Chemical Industry News – July

Chemical Industry News July 2013

The American Chemistry Council (ACC) US Chemical Production Index increased by 0.1% in May 2013 following a downwardly revised 0.2% decline in April. Compared to May 2012, chemical production rose in all regions by 0.9% following April’s 0.5% year to year increase. Comparing the first five months of 2013 to those of 2012, total chemical production rose 0.7% nationally.

The ACC’s Chemical Activity Barometer (CAB) rose by 0.3% in June, following a revised 0.1% increase in May. The year over year monthly moving average showed an increase of 3.5% over a year ago.

The TSCA reform bill is supported by the ACC and other groups, including the Environmental Defense Fund.
Senator Debbie Stabenow, D-MI, has introduced the Qualifying Renewable Chemical Production Tax Credit Act of 2013, which would cut taxes for American renewable chemicals producers.

The ACC filed a lawsuit in federal district court challenging new EPA requirements for antimicrobial pesticides, which are used to disinfect or sanitize and as ingredients in coatings and paints.

An EPA proposal aimed at requiring energy and chemical companies to disclose emissions-calculating methods has drawn criticism from the chemical industry, as it could expose trade secrets.

The Obama administration will not penalize businesses that do not provide health insurance in 2014, the Treasury Department announced on July 2. It will delay enforcement of a requirement of the Affordable Care Act for a year.

President Obama revealed on July 2 a package of separate actions focused on curbing US greenhouse gas (GHG) emissions, with an apparent focus on coal-fired electrical generation. His plan also covers home appliance efficiency standards, fuel mileage rules for over the road trucks, and new subsidies for wind farms. As recently as 2008, coal accounted for more than 50% of US electric generation but dropped to 37% in 2012. He also declared that he will approve the Keystone XL pipeline “only if this project does not significantly exacerbate the problem of carbon pollution.” It’s anticipated that if the project isn’t approved, the Alberta oil will end up in China.

Evonik announced on June 20 that it is introducing a new generation of PVC plasticizers with the product name of ELATURE. Production is at the company’s facility in Marl, Germany.

The European Chemicals Agency reported that 6,600 materials were registered under the first two phases of the REACH chemicals registration program. The next target date of May, 2018 will require registration of chemicals supplied in volumes of one to one hundred MTs per year. There is speculation in the industry that smaller or less profitable businesses may cease operations as a result.

Netherlands-based DSM plans to license its cellulosic ethanol technology after its first commercial plant in Iowa is completed. The plant is projected to make 20 to 25 million gallons of fuel per year from corn waste (husks, crop waste); production is expected to start early in 2014.

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. The feedstock will be from the Bakken shale in North Dakota as well as off-gas from oil sands production in Alberta.

Linde will invest €70 million as well as manage the gas supply infrastructure for SIBUR, the Russian petrochemical company.

A bill banning the sale of polystyrene food service products proposed by New York City Mayor Bloomberg has been opposed by food industry representatives. Polystyrene foam takes hundreds of years to break down and NYC recyclers have difficulty in separating it at extra costs.

US chlor-alkali operating rate for May 2013 was reported stable at 87% of capacity. European operating rates were below 2012 level due in part to severe flooding in parts of Central Europe.

The US District Court for the District of Columbia recently struck down a rule implemented as part of the Dodd-Frank financial reform law requiring publicly traded extractive industry companies to report taxes, royalties, and other fees paid to foreign governments. The decision was hailed by industry groups that stated that such disclosure would hurt companies’ ability to compete.

Solvay will be closing its Portuguese soda ash facility by January, 2014. At the same time, the company is planning to expand capacity at its Green River, Wyoming operation.

Shintech (Japan) plans investing $500 million in further expansion of its Louisiana operation. Planned capacity increases are expected to be about 200,000 MT/year of caustic soda, 300,000 MT/year of vinyl chloride monomer (VCM) and 300,000 MT/year of polyvinyl chloride (PVC). Target completion date is 2015.

Chinese industrial output slowed in June, and employment figures also dropped at the fastest rate since the Asian financial crisis of 1998. The World Bank cut its growth forecast for China, saying that it would likely grow 7.7% compared to an earlier figure of 8.4%.

Petrobras, the state-owned Brazilian energy enterprise, has signed a letter of intent with Chinese petrochemical company Sinopec to study a possible joint venture to build and operate a planned refinery in Maranhao state, Brazil. The refinery would have a total capacity of 300,000 bbls per day.

The Chinese government has decentralized decision making regarding 177 refinery and petrochemical projects. For certain projects, approval from Beijing will not be required and authority will shift to local governments.

The Organization for European Cooperation and Development’s (OECD) Cooperative Chemicals Assessment Program was since the 1990’s the world’s only source of internationally agreed hazard assessments for large volume production chemicals. The program’s functions have now largely been taken over by Europe’s REACH program and various US activities and the program will be replaced by the end of next year. An OECD spokesman said that the organization should develop a new program based on new test methods.

The World Health Organization (WHO) has started a chemical risk assessment network in order to enhance global efforts to assess risks to human health from chemicals. It is expected to provide a forum for scientific exchange.

