Domestic Shale Oil & Gas Production Take the Spotlight in Stabilizing U.S. Economy

The View from Jamestown - ShaleOil

Shale gas output growth just beginning

Matt Smith, commodity analyst at Schneider Electric says that the shale-driven growth in U.S. natural gas production is still likely “in the first half” of the game. He went on to say, “As natural gas prices gradually increase, we should see more production coming online because it’s incentivized by these higher prices. And so the unconventional gas story in the U.S. has a log way to run yet.” Although some countries can experience surging production from shale, they will not be able to replicate the U.S. boom, he added.

North Dakota tops 1M barrels per day

North Dakota oil production rose from 977,000 barrels per day in March to more than 1 million barrels per day in April, data from the state Department of Mineral Resources shows. Most of the output came from the Bakken Shale play and the Three Forks formations.

Domestic petrochemical exports expanding because of increased U.S. shale production

ExxonMobil Chemical President Steve Pryor said that the U.S. is joining the Middle East as a major petrochemical exporter because of the shale boom. Eventually, U.S. shale gas will find its way to Asia and Latin America in the form of resin pellets, according to the article. The American Chemistry Council estimates a total of $71.7 billion in new shale-related petrochemical investments.

Iraq’s impact on oil prices mitigated by U.S. shale boom

Nansen Saleri, CEO at Quantum Reservoir and former head of reservoir management at Saudi Arabian Oil said that the U.S. shale boom, which has driven growth in crude oil production, has prevented oil prices from increasing at a higher rate amid the crisis in Iraq. “Were it not for the increase in U.S. production that’s gained close to 2 million barrels a day, we would see a $20 to $30 rise in prices,” he said.

Even non-producing states benefit from U.S. gas boom say industry experts

In a Fuel Fix article, IHS Vice Chairman Daniel Yergin told Congress’ Joint Economic Committee that the surge in domestic natural gas production is contributing to the economic growth of U.S. states, even in states that don’t drill. Yergin said that approximately one-fourth of the 2.1 million jobs related to unconventional production can be found in those nonproducing states. Business leaders also noted that other industries are gaining from the boom.

Study reveals that oil and gas capital spending declined in 2013

According to an Oil & Gas Journal article, Deborah Byers, oil and gas leader at Ernst & Young said that capital expenditures by U.S. oil and natural gas firms in 2013 decreased by 7% from 2012, leading to a 9% gain in oil and gas reserves and strong energy prices. The decrease “is due in part to the advancement in technologies and processes that are making exploration and production less expensive and more efficient,” she said.

ExxonMobil shale gas exploration with Turkey almost certain

Turkish energy ministry official Salami Incedalci said that ExxonMobil and state-controlled Turkish Petroleum Corp. could team up on shale natural gas exploration in parts of Turkey.

The Reuters Newswire confirmed the claim in a report that quoted a Turkish energy official as saying that U.S. oil firm ExxonMobil is in talks with state-run Turkish Petroleum Corporation over a venture to explore for shale gas in the country’s southeast and northwest regions.

According to the report, Exxon held talks with TPAO in 2012 to cover a partnership in shale, but the negotiations were inconclusive. Turkish officials say talks have since advanced and are likely to result in an agreement.

The partnership could take the sting out of the possible loss in revenues suffered in the Iraq conflict if the crisis is not resolved in the near future.

Economy Shrinks for the First Time in Three Years



GDP contracts 1 percent

For the first time in three years, the economy contracted in the first quarter due to a harsh winter according to a Reuter newswire report. However, economists say that it is rebounding and shows promise of 4 percent growth in the April-June quarter.

Last Thursday the Commerce Department slashed its estimate of gross domestic product to show that the economy shrank at an annual rate of 1.0 percent.

According to the report this was the worst performance since the first quarter of 2011. It reflected a far slower pace of inventory accumulation and a larger trade deficit than previously estimated.

Weather-related factors are expected to fade and inventories are expected to swing higher, which will boost the output in the current quarter.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York said: “The race isn’t over yet for the economy. Things are better than you think. We are still expecting a strong finish to the year.”

The initial GDP estimates predicted a 0.1 percent growth rate. However, it is not unusual to see dramatic revision to GDP numbers from the government, as it does not have comprehensive data when it makes its initial estimates.

