The American Chemistry Council (ACC) US Chemical Production Index dropped by 0.2% in August, following a revised 0.5% decline in July. Chemical production fell in all regions except the Gulf Coast, which posted a gain, and the Ohio Valley, which was flat. Compared to August 2011, total production in all regions was down by 0.4%, the first negative year-over-year comparison in twelve months.
The ACC’s Chemical Activity Barometer (CAB,) for October showed a 0.6% growth to 97.9%, after September’s revised number of 90.2%. This represents the fourth consecutive monthly increase in the CAB. The chemicals industry generated about $760 billion last year.
According to the Congressional Budget Office, the bill proposed by Sen. Frank Lautenberg to reform the Toxic Substances Control Act (TSCA) would increase enforcement costs by 30% per year and would also cost manufacturers approximately $1 million per chemical for compliance.
The ACC is seeking a “highly influential scientific assessments” designation for the EPA’s planned assessment of seven chemicals under TSCA in order to foster a rigorous peer review.
St. Paul, MN-based Ecolab, Inc. will pay approximately $2.2 billion in cash and stock to purchase the specialty chemical company Champion Technologies. Champion is privately held and based in Houston, TX.
Lanxess AG opened a plant in Gastonia, NC on September 17 for the manufacture of nylon compounds and polybutylene terephthalate compounds. Investment was estimated at $20 million. Almost the entire output of the plant will be in automotive applications.
ExxonMobil plans to expand its chemical and lubricants facilities in Baton Rouge and Port Allen, LA is expected to create more than 400 construction jobs.
As part of its restructuring plan aimed at coping with slowing economic growth, Dow Chemical Co. will eliminate approximately 2,400 jobs and close approximately 20 manufacturing facilities. The job cuts amount to 5% of the company’s worldwide workforce. Cost savings are estimated to be $500 million. The company also plans to cut capital spending and investments, resulting in an additional $500 million. Dow anticipates that it will save $2.5 billion including all cost cutting measures.
Dow Chemical Chairman, President and CEO Andrew Liveris will lead the Business Council, a group made up of CEO’s of US firms that provides business practices guidance to the government.
Evonik will build a new 120,000 TPY methyl methacrylate plant at its Mobile, AL site. It is expected to come on stream in mid-2015. It will be Evonik’s largest North American site.
AkzoNobel is increasing its Texas specialty chemicals capacity in order to meet demand from the semiconductor industry. Demand is principally from the production of light-emitting diodes for tablet and laptop screens.
Nova Chemicals was named as the ICIS Company of the Year based on having taken advantage of favorable conditions in ethane to restore its finances and to show impressive profits. The success was attributed to drawing on ethane associated with shale gas drilling.
The US Export-Import Bank granted Sadara Chemical, a joint venture between Dow Chemical and Saudi Aramco, a $5 billion direct loan to help finance its $20 billion petrochemical operation in Jubail, Saudi Arabia. The loan is expected to support more than 18,000 US jobs and create export opportunities for US-based firms.
Dutch-based bioplastics producer CSM NV and BASF have established a 50/50 joint venture for the production of bio-based succinic acid. The venture will be called Succinity GmbH and will be based in Duesseldorf, Germany. Production is expected to start up in 2013.
US chlor-alkali operating rate for August was reported at 86% of capacity, down 2% from July. US chlor-alkali production reached 997, 000 tons for chlorine and 1,038,000 tons for caustic soda.
In response to growing concerns about shortages of rare earth materials a US industry group called The Rare Earth Technology Alliance has been established. Rare earth materials are used in a wide variety of electronics and energy production. China is one of the largest producers of them.
The recycling of plastic bottles by US consumers increased 45 million pounds in 2011.
Oil and gas companies asked a federal appeals court in September to force the US Department of Interior to move more quickly on issuing oil and gas leases. The 10th Circuit Court of Appeals in Denver heard arguments about whether the Department’s Bureau of Land Management must issue oil and gas leases within 60 days after they’re sold.
Chemical production in the eurozone rose in July by 1.2% on a month-to-month basis. In June, chemical production had fallen 1.6% according to revised numbers. The July level was lower than a year earlier.
Kemira has put 14 of its manufacturing facilities under review as part of a consolidation and savings program. Specific locations have not been identified.
German chemical and pharmaceutical producers plan to increase R & D spending through 2012.
Germany’s seasonally adjusted unemployment rate remained at 6.8% in September. German GDP grew by 0.3% in the second quarter, and is showing signs of slowdown towards the end of the year.
