The American Chemistry Council (ACC) US Chemical Production Index was unchanged in June following an increase of 0.1% in May. Compared to June 2012, chemical production rose in all regions by 1.1% following May’s revised 0.9% year to year increase. Comparing the first six months of 2013 to those of 2012, total chemical production rose 0.8 % nationally.
The ACC’s Chemical Activity Barometer (CAB) rose by 0.2% in June, following a revised 0.1% increase in May. The year over year monthly moving average showed an increase of 3.9% over a year ago.

The ACC showed support for President Obama’s recent executive order to review US chemical safety regulations. It seeks to work with the EPA, Department of Homeland Security, Department of Labor, and OSHA in order to formulate best practices.
The US chemical industry is in a period of resurgence due mainly to inexpensive natural gas. Prices have fallen by three-fourths since 2005 and a number of companies are either expanding or moving to the US.

In her first public speech as new head of the EPA, Gina McCarthy urged companies to “embrace the opportunity of climate change” as reason to invest. The EPA has a deadline of September for issuing a new proposal for the first-ever rules limiting carbon dioxide emissions from new power plants.

According to a survey by Chemical and Engineering News the chemical industry slowed worldwide after a strong showing in 2011. The top fifty global chemical companies had 2012 sales of $961.8 billion, a drop of 1.8% from 2011. The sales growth for those same companies from 2010 to 2011 was 13.7%.

The US Chemical Safety Board, an independent investigative agency, said that it will consider identifying OSHA inaction regarding seven recommended moves as unacceptable. They want to see action to make changes to make refineries, chemical factories, and sugar plants safer. The Board investigates industrial accidents and issues recommendations to regulatory agencies such as the EPA and OSHA, as well as to companies, states and local authorities.

The Food and Drug Administration will no longer permit the use of bisphenol A (BPA) in packaging for baby formula. Its use was banned from baby bottles and cups in 2012. The FDA said that it still considers BPA to be safe for packaging, but took the action because manufacturers have already stopped its use in baby formula packaging. Industry people said that the move had more to do with market forces than chemical safety. BPA had been used as an ingredient in the epoxy lining material used in the metal cans used to package baby formula.

Dow Chemical Co., the largest US chemical manufacturer by sales, is considering selling its paint, construction, and chlorine businesses as they are susceptible to commodity price swings. Both Dow and DuPont are moving aggressively in the agricultural sector, where sales have been booming.

DuPont said on July 23 that it planned to exit its titanium dioxide paint pigments business in order to focus on its agricultural unit.
US chlor-alkali operating rates dropped in June, but are expected to climb back shortly. One major US manufacturer reported operating rate of 84% for the month.

Ground was recently broken for the construction of a new ammonia plant in Louisiana, the first new such facility in 25 years. The project consists of construction of Dyno Nobel’s $850 million ammonia plant with Cornerstone Chemical’s $175 million investment in upgrades at its Fortier manufacturing complex. Ammonia capacity has been estimated at 800,000 MT/year. Incitec Pivot, based in Australia, is the parent company of Dyno Nobel. Incitec manufactures a range of industrial explosives and fertilizers while Dyno Nobel manufactures industrial explosives and blasting services. Cornerstone makes key intermediate chemicals.

BASF plans additional investment for the production of fiber and plastics intermediates at its facilities in Geismar, LA and Caojing, China. No specifics were available but the investment was estimated to be in excess of 10 million euros.

Renewable chemicals company Myriant is in discussions with various companies to build its first commercial scale bio-based butanediol plant in Asia. Volume is estimated at 65,000 MT/year.

Chinese exports fell 3.1% year-on-year in June, down from a 1% growth factor in May.
China’s consumer price index increased by 2.7% in June, year on year.

Chinese Gross Domestic Product growth slowed to 7.5% in the second quarter, down from 7.7%. An average annual rate of 7.5% would be the lowest annual growth for China in twenty years.

Germany’s business confidence continued to rise in June. Munich-based Ifo, an economic research group, reported that its monthly business climate for Germany rose in April, May and June.

Germany plans to stop subsidizing solar energy by 2018 at the latest. The country has seen a wave of solar company insolvencies.