Reports from economists estimate that the severe weather could have been responsible for chopping off as much as 1.5 percentage points from GDP growth. The economy grew at a 2.6 percent pace in the fourth quarter of last year.

As investors focused on the brighter second-quarter growth prospects, U.S. stocks traded higher. Prices for U.S. Treasury debt rose, but the dollar fell against most competing currencies.

Chemicals in Commerce Act Discussions Continue

Chemicals in Commerce Act - The Chemical Company

Chemicals in Commerce Act (CICA)

A draft of the Chemicals in Commerce Act (CICA) was discussed at length in a hearing chaired by Rep. John Shimkus (R-IL) on April 29, 2014 in Washington, DC. The proposed act, authored by Shimkus is intended to reform the Toxic Substances Control Act (TSCA) that was passed in 1976.

American Chemistry Council (ACC) urged Congress to seize the opportunity to modernize the nation’s primary chemicals management law (TSCA) with the new legislation.

ACC President and CEO Cal Dooley said, “We appreciate Chairman Shimkus’ continued commitment to this important issue, and we welcome the Subcommittee’s efforts to work cooperatively toward meaningful, balanced reform. Consistent with ACC’s principles for TSCA modernization, the CICA presents a roadmap to legislation we could strongly support.

The subcommittee reviewed an initial draft of the legislation in March. At the April 29 meeting, they reviewed an updated draft that reflects changes from members on both sides of the aisle, stakeholders, and the administration.

At the meeting, Shimkus said, “Since our March 12 hearing on the original discussion draft of the Chemicals in Commerce Act we’ve been working on a bipartisan basis to find common ground. The revised discussion draft before you today contains several significant changes from the earlier version.” He went on to say that he appreciated the time and effort put into the legislative effort by all participants. He promised to work with his colleagues on both sides of the aisle to achieve the desired goals.

The updated draft was endorsed by Environmental Protection Agency Assistant Administrator Jim Jones; Mark Greenwood, an environmental attorney and former EPA official; and Len Sauers, Vice President of Global Sustainability, Product Safety and Regulatory Affairs at the Proctor & Gamble Company.

ACC President Dooley called the updated draft “an appropriate step forward in TSCA reform.” Full Committee Chairman Fred Upton (R-MI) concluded, “This law has not been updated in nearly 40 years. It has been a challenging task, but this draft bill gets us even closer toward our objective of a commonsense law that protects the public health and further encourages our manufacturing renaissance.”

(Key words Chemicals in Commerce Act (CICA), TSCA reform)

Federal lawsuit challenges safety of railroad transport of toxic chemicals

The Chemical Company - The View from JamestownTwo train accidents, one resulting in 47 deaths, and both causing massive, fiery explosions, has put the railroad transportation of toxic chemicals under scrutiny.

Now, a lawsuit has been filed in Minnesota by several chemical groups that include The Chlorine Institue and the American Chemistry Council (ACC) against the Canadian Pacific Railroad for their abrupt changes in policy and implementation of stringent regulations that the chemical groups consider unreasonable.

The new regulations require all rail cars hauling certain toxic chemicals on Canadian Pacific lines to comply with stricter safety standards effective immediately.

The chemical groups involved in the suit called the move “arbitrary, unilateral, and illegal,” and said in a statement that such chemicals “are essential to the economy and national health, and rail movement of these materials is extremely safe.”

“CP’s decision blindsides the chemical industry and has ramifications for America’s public health, agriculture, pharmaceutical, construction, defense, and manufacturing sectors,” said Tom Schick, ACC’s Senior Director of Regulatory and Technical Affairs.

Canadian Pacific responded with a statement saying: ” . . . CP opposes the motion by the American Chemistry Council based on our railroad’s continual concern over safety in our communities. CP believes there is a shared responsibility to haul these commodities throughout North America in the safest possible manner and our railroad is asking shippers of these toxic chemicals to take steps to further protect our employees and the public.”

Statistics reveal that as many as 78,000 cars could be involved. Meeting the new standards would take several years and lots of money.

The chemical groups filing the suit claim that their rail cars meet all existing Department of Transportation (DOT) safety requirements.

The railroad feels that they have the right to protect themselves from lawsuits in the event of any accidents and they do not want to be responsible for the liability.