Germany is planning to warn Great Britain that it will seek to cancel November’s European budget summit if Prime Minister David Cameron insists that he will veto any deal other than a total freeze on spending.
Sweden’s finance minister has warned that it is “probable” that Greece will leave the common currency within the next six months. Spain’s debt rating was recently cut to one level above junk by Standard and Poor’s.
Unemployment in the eurozone rose to 11.4 % in August. This is the highest level since the euro was formed in 1999.
Chinese GDP slipped to 7.4% in the third quarter, basically in line with the government target of 7.5% for the year.
China’s exports were at a record monthly level of $186.4 billion in September, rising 9.9% from a year ago. August increase was reported as 2.7%. Imports rose 2.4% year-on-year, compared with a 2.6% decline in August. Exports to the US were 9.6% higher year-on-year for the January-September period. Chinese manufacturing declined in September as the volume of new orders fell for the eleventh consecutive month. The Chinese yuan strengthened against the US dollar.
BP announced that it is selling its 475,000 bbl/day Texas City, TX refinery to Marathon Oil. The $2.5 billion deal also includes some of BP’s retail and logistics assets. It was stated that the agreement did not include the chemicals complex at Texas City.
Middle East supply chains are facing increased risk from piracy. The Gulf Cooperation Council, made up of over thirty countries is addressing the issue.
The Association of American Railroads announced that intermodal traffic on major US railroads for the week ending 9/15 rose 3.9% year over year, and 14.1% from the prior week. Carload traffic decreased 2.9% but was 6.6% higher week to week.
The American Trucking Association reported that tonnage was unchanged in July after increasing 1.1% in June, and falling 1.0% in May. Compared with July 2011, the tonnage index was up 4.1%. Year-to-date, tonnage was up 3.7% compared with the same period last year.
The US Postal Service has enough cash to avoid insolvency in October thanks in large part to the mountains of political junk mail and the influx of Super PACs paying top postage rates. Federal candidates, political parties, and special interest groups are mailing out more fliers and postcards than in previous election cycles. Spending was more than $28 million through the end of August.
Shale Oil and Gas
According to a report prepared by IHS Global Insight, unconventional oil and natural gas development could support approximately 3 million jobs by 2020 and generate more than $5 trillion in capital expenditures.
Chevron Phillips recently announced that it will start up its Gulf Coast cracker in 2017. It will use low cost ethane from shale gas.
The US Geological Survey (USGS) issued its first estimate of the Utica Shale stating that the formation holds about 38 trillion cubic feet of undiscovered, recoverable natural gas, 940 million barrels of oil and 9 million barrels of natural gas liquids like ethane and propane. The Utica lies beneath the Marcellus Shale, where energy companies have drilled thousands of unconventional gas wells in Pennsylvania in recent years. The USGS estimated last year that the eight state Marcellus region contains 84 trillion cubic feet of natural gas, far more than the 2002 assessment of 2 trillion.
The highly saline wastewater generated by hydraulic fracturing (fracking) is expected to create demand for water treatment in the Marcellus region. The demand is set to increase between 10% and 20% across North America each year through 2025.
A bipartisan Senate group expressed concern about the EPA’s draft guidance regarding diesel consumption in fracking. The group saw it as an effort by the agency to widen its authority over the drilling technique.
Shell Oil Co. has offered payments in lieu of taxes if it builds a multibillion dollar petrochemical plant in Beaver County, PA. The state has offered tax breaks for such a project.
The Congressional Budget Office estimated that the federal government incurred a budget deficit of $1.1 trillion for fiscal 2012, approximately $200 billion less than the deficit recorded in fiscal 2011. The US Treasury Department reported that on October 18, the federal debt was $16.2 trillion. It stood at $5.7 trillion in 2001.
The US government debt held by foreign entities is a record $5.4 trillion, with China holding $1.15 trillion of it. In January 2009 the US government owed $3.07 trillion to foreign entities. China was the top creditor, with Japan a close second. It was estimated that each person in the US has $17,400 in foreign debt.
The Bureau of Economic Analysis reported an updated third estimate for the second quarter 2012 Gross Domestic Product growth at an annual growth rate of 1.3%, that is, from the first quarter to the second quarter. This is a decrease from the earlier estimate of 1.7%. In the first quarter, real GDP increased 2.0%. In the fourth quarter of 2011, real GDP increased 3.0%. Current-dollar GDP, the market value of the nation’s output of goods and services, increased at a rate of 2.8% or $107.3 billion in the second quarter to a level of $15,585.6 billion. Revised first quarter increase was reported as 4.2% or $157.3 billion.