Unemployment across the seventeen European Union countries that use the euro hit a high of 12.1% in May, with the number of people out of work rising above nineteen million. Among the member states, the lowest rates were Austria at 4.7% and Germany at 5.3%. Youth unemployment in Spain and Greece has been reported at close to 60%.
Inflation in the Euro zone increased to 1.6% year to year in June, an increase from May’s 1.4%.

South Korea’s nine major companies have announced a plan to invest $2.45 billion over the next three years in order to prevent deadly chemical accidents. The plan is the result of a recent series of deadly accidents at Korean chemical plants.

Carload rail volume was up 2.7% annually in June on major US railroads. Intermodal volume was also up 2.7% compared with the same period last year. Total weekly traffic for carloads and intermodal units was up 1.2% annually. Petroleum products shipments were up 37.2%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 2.3% in May after falling an adjusted 0.2% in April.

Shale oil and Gas-related:

The EPA tabled a draft study that suggested that hydraulic fracturing (fracking) contaminated groundwater in Pavillion, WY. The agency stated that it “recognizes the state of Wyoming’s commitment to further investigation and efforts to provide clean water and does not plan to finalize or seek peer review of its draft Pavillion groundwater report.” The EPA further said that it plans to use the results of its ongoing national study to inform of its recommendations regarding fracking. The national study is expected in 2016.

Plentiful and inexpensive US shale gas is becoming a threat to the European petrochemical industry which is dependent on oil-based feedstock. European manufacturers, such as BASF, Ineos, and LyondellBasell are seen as particularly vulnerable.

Illinois is making plans to leverage abundant supplies of shale gas in order to fuel an economic revival. In early June, the Illinois legislature overwhelmingly endorsed the use of fracking as a first step.

According to the International Energy Agency, US natural gas production will accelerate from 2014 through 2018. Gas output will reach 797 billion cubic meters by 2018, 17% higher than last year. US shale production increased sixfold from 2007 to 2012.

Cuadrilla Resources, a British oil and gas company said that it was applying for a permit to hydraulically fracture an exploration well at Grange Hill, in Lancashire, England. The British government sees shale gas as possible replacement for the declining North Sea production. The UK formation is said to resemble the Barnett shale deposit in Texas.

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 July 2, 2013 the federal debt was $16.75 trillion. The national debt has increased an average of $3.81 billion per day since September 2007.

Personal income in May increased by $69.4 billion, or 0.5% compared to April. In April, personal income decreased by $5.6 billion or less than 0.1%. 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 $1.26 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 1.8%, that is from the fourth quarter of 2012 to the first quarter of 2013. The previous estimate was an increase 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 at a revised rate of 3.1% or $120.0 billion in the first quarter of 2013 to a level of $15,984 billion. In the fourth quarter current dollar GDP increased 1.3% or $53.1 billion.

The Conference Board’s Leading Economic Index increased 0.1% in May to 95.2 (2002=100) following a 0.8% increase in April and a 0.3% decline in March.

The Conference Board Consumer Confidence Index which had improved in May increased again in June. It stands at 81.4 (1985=100) up from an adjusted 74.3 in May.

The Institute for Supply Management’s June Manufacturing Index registered 50.9%, an increase of 1.9% from May’s number of 49.0%, indicating expansion in manufacturing for the fifth time the first six months of 2013. The Non-Manufacturing Report for June was 52.2%, or 1.5% lower than the 53.7% reported for May, reflecting continued growth, but at a slower rate.

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 May of 914,000 were 6.8% above the revised April estimate of 856,000 and were 28.6% above the May 2012 rate of 711,000. Single family housing starts in May were at a rate of 599,000 or 0.3% above the revised April figure of 597,000. New single home sales in May were at a seasonally adjusted annual rate of 476,000. This was 2.1% above the revised April rate of 466,000 and 29.0% above the May 2012 estimate of 369,000.

The National Association of Realtors reported that sales of existing homes rose in May. Existing home sales increased 4.2% to a seasonally adjusted annual rate of 5.18 million units, an increase of 12.9% from the same period a year ago. Distressed homes, foreclosures and short sales, accounted for 18% of May sales, unchanged from April, but the lowest number since monthly tracking began in 2008. They were 25% a year ago.

New orders for manufactured durable goods in May increased $8.0 billion or 3.6% to $231.0 billion. This increase, up three out of the last four months, followed a 3.6% increase in April.

May unfilled orders for manufactured durable goods increased $8.1 billion or 0.8% to $1,004.7 billion. This followed a increase of 0.3% in April.

Consumer Price Index for all urban consumers increased 0.1% in May on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.4 % before seasonal adjustments. Food index, which rose in April, declined 0.3% in May. The shelter index rose 0.3% and accounted for more than half of the May increase.

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 May reported at 1.4%. The 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 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 June 2013 rate was little changed at 7.6%, and has shown little movement since February. 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 4.3 million in June. Those individuals accounted for 36.7% 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 May of 3.2%; Nevada was reported highest at 9.5%, Illinois, Mississippi, and California close behind. An analysis completed for the US Conference of Mayors said that more than half of all US metro areas won’t regain the jobs lost in the recession until the second half of 2015 or later.

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