All parties agree that safety should always be the first consideration, but who is going to pay for it is an issue that needs to be resolved.

Chemical Industry News – March

Chemical Industry News - March 2014 - The Chemical Company

The American Chemistry Council (ACC) US Chemical Production Index rose by 0.3% in January, following a revised 0.6% gain in December, 2013. Production increased in all seven regions of the US for the third consecutive month. Compared to January 2013, total chemical production in all regions increased by 0.3% year-over-year.

The ACC reported that US exports of chemicals grew 0.4% in 2013, while chemical imports declined by 1.0%, expanding the chemical industry trade surplus to $3.4 billion. The US chemical industry typically has a surplus in all its major segments with the exception of pharmaceuticals and agricultural chemicals.

The ACC’s Chemical Activity Barometer (CAB) rose by 0.2% in January. The CAB has shown a gain for nine consecutive months and it is up 2.6% over a year earlier.

Draft legislation for overhaul of the Toxic Substances Control Act was proposed in the House of Representatives on February 27. Among other points, it would require the EPA to divide all commercial chemicals on the market into two categories: low or high priority, depending on risk to human health or the environment. Chemical industry trade associations have welcomed the draft, while environmental activists are speaking out against it. With increased bipartisan support there could be a vote before elections this fall.

The EPA issued on March 3 long-awaited rules to reduce sulfur content of gasoline by 67% in 2017. The American Petroleum Institute and the American Fuel and Petrochemical Manufacturers said that the rules would raise gas prices by 10 cents per gallon and incur billions of dollars in capital costs. EPA administrator Gina McCarthy disagreed and said that the increase would be less than one cent per gallon.

A new experiment by scientists at the US Food and Drug Administration has found that bisphenol A (BPA) doesn’t affect the health of rats fed low doses. European studies have indicated that BPA poses no risk to infants. Some scientists have said that the FDA study is flawed and the controversy continues.

The Canadian government is lending $10 million to a Quebec firm for the construction of a commercial scale bio-based chemical plant, the first of its kind in Canada. A succinic acid plant will be built in Sarnia, Ont. and will have a capacity of 30,000MT/year.

Dow Chemical turned down a request that the company spin off its petrochemical businesses. This was in response to Daniel Loeb, CEO of Third Point, whose company has taken a $1.3 billion stake in Dow.

BASF reported an increase of 16% in net income for Q4 2013 year on year to €1.14 billion.

US chlor-alkali average operating rates increased to 86% in January 2014 from December’s 84%. New production from Westlake’s Geismar, LA plant was to come on line in March, adding 350,000 electrochemical units (ECU), representing 350,000 MT of chlorine and 385,000 MT of caustic soda of annual production. Dow Chemical and partner Mitsui are preparing for start-up of an 800,000 ECU/year facility in Freeport, Texas which will replace older, existing equipment.

The US Geological Survey reported that US production of soda ash in 2013 was a record high at 11.4 million tons.

The House of Representatives passed legislation on March 4 that aims to boost energy efficiency of commercial buildings.

Supreme Court Justice Anthony Kennedy recently suggested that he believed that the EPA overstepped its bounds in the way that it requires greenhouse gases be regulated under permits for power plants.

Senator Manchin, D-WV and Rep. Whitfield, R-KY are seeking to pass a measure that would eliminate the carbon capture requirement for new coal-fired power plants and delay the EPA carbon emission rules for existing plants. The House passed such legislation on March 6, but it’s not likely to come up for a Senate vote. The administration is against the bill, and it risks a presidential veto.

Electric car maker Tesla Motors says that is considering sites in Nevada, Arizona, New Mexico, and Texas for a massive battery factory that would employ approximately 6,500 people. The company has not specified locations, but plans to start construction this year with completion in 2017. Cost is estimated at between $4 and $5 billion.

According to Russia Business Directory, the chemical industry accounts for 10.4% of the total output of Russian processing industry and 5.4% of export profits. The industry employs more than 740,000 people. It was stated the Russian chemical industry accounts for 1.1% of world output, but has 15% of world ammonia and carbamide(urea) production.

Brazil’s chemicals trade deficit increased by 13.6% in 2013, reaching a total of $32 billion. Brazil imported $46.1 billion in chemical products last year, an increase of 7.3% year on year.

