Chemical Industry News – September

Beavertail Lighthouse. 3 Miles from TCC Corporate Headquarters

The American Chemistry Council (ACC) US Chemical Production Index declined slightly by 0.1% in July following an upwardly revised gain of 0.2% in June. Compared to July 2012, chemical production in all regions rose by 1.4% following June’s revised 1.2% year to year increase. Comparing the first seven months of 2013 to those of 2012, total chemical production rose 0.8 % nationally, with five of the seven regions posting gains.

The ACC’s Chemical Activity Barometer (CAB) rose by 0.1% in July, showing its fourth consecutive monthly gain. The year over year monthly moving average showed an increase of 3.8% over a year ago.

Toray Plastics (Japan) will build a cogeneration power plant at its US production site in North Kingstown, RI. The estimated cost is $22.7 million with operation expected by March 2014.

SLM and partner Todd Corp. of New Zealand plans to build the largest methanol plant in North America in St. James Parish, LA. The $1.3 billion project has retained Morgan Stanley to supervise raising funds. It is expected that the plant will produce 1.8 million MT/year of methanol.

Dow Chemical filed an appeal for a $1 billion judgment in a lawsuit that accuses Dow and other companies of fixing prices for a number of products, including polyols and isocyanates during the period from January 1, 1999 to December 31, 2004. The other firms had reached settlements, but Dow went to trial and a jury found that Dow had fixed prices and that the customers involved were entitled to $400 million in damages.

Both DuPont and Huntsman have denied allegations that they conspired to fix titanium dioxide prices, but have agreed to settle in order to avoid further litigation. DuPont has proposed paying $72 million while Huntsman has proposed $6.5 million.

The ACC Polycarbonate/BPA Global Science Group has relaunched its website entitled Facts About BPA in order to provide the public with easy access to the latest science-based news, research, and safety and health information on bisphenol A.  The revised website includes new sections providing basic information about BPA.

Rhodia has established a partnership with GranBio to build the world’s first biomass-based n-butanol plant in Brazil. Start-up is expected in 2015. Planned raw materials are sugar cane straw and bagasse. GranBio currently uses these materials to make ethanol.

The Environmental Protection Agency made public its two year timeline for public meetings under the Integrated Risk Information System program (IRIS). The chemicals to be addressed during the first meeting in October are gasoline octane booster, a gasoline additive, and an industrial and military explosive called RDX. Meetings are to take place every two months throughout 2014.

Plastics makers continue to oppose New York City’s proposal to ban polystyrene foam in food service packaging. The ban is estimated to cost the state 1200 jobs and nearly $100 million per year.

SABIC has hired Linde to build a plant designed to capture and use 1500 tons of carbon dioxide per day. The plant is intended to capture carbon dioxide from ethylene plants for use in petrochemical manufacture.

Russian petrochemical company SIBUR has formed a synthetic rubbers joint venture with China Petroleum and Chemical Corporation (SINOPEC) to be developed in Russia.

A World Bank arbitration panel said on September 4 that Venezuela failed to act in good faith or properly compensate ConocoPhillips for three oil assets that the country expropriated in 2007. The decision did not state how much money Venezuela must pay ConocoPhillips.

Chinese exports increased 7.2% in August from a year earlier. This followed July’s 5.1% year-on-year rise and a contraction of 3.1% in June.  This contributed to the biggest trade surplus of 2013 of $28.6 billion, up from $17.8 billion in July.

China’s consumer price index increased at an annual rate of 2.6% in August down from 2.7% in July.

China’s industrial output rose 10.4% in August, and was the fastest pace in 17 months.

Lanxess recently announced that it has completed the move of its German group headquarters from Leverkusen to Cologne. About 1,000 employees, including all of the central management functions, are now based at the Lanxess Tower at Kennedyplatz 1.

Germany’s business climate continued to grow in August for the fourth month in a row. Munich-based Ifo, an economic research group, reported that its monthly business climate index for Germany rose to 107.5 in August from 106.2 in July. The survey represents responses from firms in construction, manufacturing, wholesaling and retailing.

Unemployment across the seventeen European Union countries that use the euro remained the same in July at 12.1%.  The lowest rates among member states were Austria at 4.8% and Germany at 5.3%.

Inflation in the Euro zone was reported at 1.3% year to year in August.

Senator Chuck Schumer has voiced concern over the safety of the majority of type DOT-111 railroad tank cars used for the shipment of crude oil and other volatile liquids. Some 1400 tank cars per day carry crude oil across the US, up from only 31 cars per day in 2009, Schumer said, and most of them are type 111.