Unemployment across the seventeen European Union countries that use the euro fell in June, 24,000 fewer than in May, but remained at 12.1%. Among the member states, the lowest rates were Austria at 4.6% and Germany at 5.4%.
Inflation in the Euro zone remained at 1.6% year to year in July.

After the deadly derailment in Canada in July, the rail industry is dealing with the issue of tank car safety. Tougher standards were adopted several years ago and new tank cars were built to the standard, but existing ones were not retrofitted. It’s estimated that approximately 23% of the 310,000 US tankers meet the new rules. Last year, tank car rail shipments of crude oil were 233,811 carloads, a jump from 9,500 in 2008.

The Federal Railroad Administration issued rules on August 2 meant to prevent the kind of runaway fuel train accident that happened in Canada. Under the rules, rail cars carrying hazardous materials like combustibles may not be left unattended on main tracks or adjacent tracks unless specifically authorized.

Carload rail volume was down 0.3% annually in July on major US railroads. Intermodal volume was up 2.8%. Petroleum products shipments were up 28.0%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 0.1% in June after increasing 2.1% in May. It fell an adjusted 0.2% in April.

The Energy Information Administration said that world energy consumption will rise 56% in the next three decades, driven by growth in developing nations such as China and India. The report also predicted that fossil fuels will supply almost 80% of world energy through 2040; natural gas will grow 64%; renewable and nuclear will increase by 2.5% per year; coal consumption will rise 1.3% per year.

 

Shale Oil and Gas-related

In a preliminary study, Department of Energy researchers reported that there was no evidence that hydraulic fracturing chemicals contaminate water sources at a drilling site in Pennsylvania.

A Republican-sponsored House bill seeks to block the Department of the Interior’s proposed rules covering fracking on federal land. It proposes that the Department would be barred from imposing new rules in states that already have policies for the drilling process. US Interior Secretary Jewell defended the proposed federal regulations in testimony to the House Natural Resources Committee.

Valero Energy Corp. plans to build a $700 million methanol plant at its St. Charles, LA refinery based on low cost natural gas. This shift to petrochemicals represents a major expansion for Valero.

JBI, Inc., of Niagara Falls, NY announced an agreement with Crayola to take in expired markers from schools and overruns from Crayola and convert them to fuel. Crayola will pay the shipping for schools to send any brand of used markers to JBI. Crayola is reported to make 500 million markers per year at its Easton, PA facility.

Chesapeake Energy agreed to sell shale oil and gas assets in Texas and Louisiana to EXCO Resources for $1 billion. The deal is expected to finalize in the third quarter of 2013.

As shale oil production increases in the US, more natural gas liquids will be produced as well, creating the opportunity for the US to become a major exporter of NGL’s.

The Economy

The Congressional Budget Office reported that the federal government incurred a budget deficit of $512 billion from October 2012 through June 2013 (the first nine months of fiscal 2013), almost $400 billion less than the shortfall recorded for the same period last year. The US Treasury Department reported that on July 2, 2013 the federal debt was $16.75 trillion. The national debt has increased an average of $2.20 billion per day since September 30, 2012.

Personal income in June increased by $45.4 billion, or 0.3% compared to May. In May personal income increased by 0.4%, in April, personal income decreased by $5.6 billion or less than 0.1%.

The US government debt held by foreign entities is in excess of $5.7 trillion, with China holding $1.31 trillion of it, a May year to year increase of 13.1%. 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 trillion.

The Bureau of Economic Analysis advance estimate of the second quarter 2013 Gross Domestic Product showed an increase at an annual rate of 1.7%, that is, from the first quarter to the second quarter. Revised first quarter data showed an increase of 1.1%, down from an earlier estimate of 1.8%, which was down from early estimate of 2.4%. 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 2.4% or $98.1 billion to a level of $16,633 billion. In the first quarter current dollar GDP increased 2.8% or $115.0 billion.

The Conference Board’s Leading Economic Index was unchanged in June, remaining at 95.3 (2004=100), following a 0.2% increase in May and a 0.8% increase in April.

The Conference Board Consumer Confidence Index which had improved in June decreased slightly in July. It stands at 80.3 (1985=100) down from an adjusted 82.1 in June.