Mitsui Chemicals is closing multiple plants in Japan and bringing in a new CEO. It is one of Japan’s largest chemical companies with sales of $17.6 billion in its last fiscal year. But it has not shown a profit in three of the past four years.

China’s economy grew by a healthy 7.7% in 2013, and is expected to grow at a rate of 7.4% in 2014. The national target is 7.5%.

China’s producer price index in January was 1.6% lower year to year and was viewed by some as a sign of continued slowness in the manufacturing sector.

China’s consumer price index increased at an annual rate of 2.5% in January at no change from December.

China’s February exports dropped 18.1% from a year earlier. Imports increased 10.1%, resulting in a trade deficit of $23 billion.

According to a revised German government forecast, the country’s economy should expand by 1.75% this year and 2.0% in 2015.

Germany’s business climate continued to grow in February. Munich-based Ifo, an economic research group, reported that its monthly business climate index for Germany (2005 = 100) rose to 111.3 from 110.6 in January from 109.5 in December. The survey represents responses from firms in construction, manufacturing, wholesaling and retailing.

Unemployment across the seventeen European Union countries that use the euro was reported unchanged at 12.0% for January, stable since October 2013. The lowest rates among member states were Austria at 4.9%, Germany at 5.0% and Luxembourg at 6.1%. The highest rates among member states were Greece at 28.0% and Spain at 25.8%.

February inflation in the Euro zone was reported at 0.8%, unchanged from January and December and down from 0.9% in November. At numbers less than 1%, this is considered by the European Central Bank as the “danger zone.”

BNSF Railway Co. intends to buy its own fleet of up to 5,000 new crude oil tank cars with safety features that exceed the latest standards adopted by the industry more than two years ago. The railroad is owned by Berkshire Hathaway and is a major mover of crude oil by rail throughout the US. Railcars are usually owned by companies that lease them to shippers.

Total carload rail volume for February decreased 0.4% overall compared with February 2013.  Intermodal volume was up 1.1% compared to the same period in 2013 and was the 51st consecutive year over year monthly increase for intermodal volume.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage decreased 4.3% in January after a decline of 0.8% in December. The index was 1.2% higher year to year.

Shale Oil and Gas Related

World Shale Oil&Gas Latin America Summit

BASF has ruled out the possibility of importing shale gas from the US for use in its European petrochemical operations.

The American Petroleum Institute has urged the federal government to increase liquefied natural gas (LNG) exports amid the continuing crisis in Ukraine. Chevron Corp. Chairman John Watson said that there are more than enough reserves in North America to expand exports. A special permit is required from the US government to send LNG to countries that don’t have a free trade agreement with Washington.

According to the American Chemistry Council, potential US chemical industry investment linked to plentiful and affordable natural gas from shale formations has topped $100 billion.

The International Energy Agency (IEA) stated that oil demand in 2014 would be greater than last year based on stronger economic growth. Global production of crude oil is expected to increase in 2014 and 2015, with the US leading the way. At the same time, OPEC output is expected to decrease.

The southern leg of the Keystone XL oil pipeline, known as the Gulf Coast Project, is expected to begin deliveries. This section runs from Cushing, Oklahoma to the US Gulf Coast, and does not require White House approval, unlike the northern Keystone XL which crosses the Canadian-US border.

A new Washington Post-ABC News poll shows that Americans support the idea of constructing the Keystone XL oil pipeline between Canada and the US by a nearly three to one margin, with 65% saying that it should be approved. The poll also indicated that the public thinks that the project will create a significant number of jobs.

Canadian Natural Resources Ltd. will pay $3.125 billion in cash in order to buy conventional oil and gas assets in Western Canada.

Canadian oil exports to the US increased 10% in 2013, averaging more than 2.5 million barrels per day.

The chief executive of the International Energy Agency, Maria van den Hoeven, said in an interview with The Christian Science Monitor that US oil and natural gas production will plateau, and then go down from 2025 onward.