Total carload rail volume was up 1.0% annually in August on major US railroads. Intermodal volume was up 4.4% compared to August 2012, and represented a new record. Petroleum products shipments were up 18.5%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage dropped 0.4% in July, following an increase of 0.1% in June.

Shale Oil and Gas-related

Marcellus Shale natural gas production in Pennsylvania and West Virginia is rising even faster this year than energy experts had predicted. Bentek, a Colorado company that analyzes industry trends, said that 2013 production in those states is up approximately 50% compared with 2012. A Bentek analyst stated that Marcellus Shale gas is starting to displace Gulf of Mexico production.

The Bureau of Land Management (BLM) finished taking public comments on its latest plan for oversight of hydraulic fracturing on August 23. The new rules would apply only to federal and Indian lands. The BLM said it didn’t have a target date for finishing the rule.

Statoil (Norway) struck oil for the third time in the Bay du Nord off the coasts of Newfoundland and Labrador.

A decision on the 1700 mile $7 billion Keystone XL pipeline project has been pending since 2007 but is expected from the administration this year. Some economists have said that the pipeline would help to maintain an improving US manufacturing economy. In the meantime railroads are carrying increasing amounts of crude oil from Canada to Gulf Coast refineries. A rival pipeline company, Enbridge Inc., is expanding existing systems to carry Canadian crude. Enbridge doesn’t need federal permission because it uses existing rights of way.

A bipartisan group of US Senators said on August 29 that President Obama and the State Department should not again delay a decision on the XL pipeline. Reports have noted that construction might not be authorized until an inspector general’s report is completed in 2014. The AFL-CIO and other organizations are strongly in support of the project.

White House spokesmen recently stated that increased domestic oil and natural gas production is something to celebrate as it helps to reduce the US trade deficit. A spokesman for the American Petroleum Institute pointed out that such statements are in conflict with Obama administration policies that discourage oil production and that much of the increased production comes from private lands.

The Lithuanian government has awarded Chevron the rights to explore for shale natural gas in the Silute-Taurage prospect in the country. The prospect is estimated to contain up to 2.8 trillion cubic feet of technically recoverable shale gas reserves.

Centurion Pipeline LP, a unit of Occidental Petroleum, is constructing a pipeline system to transport crude oil from the Cline Shale in West Texas to its Colorado City facilities.  The system, 100 miles long, is expected to come on line by July 2014. It will be able to transport 75,000 bbl/day of crude and is expected to interconnect with other systems.

Houston-based Oasis Petroleum recently agreed to acquire approximately 161,000 acres in North Dakota at a cost of $1.52 billion. Company spokesmen stated that this adds high quality acreage in the heart of the Bakken and Three Forks deposits.

The Economy

The Congressional Budget Office reported that the federal government incurred a budget deficit of approximately $750 billion from October 2012 through August 2013 (the first eleven months of fiscal 2013), more than $400 billion less than the shortfall recorded for the same period last year. The CBO estimates that the federal government incurred a deficit of $146 billion in August 2013, in contrast with the $191 billion deficit reported for the same period a year ago. The US Treasury Department reported that on September 7, 2013 the federal debt was $16.7 trillion. The national debt has increased an average of $1.98 billion per day since September 30, 2012.

Secretary of the Treasury Jacob J. Lew urged Congress to raise the debt limit as soon as possible. House Speaker Boehner has said that Republicans wouldn’t increase the debt ceiling without spending cuts, and Lew has said that the Obama administration won’t negotiate on the debt limit.

Personal income in July increased $14.1 billion or 0.1% according to the Bureau of Economic Analysis. In June, personal income increased 0.3% or $38.2 billion.

The US government debt held by foreign entities is in excess of $5.6 trillion, with China holding $1.3 trillion of it. 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 second estimate of the second quarter 2013 Gross Domestic Product showed an increase at an annual rate of 2.5%, 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 2012 real GDP increased 0.4%. Current-dollar GDP, the market value of the nation’s output of goods and services, increased 3.2% or $132.6 billion in the second quarter to a level of $16,667 billion. In the first quarter current dollar GDP increased 2.8% or $115.0 billion.

The Conference Board’s Leading Economic Index increased 0.6% in July, to 96.0 (2004=100), following no change in June and a revised 0.3% increase in May.

The Conference Board Consumer Confidence Index which had declined in July, increased slightly in August to 81.5 (1985=100) up from 81.0 in July.

