Chemical Industry News – December
The American Chemistry Council (ACC) US Chemical Production Index edged lower by 0.2% in October, following a revised 0.3% decline in September, a 0.2% decline in August and a gain of 0.2% in July. Compared to October 2012, chemical production in all regions increased by 1.5% year over year, following a gain of 1.7% in September. Comparing the first ten months of 2013 to those of 2012, total chemical production rose 1.2% nationally, with five of the seven regions posting gains.
The ACC’s Chemical Activity Barometer (CAB) rose by 0.1% in November. Following slight downward revisions for September and October the CAB remains up 2.8% over a year earlier and is at its highest point since June 2008.
Dow Chemical is planning to spin off or sell about 40 manufacturing facilities over the next two years. They include Gulf Coast chlor-alkali and chlor-vinyl plants as well as its global chlorinated organics plants in the US, Germany, Italy, South Korea, Brazil, and China. These businesses account for approximately $5 billion in annual revenue and employ about 2000 workers.
A House Energy and Commerce subcommittee met on November 13 in order to review the Chemical Safety Improvement Act.
DuPont announced that it will sell its Glass Laminating Solutions/Vinyl unit, which supplies the automotive, architectural, and industrial industries, to Japan’s Kuraray Co. Ltd. The business has 600 employees in six manufacturing facilities in the US, Europe, and Asia and reported sales of approximately $500 million last year.
US chlor-alkali average operating rates remained at 79% in October and are not expected to increase until the new year.
The startup of Westlake Chemical’s new chlor-alkali plant in Geismar, LA is expected within weeks. Full operation is expected in 2014, with total capacity of 350,000 electrochemical units (ECU) per year.
Manufacturers of polystyrene food containers have been given until January 1, 2015 to present evidence to New York City that food-contaminated containers can be recycled economically. If not successful, a proposed ban on such containers will take effect July 1, 2015.
An updated EPA regulatory agenda issued on November 26 stated plans to develop regulations aimed at addressing climate change, securing chemicals, providing clean water and improving air quality. In its statement of priorities, the EPA confirmed that it intends to issue performance standards for CO2 emissions from existing and modified power plants in 2014. EPA Administrator Gina McCarthy promised that the agency would be “really flexible” in implementation. There was no reference to a Department of Energy report that stated that US carbon dioxide (CO2) emissions dropped by 3.8% last year, falling to the lowest level in almost twenty years.
Formosa Plastics Group has applied for permits for a $2 billion expansion of its Texas operations, including an ethane cracker and downstream product capacity.
On December 5, Royal Dutch Shell announced that it would not move ahead with a proposed 140,000 barrel/day gas to liquids project on the US Gulf Coast. Development costs were cited as a reason for dropping the project.
OCI N. V., a Netherlands-based fertilizer company said on November 21 that it plans to build what would be the largest methanol plant in the US in Beaumont, TX. The plant will be built by its subsidiary, Natgasoline. Cost is estimated in excess of $1 billion, and production is estimated at 1.75 million tons of methanol per year. OCI N. V. operates another methanol plant in Beaumont, with an annual capacity of 730,000 tons. Additional methanol capacity is also planned for the Gulf Coast by Valero, Methanex, and Celanese.
General Motors and Detroit Renewable Energy have combined to develop a renewable energy project that will turn solid municipal waste from Metro Detroit into process steam used to heat and cool GM’s Detroit-Hamtramck assembly plant. The steam will travel 8300 feet through a pipe originating at Detroit Renewable Power.
On November 15 the U.S. Postal Service reported a fiscal year 2013 loss of $5 billion. This was down from approximately $16 billion in fiscal 2012. The Postal Service benefited from growth in its shipping and packages business as well as cost cutting programs.
At a meeting of the World Trade Organization (WTO) on December 7 in Indonesia agreement was reached in the first major accord in the group’s 18 year history. It is designed to smooth commerce at borders and to safeguard food security programs in developing nations. This was the first multilateral agreement negotiated by all of the WTO’s 159 member countries. US business groups, including the Chamber of Commerce, praised the new pact.
Chinese exports increased 12.7% over a year earlier in November, a number higher than what was anticipated. October increased 5.6%. The Chinese General Administration of Customs reported a trade surplus of $33.8 billion for November, the biggest since January, 2009.
China’s consumer price index increased at an annual rate of 3.0% in November, down from 3.2% in October. Producer prices fell again by 1.4%.
China’s monthly industrial output in excess of 10% continues to exceed the government annual target of 7.5%.
Germany’s business climate continued to grow in November. Munich-based Ifo, an economic research group, reported that its monthly business climate index for Germany rose to 109.3 in November from 107.4 in October. The survey represents responses from firms in construction, manufacturing, wholesaling and retailing. Their expectations regarding business developments rose to their highest level since spring 2011.