The Economy

Wall Street

The Congressional Budget Office estimated that the federal government incurred a budget deficit of $184 billion for the first four months of fiscal year 2014, $107 billion less than the shortfall reported for the same period a year ago. If lawmakers pass no additional legislation affecting spending/revenues, the federal government will end fiscal year 2014 with a deficit of $514 billion compared with a $680 billion deficit in fiscal year 2013. The US Treasury Department reported that on March 5, 2014 the federal debt was $17.448 trillion. The US population is approximately 317 million, so each citizen’s share of the debt is roughly $55,000. The national debt has increased an average of $2.65 billion per day since September 30, 2012.

The $3.9 trillion federal budget released on March 4 would, according to some analysts, exceed the ceiling agreed to in December of last year with $56 billion in new stimulus spending.

The CBO recently concluded that the Affordable Care Act would result in the net loss of the equivalent of 2.5 million full time workers. This was followed by a CBO report stating that the higher minimum wage proposed by the administration would cost the economy as many as one million jobs.

The IMF modified its growth forecast for the world economy to 3.7% in 2014 and 3.9% in 2015, based on anticipated growth in advanced economies.

Personal income in January increased $43.9 billion or 0.3% according to the Bureau of Economic Analysis. In December, personal income decreased less than 0.1 % or $5.5 billion.

The Bureau of Economic Analysis second estimate showed an increase in Gross Domestic Product of 2.4% in the fourth quarter of 2013, that is, from the third quarter to the fourth quarter. This was revised from an earlier figure of 3.2%. It was noted that all the growth came from private spending and investment. In the third quarter real GDP increased 4.1%, in the second quarter, real GDP increased 2.5% and first quarter data showed an increase of 1.1%.

Current-dollar GDP, the market value of the nation’s output of goods and services, increased 4.0% or $167.8 billion in the fourth quarter to a level of $17,080.7 billion. In the third quarter current dollar GDP increased 6.2% or $251.9 billion to a level of $16,912.9 billion.

The Conference Board’s Leading Economic Index increased 0.3% in January to 99.5 (2004 = 100) following no change in December, and a 0.9% increase in November.

The Conference Board Consumer Confidence Index which had increased in January fell in February. The index now stands at 78.1 (1985 = 100), down from 79.4 in January.80.7 (1985 = 100) up from 77.5 in December.

The Institute for Supply Management’s February Manufacturing Index registered 53.2%, an increase of 1.9% from January’s reading of 51.3%, which was a decrease of 5.2% from December’s seasonally adjusted reading of 56.5%. The Non-Manufacturing Report for February was 54.6%,  a decrease of 1.7% from January’s 56.3%, but reflecting growth at a slower rate.

In January, retail and food services sales adjusted for seasonal variations were $427.8 billion, a decrease of 0.4% from December but 2.6% above January 2013. Total sales for the twelve months ending January 2014 were up 3.4% from a year earlier.

Privately owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 937,000, which was 5.4% below the revised December rate 991,000, but is 2.4% above the January 2013 figure of 915,000. Single family authorizations in January were at a rate of 602,000, which was 1.3% below the revised December figure of 610,000.

Sales of new single family houses in January were at a seasonally adjusted rate of 468,000. This was 9.6% above the revised December rate of 427,000 and is 2.2% higher than the January 2013 number of 458,000.

The National Association of Realtors reported that total sales of existing homes fell 5.1% in January to a seasonally adjusted annual rate of 4.62 million from a December rate of 4.87 million and were also 5.1% below the January 2013 rate of 4.87 million. The national median existing home price for January was up 10.7% from January 2013. Distressed homes, foreclosures and short sales, accounted for 15% of January sales, compared with 14% in December and 24% in January 2013.

New orders for manufactured durable goods in January decreased $2.2 billion or 1.0% to $225.0 billion. This decrease, down three of the last four months, followed a December decrease of 5.3%.

January unfilled orders for manufactured durable goods increased $0.6 billion or 0.1% to $1061.1 billion. This number has increased for eleven of the last twelve months.

Consumer Price Index for all urban consumers increased 0.1% in January on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.6% before seasonal adjustments. Food index rose 0.1% and has not posted a monthly increase larger than 0.1% since June 2013.  The electricity index posted its largest increase since March, 2010; gas and fuel oil rose as well whereas the gasoline index decreased.

The seasonally adjusted Producer Price Index for finished goods increased 0.2% in January, following a 0.1% increase in December and no change in November. On an unadjusted basis, prices for finished goods increased 1.2% for the twelve months ended in January 2014.