The Institute for Supply Management’s August Manufacturing Index registered 55.7%, an increase of 0.3% from July’s revised number of 55.4%, indicating expansion in manufacturing for the third consecutive month. The Non-Manufacturing Report for August was 58.6%, up 2.6% from July’s 56.0%, indicating continued growth in the non-manufacturing sector.

In July, retail and food services sales adjusted for seasonal variations were $424.5 billion, an increase of 0.2% from June and 5.4% above July 2012. May through July 2013 sales were up 5.2% from the same period a year ago.

Privately owned housing starts in July of 943,000 were 2.7% above the revised June estimate of 918,000 and were 12.4% above the July 2012 rate of 839,000. Single family housing starts in July were at a rate of 591,000 or 2.2% below the revised June figure of 604,000. New single home sales in July were at a seasonally adjusted annual rate of 394,000. This was 13.4% below the revised June rate of 455,000 and 6.8.% above the July 2012 estimate of 369,000.

The National Association of Realtors reported that sales of existing homes rose sharply in July, with median prices showing double-digit year over year increases. Existing home sales increased 6.5% to a seasonally adjusted annual rate of 5.39 million, up from a downwardly revised 5.06 million units in June. This was an increase of 17.2% from the same period a year ago. Sales have remained above year-ago levels for 25 months. Distressed homes, foreclosures and short sales, accounted for 15% of July sales, the same as in June and match the lowest number since monthly tracking began in 2008. They were 24% in July 2012.

New orders for manufactured durable goods in July decreased $17.8 billion or 7.3% to $226.6 billion. This decrease followed three consecutive monthly increases.

July unfilled orders for manufactured durable goods increased $4.4 billion or 0.4% to $1034.3 billion. This number has increased for five of the last six months.

Consumer Price Index for all urban consumers increased 0.2% in July on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 2.0% before seasonal adjustments, higher than the 1.8% reported for June. Food index increased 0.1% in July after rising 0.2% in June. The gasoline index rose 1.0% in July after an increase of 6.3% in June.

The seasonally adjusted Producer Price Index for all finished goods was unchanged in July following an increase of 0.8 % in June. There was  an increase of 0.5% in May and a decrease of 0.7% in April. On an unadjusted basis prices for finished goods increased 2.1 % for the twelve months ended in July 2013.

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

Inflation: Inflation rate in July reported at 2.0%. This followed a June rate of 1.8%, May rate of 1.4%, and April rate of 1.1%. The average rate of 2.1% was reported for 2012. It is expected to average 2.0% in 2013.

Industrial production was unchanged in July after having increased a revised 0.2% in June, and showing no change in May. At 98.9% of its 2007 average, total industrial production in July was 1.4% above its year-earlier level. Capacity utilization rate for total industry decreased 0.1% to 77.6%, a rate 0.3% below the level of a year earlier, and 2.6% below its 1972 – 2012 average.

Unemployment: The August 2013 rate as reported by the Bureau of Labor Statistics was little changed at 7.3%. The number of unemployed persons was reported at 11.3 million. Employers added 169,000 jobs in August. The BLS stated that the long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.3 million in August. Those individuals accounted for 37.9% of the unemployed. North Dakota, with its booming energy industry, continued to lead the nation with the lowest state unemployment rate in July of 3.0%; Nevada was highest at 9.5 % with Illinois, Rhode Island and North Carolina not far behind.

The Bureau also released information that the number of Americans who are 16 years of age or older and who have decided not to participate in the nation’s labor force has gone past 90 million for the first time. In January 2009 there were 80.5 million Americans not in the labor force.

Exports/Imports: July exports of $189.4 billion and imports of $228.6 resulted in a goods and services deficit for the month of $39.2 billion, up from a revised number for June of $34.5 billion.

Crude Oil: WTI trading at $110/bbl, up from ~$90 a year earlier; prices expected to trend lower near year end.

Natural Gas: Henry Hub spot price closed on September 3 at $3.68/MMBTU, up $.14 from the beginning of the week. October 2013 contract reported in the $3.70/MMBTU range. Working natural gas in storage at the end of August was less than last year at that time, but higher than the five year average.

U.S. Dollar: The US dollar trading at 99.1 Japanese yen; $1.32 = euro. The British pound sterling = $1.56. The Canadian dollar trading at US$1.04.

Gold Price: Current US gold price quoted at $1391.90/ounce. The record price of $1920/ounce was recorded in September, 2011.

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