Unemployment across the seventeen European Union countries that use the euro was reported for October at 12.1%, down from 12.2% in September. The October, 2012 reading was 11.7%. The lowest rates among member states were Austria at 4.8%, Germany at 5.2% and Luxembourg at 5.9%. The highest rates among member states were Greece at 27.3% and Spain at 26.7%.
Inflation in the Euro zone was reported at 0.9%, up from 0.7% in October. This was less than half of the European Central Bank’s ceiling, which indicated economic weakness in parts of the region.
The ACC filed comments on December 5 with the Pipeline and Hazardous Materials Safety Administration (PHMSA) urging the agency to adopt an effective strategy for further improving rail safety that recognizes the importance of preventing rail accidents as well as improving tank car designs. The ACC urged the PHMSA to conduct a thorough analysis and prioritize enhancements on the construction of new tank cars.
The Association of American Railroads (AAR) and Regional Railroad Association proposed new a new safety standard that would require shippers to upgrade DOT-111 tank cars in order to avoid explosions during derailment accidents. The American Petroleum Institute and other energy groups responded that the rail industry should improve its own business practices and make other fixes instead.
Total carload rail volume for the first 48 weeks of 2013 was down 0.5% from the same point in 2012. Intermodal volume was up 4.3% compared to the same period. Petroleum products shipments were up 7.2%.
The port of Miami restored its rail connection in October at a total project cost of $49 million. The port is undertaking a massive expansion in anticipation of a widened Panama Canal opening in 2015.
The American Trucking Association reported that seasonally adjusted for-hire truck tonnage decreased 2.8% in October, and was the first decrease since July. In September there was an increase of 0.5%. Compared with October 2012, year-over-year increase was 8%.
Shale Oil and Gas -Related
Abundant low cost natural gas in the U.S. has led to 134 new plants and expansions in the chemicals, plastics, tire, steel, and energy industries since June according to Kevin Swift, ACC economist and managing director.
Gas supply from the Marcellus Shale has surged as companies use improved technologies to increase well efficiency. A Bloomberg report anticipated that production from the formation may jump 37% from a year earlier in November. The gas from the Marcellus comes from about 5,000 wells.
In its revised November forecast, OPEC sees demand for 2013 up by 34,000 barrels/day to a total of 860,000 barrels/day.
A record number of 400 shale wells may be drilled outside the U.S. during 2014, with most of them in China and Russia. Maria van den Hoeven, executive director of the International Energy Agency said that this will be a revolution, but not everywhere at the same time and not a copy of the U.S. experience. Conditions that aided the US success don’t exist in Europe or Asia.
China has the largest shale gas reserves, followed by Argentina.
TransCanada Corp. expects to be delivering oil on January 3, 2014 to Texas on the southern portion of the Keystone XL pipeline, enabling more crude oil to be shipped from the hub in Oklahoma. The pipeline can carry 700,000 barrels/day to Port Arthur, TX. The $5.4 billion Keystone XL project entered its sixth year of US review in November. TransCanada Corp. once again changed the project start date, this time into 2016.
Federal land managers intend to reissue a right of way for a 678 Mile natural gas pipeline from Wyoming to Oregon after completion of environmental review.
The Congressional Budget Office reported that the federal government incurred a budget deficit of 231 billion for the first two months of fiscal year 2014, $61 billion less than the shortfall reported for the same period a year ago. The federal government incurred $680 billion deficit in fiscal year 2013. This was $409 billion less than the deficit in fiscal year 2012. The US Treasury Department reported that on December 4, 2013 the federal debt was $17.239 trillion. The national debt has increased an average of $2.73 billion per day since September 30, 2012.
House and Senate budget agreement is expected to be issued shortly for the first time since 2011. It was defined as a “cease-fire” between political parties with no major changes.
Personal income in October decreased $10.8 billion or 0.1% according to the Bureau of Economic Analysis. In September, personal income increased 0.5% or $67.4 billion.
The U.S. government debt held by foreign entities continues in excess of $5.6 trillion, with China holding $1.3 trillion of it. China remains the top creditor. Japan is a close second, holding $1.1 trillion.
The Bureau of Economic Analysis second estimate showed an increase in Gross Domestic Product of 3.6% in the third quarter of 2013, that is, from the second quarter to the third quarter. In the second quarter, real GDP increased 2.5%. First quarter data showed an increase of 1.1%. Revised fourth quarter 2012 real GDP increased 0.4%. Current-dollar GDP, the market value of the nation’s output of goods and services, increased 5.6% or $229.8 billion to a level of $16,890.8 billion. In the second quarter, current dollar GDP increased 3.1% or $125.7 billion to a level of $16,661 billion. In the first quarter current dollar GDP increased 2.8% or $115.0 billion.