The Institute for Supply Management’s July Manufacturing Index registered 55.4%, an increase of 4.5% from June’s revised number of 50.9%, indicating expansion in manufacturing for the second consecutive month. The Non-Manufacturing Report for July was 56.0%, or 3.8% higher than the 52.2% reported for June, indicating continued growth.

In June, retail and food services sales adjusted for seasonal variations were $422.8 billion, an increase of 0.4% from May and 5.7% above June 2012. April through June 2013 sales were up 4.6% from the same period a year ago.

Privately owned housing starts in June of 836,000 were 9.9% below the revised May estimate of 928,000 and were 10.4% above the June 2012 rate of 757,000. Single family housing starts in June were at a rate of 591,000 or 0.8% below the revised May figure of 596,000. New single home sales in June were at a seasonally adjusted annual rate of 497,000. This was 8.3% above the revised May rate of 459,000 and 38.1% above the June 2012 estimate of 360,000.

The National Association of Realtors reported that sales of existing homes declined in June, but stayed well above year-earlier levels. Existing home sales decreased 1.2% to a seasonally adjusted annual rate of 5.08 million units, an increase of 15.2% from the same period a year ago. Distressed homes, foreclosures and short sales, accounted for 15% of May sales, down from May’s 18%, and are the lowest number since monthly tracking began in 2008. They were 26% in June 2012.
New orders for manufactured durable goods in June increased $9.9 billion or 4.2% to $244.5 billion. This increase, up four out of the last five months, followed a 5.2% increase in May.

June unfilled orders for manufactured durable goods increased $21.4 billion or 2.1% to $1029.4 billion. This followed an increase of 1.1% in May.

Consumer Price Index for all urban consumers increased 0.5% in June on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.8% before seasonal adjustments, higher than the 1.4% reported for May. Food index, which declined in May, increased 0.2% in June. The gasoline index rose sharply in June and accounted for about two thirds of the all items increase.

The Producer Price Index for all finished goods increased 0.8 % in June, seasonally adjusted, following an increase of 0.5% in May and a decrease of 0.7% in April. On an unadjusted basis prices for finished goods increased 2.5 % for the twelve months ended in June 2013, the largest twelve month increase since March, 2012.
Interest rate: Prime at 3.25%, unchanged since 12/16/08.

Inflation: Inflation rate in June reported at 1.8%. The May rate was 1.4%, April rate was 1.1%, 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 2.0%.

Industrial production increased 0.3% in June, having been unchanged in May. For the second quarter as whole, industrial production increased 0.6%. 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 99.1% of its 2007 average, total industrial production in June was 2.0% above its year-earlier level. Capacity utilization rate for total industry increased 0.1% to 77.8%, a rate 0.1% above the level of a year earlier, but 2.4% below its 1972 – 2012 average.

Unemployment: The July 2013 rate edged down to at 7.4%, and has shown little movement since February. The number of unemployed persons was reported at 11.5 million. Employers added 162,000 jobs in July, but part-time work accounted for more than 65% of them. The Bureau of Labor Statistics stated that the long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.2 million in July. Those individuals accounted for 37.0% of the unemployed. North Dakota, with its booming energy industry, continued to lead the nation with the lowest state unemployment rate in June of 3.1%; Nevada was highest at 9.6 % with Illinois, Mississippi, and Rhode Island not far behind. A new analysis by the Congressional Budget Office says that if Congress allows the next round of across the board sequester spending cuts to take place, as many as 1.6 million jobs could be lost.

June exports of $191.2 billion and imports of $225.4 resulted in a goods and services deficit for the month of $34.2 billion, down from a revised number for May of $44.1 billion.

Crude Oil: WTI trading at $104/bbl, up from ~$90 a year earlier.

Natural Gas: Henry Hub spot price closed on July 31 at $3.46/MMBTU. September 2013 contract reported at $3.69/MMBTU.

Working natural gas in storage increased at the end of July, but is still lower than last year and the five year average.

The US Dollar trading at 98.4 Japanese yen; $1.33 = euro. The British pound sterling = $1.53. The Canadian dollar trading at US$1.04.

Current US Gold price quoted at $1285.30/ounce. The record price of $1920/ounce was recorded in September, 2011.