The Conference Board’s Leading Economic Index increased 0.6% in September to 95.9 (2004=100) following a 0.4 % decrease in August, and a 0.4% decrease in July.
The Conference Board Consumer Confidence Index which had decreased in August, improved in September. It stands at 70.3 (1985=100) up from an adjusted 61.3 in August.
The Institute for Supply Management’s Manufacturing Index expanded in September following three straight months of contraction. The index for September registered 51.5%, an increase 1.9% from August 49.6%, indicating a return to expansion. A reading below 50% indicates that the manufacturing economy is generally retracting. The Non-Manufacturing Report for September was 55.1%, higher than August 53.7% indicating continued growth.
In September, retail and food services sales adjusted for seasonal variations were $412.9 billion, an increase of 1.1% from August and 5.4% above September 2011. Total sales for the July through September 2012 period were up 4.8 % from the same period a year ago.
According to the trade group International Council of Shopping Centers, a group of 18 major retailers reported September sales rose 3.9% and reflected the industry’s continuing positive performance.
Privately owned housing starts in September of 872,000 were 15.0% above the revised August estimate of 758,000 and were 34.8% above the September 2011 rate of 647,000. Single family housing starts in September were at a rate of 603,000 or 11.0% above the revised August figure of 543,000. New home sales decreased 0.3% in August, to a seasonally adjusted annual rate of 373,000, and were 27.7% above the August 2011 figure of 292,000.
The National Association of Realtors reported that sales of existing homes declined 1.7% in September 2.3% to a seasonally adjusted annual rate of 4.75 million from August adjusted level of 4.83 million. The national median existing home prices rose in September, up 11.3% from a year earlier.
US foreclosures and short sales accounted for 24% of September sales, up from 22% in August. They were 30% in September 2011.
New orders for manufactured durable goods in August decreased $30.1 billion or 13.2% to $198.5 billion. This decrease followed three consecutive monthly increases, and was the largest decrease since January 2009.
August unfilled orders for manufactured durable goods, following two consecutive monthly increases, decreased $16.9 billion or 1.7% to $978.7 billion. This was the largest decrease since December 2009 and followed an increase in July of 0.7%.
Consumer Price Index for all urban consumers increased 0.6% in September on a seasonally adjusted basis, following no change in July. Over the last twelve months, the index increased 2.0 % before seasonal adjustments. A large part of the increase was accounted for by the gasoline index, which rose 7.0% after increasing 9.0% in August.
The Producer Price Index for finished goods increased 1.1% in September, seasonally adjusted, following an increase of 1.7% in August and 0.3% in July. On an unadjusted basis, prices for finished goods increased 2.1 % for the twelve months ended September 2012, the largest advance since a 2.8% increase for the twelve month period ended March 2012.
Interest rate: Prime at 3.25%, unchanged since 12/16/08.
Inflation: Inflation rose in September by 2.0%. The August rate was 1.7%, July rate was 1.4%. A revised average rate of 2.0% is projected for 2012.
Industrial production rose 0.4% in September, after having fallen 1.4% in August. For the third quarter as a whole, industrial production declined at an annual rate of 0.4%. At 97.0% of its 2007 average, total industrial production in September was 2.8% above its year-earlier level. Capacity utilization for total industry increased 0.3% to 78.3%, a rate 2.0% below its 1972 – 2011 average.
Unemployment: The September 2012 rate declined to 7.8% from 8.1% in August as reported by the Bureau of Labor Statistics. The BLS stated that the long-term unemployed, i.e., jobless for 27 weeks and over was little changed at 4.8 million. Those individuals accounted for 40.0% of the unemployed. North Dakota led the nation with the lowest state unemployment rate in September of 3.0%, and Nevada was reported the highest at 11.8%. According to the BLS government unemployment has dropped from 5.7% in July to 5.1% in August to 4.3% in September.
Trade Deficit: For August 2012 the goods and services deficit increased to $44.2 billion from a revised July figure of $42.5 billion as exports decreased more than imports.
Crude Oil: Present WTI spot price ~$90/bbl and holding, compared to ~$87/bbl a year earlier. OPEC has reported that world oil demand is expected to decline in 2013 due to the economic slowdown.
Natural Gas: Henry Hub spot price closed on October 23 at $3.34/MMBTU. Working natural gas in storage remains above the five year average. Residential and commercial consumption is increasing as the temperature drops.
The US Dollar trading at 79.3 Japanese yen; $1.30 = euro. The British pound sterling = $1.60. Canadian dollar trading at US$.99
Current US gold price quoted at $1722.10/ounce compared to the record price of $1920/ounce in September, 2011.