The Conference Board’s Leading Economic Index increased 0.2% in October, to 97.5 (2004=100), following a 0.9% increase in September and a 0.7% increase in August.
The Conference Board Consumer Confidence Index which had decreased in October, declined again in November to 70.4 from October’s 72.4. September was reported as 80.2 (1985=100).
The Institute for Supply Management’s November Manufacturing Index registered 57.3%, an increase of 0.9% from the October reading of 56.4%. The November reading is the highest of the year, and is the sixth consecutive monthly increase. The Non-Manufacturing Report for November was 53.9%, a decrease of 1.5% from October’s 55.4%, but indicating continued growth in the non-manufacturing sector at slower rate.
In October, retail and food services sales adjusted for seasonal variations were $428.1 billion, an increase of 0.4% from September and 3.9% above October 2012.
Privately owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,034,000, which was 6.2% above the September rate of 974,000, and 13.9% above the October 2012 figure of 908,000. Single family authorizations in October were at a rate of 620,000, which was 0.8% above the September figure of 615,000. Accurate data for new housing starts in September and October were not yet available due to lapse in federal funding.
Sales of new single family houses in October were at a seasonally adjusted rate of 444,000. This was 25.4% above the revised September rate of 354,000 and 21.6% higher than October 2012.
The National Association of Realtors reported that sales of existing homes declined for the second consecutive month in October, while prices continued to show year over year gains. Total existing home sales fell 3.2% to an annual rate of 5.12 million from 5.29 million in September, but were 6.0% higher than the October 2012 rate of 4.83 million. Prices were up 12.8% from October 2012, and reflected the eleventh consecutive month of double digit year-to-year increases. Distressed homes, foreclosures and short sales, accounted for 14% of October sales, at no change from September.
New orders for manufactured durable goods in October decreased $4.6 billion or 2.0% to $230.3 billion. This decrease followed two consecutive monthly increases.
October unfilled orders for manufactured durable goods increased $3.5 billion or 0.3% to $1045.4 billion. This number has increased for eight of the last nine months.
Consumer Price Index for all urban consumers decreased 0.1% in October on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.0% before seasonal adjustments. Food index rose 0.1% after no change in September and a rise of 0.1% in August. The gasoline index dropped 2.9% in October and led to the all items decrease for the month.
The seasonally adjusted Producer Price Index for finished goods decreased 0.2% in October. Prices for finished goods fell 0.1% in September after an increase of 0.3% in August. On an unadjusted basis, prices for finished goods increased 0.3 % for the twelve months ended in October 2013.
Interest rate: Prime at 3.25%, unchanged since 12/16/08.
Crude Oil: WTI trading at ~$97/bbl, up from ~$89 a year earlier.
Inflation rate for the twelve months ended in October reported at 1.0%. September reported at 1.2% and August reported at 1.5%. The average rate of 2.1% was reported for 2012.
Industrial production decreased 0.1% in October, having increased an adjusted 0.7% in September after an increase of 0.4% in August and having been unchanged in July. The level of the index for total industrial production in October was equal to its 2007 average and was 3.2% above its year-earlier level. Capacity utilization rate for total industry declined 0.2% to 78.1%, a rate 1.1% above the level of a year earlier, and 2.1% below its 1972 – 2012 average.
The November unemployment rate declined to 7.0% from the October 2013 rate of 7.3% as reported by the Bureau of Labor Statistics. The number of unemployed persons was reported at 10.9 million, down from the 11.3 million from a month earlier. Employers added 203,000 jobs in November. The long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.1 million in November. Those individuals accounted for 37.3% of the unemployed. The number of long-term unemployed has declined by 718,000 in the past twelve months. North Dakota, with its booming energy industry, continued to lead the nation with the lowest state unemployment rate in October of 2.7%; Nevada was highest at 9.3% with Rhode Island, Michigan, and Illinois not far behind.
The U.S. Census Bureau and the Bureau of Economic Analysis through the Department of Commerce announced on December 4 that total October exports of $192.7 billion and imports of $233.3 billion resulted in a goods and services deficit of $40.6 billion, down from the revised September figure of $43.0 billion. October exports were $3.4 billion higher than September and imports were $1.0 billion higher for the same period.
Henry Hub spot price closed on December 4 at $3.88/MMBTU, up $.09 from the beginning of the week. January 2014 contract reported in the $3.90/MMBTU range. Working natural gas in storage at the end of November was 5.2% lower than last year at that time, and 2.8% lower than the five year average.
The U.S. dollar trading at 102.7 Japanese yen; $1.35 = euro. The British pound sterling = $1.63. The Canadian dollar trading at US$1.07.
Current U.S. gold price quoted at $1229.20/ounce. The record price of $1920/ounce was recorded in September, 2011.