics agency Rosstat said that Russia’s overall production of chemical and petrochemical products was up year on year in January and February. Plastics and synthetic rubber outputs were up significantly.

Russia’s SIBUR polypropylene plant is due to come on stream in the near future, which could double the company’s basic polymers capacity.

Saudi Acrylic Polymers Co. (SAPCO) is on schedule for a September start-up of its 80,000 MT/year superabsorbent polymers plant in Al-Jubail, Saudi Arabia. This will be the first SAP plant in the Middle East.

Trinidad and Tobago and a group led by Mitsubishi Gas Chemical signed an agreement to build a methanol to petrochemical project in a new industrial area in the country. The cost is estimated at $850 million.

Carload rail volume was down 2% annually as of the week ending April 20 on major US railroads. Intermodal volume was up 0.6% compared with the same week last year. Petroleum products shipments were up 40%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 0.9% in March after decreasing an adjusted 0.7% in February. Tonnage has increased in four of the past five months.

In a deal expected to end long delay for fliers caused by sequestration, Congress speedily approved a bill to revoke the furlough of air traffic controllers.

Shale oil and Gas-related

 

Pennsylvania State University is creating the Institute for Natural Gas Research in order to study natural gas developments in the Marcellus Shale. The project involves more than seventy faculty members.

Phillips 66 finalized agreements with energy logistics companies to increase supplies of lower cost US and Canadian crude oil, including Bakken shale product, to its US refineries.

The US east coast has seen a rejuvenation of refinery activities due to shale-based crude oil. Oil companies have begun to bring domestic shale east by rail then ship it down the coast. The Carlyle Group is building a high-speed rail facility as well.

The House Science, Space and Technology Committee was to have held a hearing on April 25 on the federal government’s studies of fracking. Officials from all concerned agencies were expected to testify.

Interior Secretary Sally Jewell was recently quoted saying that based on her experience fracking is a safe drilling procedure.

News that the UK government is to promote shale gas exploration is expected to be greeted positively by the European chemical industry, which is struggling with a non-competitive feedstock market.

Royal Dutch Shell and Williams Partners are forming a joint venture to supply natural gas and liquids to petrochemical facilities in northwest Pennsylvania, including a possible ethane cracker. The company will be called Three Rivers Midstream and will be operated by Williams, with Shell having the right to increase its investment.

David Spence of the University of Texas recently wrote that state-based regulation of fracking is more effective than federal oversight. He stated that the benefits and costs of fracking fall mostly on local and state communities.

China reportedly has about twice the amount of shale gas reserves as does the US and Chinese firms are eager to learn shale technology. Analysts expect a Chinese shale gas boom possibly as soon as three years from now.

The Economy

The Congressional Budget Office reported that the federal government incurred a budget deficit of $601 billion for the first half of fiscal year 2013 (that is, October 2012 through March 2013), $178 billion less than the shortfall recorded for the same period last year. The deficit in March 2013 amounted to $107 billion. The US Treasury Department reported that on April 27, 2013 the federal debt was $16.77 trillion. The national debt has increased an average of $3.81 billion per day since September 2007.

March personal income increased by $30.9 billion, or 0.2% compared to February. Consumer spending rose 0.2% in March. In February personal income increased $151.2 billion or 1.1% and spending increased $81.6 billion, or 0.7%.

It’s been reported in The Wall Street Journal that Congressional leaders were in confidential talks to exempt themselves and their staffs from Obamacare.

The US government debt held by foreign entities is in excess of $5.5 trillion, with China holding $1.23 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 estimate of the first quarter 2013 Gross Domestic Product showed an increase of 2.5%, 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 declined 0.1% in March to 94.7 (2002=100) following a 0.5% increase in February and an increase of 0.5% in January.

The Conference Board Consumer Confidence Index which had improved in February, declined in March. It stands at 59.7 (1985=100) down from an adjusted 68.0 in February.

The Institute for Supply Management’s Manufacturing Index decreased 2.9% to 51.3% in March, showing expansion for the fourth consecutive month but at a slower rate. A reading above 50% indicates that the manufacturing economy is generally expanding. The Non-Manufacturing Report for March was 54.4%, or 1.6% lower than the 56% reported for February, but reflecting growth for 44 consecutive months.

In March, retail and food services sales adjusted for seasonal variations were $418.3 billion, a decrease of 0.4% from February and 2.8% above March 2012. January through March 2013 sales were up 3.7% from the same period a year ago.

Privately owned housing starts in March of 1,036,000 were 7.0% above the revised February estimate of 968,000 and were 46.7% above the March 2012 rate of 706,000. Single family housing starts in March were at a rate of 619,000 or 4.8% below the revised February figure of 650,000. New single home sales were at a seasonally adjusted annual rate of 417,000. This was 1.5% above the revised February rate of 411,000 and 18.5% above the March 2012 estimate of 352,000.

The National Association of Realtors reported that sales of existing homes edged down 0.6% in March to a seasonally adjusted annual rate of 4.92 million units. Sales of existing homes in March were 10.3% higher than the same period a year earlier.

New orders for manufactured durable goods in March decreased $13.1 billion or 5.7% to $216.3 billion. This decrease, down two out of the last three months, followed a 4.3% increase in February.

March unfilled orders for manufactured durable goods decreased $6.4 billion or 0.6% to $991.2 billion. This followed an increase of 0.7% in February.

Consumer Price Index for all urban consumers decreased 0.2 % in March on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.5 % before seasonal adjustments. Food index was unchanged in March, and the gasoline index decreased 4.4% in March.

The Producer Price Index for finished goods decreased 0.6 % in March, seasonally adjusted, following increases of 0.7% in February and 0.2% in February. Unadjusted basis prices for finished goods increased 1.1 % for the twelve months ended in March 2013, the smallest twelve month increase since a 0.5% rise in July 2012.

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

Inflation: Inflation rate in March reported at 1.5%. The February rate was 2.0%, January rate was 1.6%, and the December rate was 1.7%. The average rate of 2.1% was reported for 2012. It is expected to rise slightly in 2013 to approximately 2.3%.

Industrial production 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%m the largest gain since the first quarter of 2012. At 99.5% of its 2007 average, total industrial production in March was 3.5% above its year-earlier level. Capacity utilization rate for total industry increased to 78.5%, a rate 1.2% above the level of a year earlier, but 1.7% below its 1972 – 2012 average.

Unemployment: The March 2013 rate was little changed at 7.6%, and has shown little movement since September 2012. The number of unemployed persons was reported at 11.7 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 4.6 million in March. Those individuals accounted for 39.6% of the unemployed. North Dakota continued to lead the nation with the lowest state unemployment rate in March of 3.3%; Nevada was reported highest at 9.7%, Illinois, Mississippi, and California close behind.

The goods and services deficit decreased to $43.0 billion in February, from $44.5 billion in January as exports increased more than imports. President Obama recently told his advisory council on exports that the US is on target toward his goal of doubling US exports before 2015. He said that the best way to increase exports is to move ahead with free trade agreements in Asia and Europe.

Crude Oil: Present WTI spot price ~$93/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 April 23 at $4.25/MMBTU. May 2013 contract reported at $4.40/MMBTU. Working natural gas in storage is lower than last year and the five year average.

The US dollar trading at 98.0 Japanese yen; $1.30 = euro. The British pound sterling = $1.54. The Canadian dollar trading at US$1.01.

Current US gold price quoted at $1463.60/ounce, down from $1597.00/ounce approximately one month earlier. The record price of $1920/ounce was recorded in September, 2011.

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