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

Inflation: Inflation rate for the twelve months ended in January 2014 reported at 1.6%; December was reported at 1.5%, November at 1.3%. A rate of 1.8% for 2014 is foreseen by some economists. An average rate of 2.1% was reported for 2012.

Industrial production decreased 0.3% in January, after having risen 0.3% in December, which was a fifth consecutive monthly increase. For the fourth quarter of 2013, it increased at an annual rate of 6.8%. Total industrial production in January was 2.9% above the rate of a year earlier. Capacity utilization rate for total industry decreased 1.6% to 78.5%, a rate 1.6 % below its 1972 – 2013 average.

Unemployment: The February unemployment rate was little changed at 6.7% from the January rate of 6.6% as reported by the Bureau of Labor Statistics. The number of unemployed persons was reported at 10.5 million. The long-term unemployed, i.e., jobless for 27 weeks and over was reported at 3.8 million in February, an increase of 203,000. Those individuals accounted for 37% of the unemployed. The number of long-term unemployed has declined by 901,000 in the past twelve months. In December, North Dakota continued to lead the nation with the lowest state unemployment rate of 2.7%; Rhode Island and Nevada were highest at 9.3% and 9.0% respectively.

The US Census Bureau and the Bureau of Economic Analysis through the Department of Commerce announced on March 7 that total January exports of $192.5 billion and imports of $231.6 billion resulted in a goods and services deficit of $39.1 billion, up from the revised December figure of $39.0 billion.

Crude Oil: WTI trading at ~$103/bbl, an increase of ~ $10 from a year earlier.

Extremely cold weather continued to drive up natural gas pricing through February and into early March. Henry Hub spot price rose to $7.90/MMBTU on March 4, and then settled back down to $6.41/MMBTU.  April contracts were trading at $4.52. Working natural gas in storage at the end of February decreased and was 43.2 % lower than last year at that time, and 38.8% lower than the five year average.

The US dollar trading at 102.4 Japanese yen; $Canadian 1.10; $1.37 = euro; The British pound sterling = $1.67.

Current US gold price quoted at $1338.00/ounce. The record price of $1920/ounce was recorded in September, 2011.

Chemical Industry News February 2013


The View from Jamestown – February 2013

The American Chemistry Council (ACC) US Chemical Production Index rose by 0.7% in January 2013 following a revised 0.9% increase in December 2012. Chemical production rose in all regions for the second consecutive month. Compared to January 2012 total chemical production in all regions was up 0.9%. The outlook for 2013 is sluggish, with increase of approximately 2% foreseen.

The ACC’s Chemical Activity Barometer(CAB) for February 2013 showed slow expansion, with a 0.6% gain over January. The year over year monthly moving average showed an increase of 2.9% compared with January 2012.

Senator Lisa Murkowski (R, AK) introduced an energy policy plan that includes drilling in ANWAR and opening the coasts of the Carolinas, Georgia, and Virginia to leasing.

The Carlyle Group completed its acquisition of DuPont Performance Coatings for $4.9 billion. The new organization will be known as Axalta Coating Systems.

The BPA issue surfaced again recently with a toxicology analysis of 150 studies by the Department of Energy that found that the amount of bisphenol A used in plastic bottles and food containers is too little to account for negative effects on humans.

Air Products and Chemicals installed a $400 million demonstration-scale carbon capture system that can reduce carbon dioxide emissions at Valero’s Port Arthur, Texas refinery by approximately one million tons per year.

Senate Environmental and Public Works Committee Chair Barbara Boxer (D, CA) and Sen. Bernie Sanders (I, VT) have proposed a bill that would tax carbon dioxide emissions of major industrial facilities, including natural gas processing plants. Their plan would charge a $20 tax for every ton of CO2 emitted beyond a set limit.

Plastic film recycling increased 4% in 2011 reaching 1 billion pounds annually for the first time. The category includes plastic bags, product wraps, and commercial shrink film. It was reported that recycling of plastic film has increased 55% since 2005.

A federal judge ordered that the Department of Health and Human Services meet with the ACC on February 27 regarding whether or not the department and its agencies have fulfilled ACC’s Freedom of Information Act request regarding a study on formaldehyde.

US chlor-alkali operating rate for January 2013 was reported at 80% of capacity, essentially the same as December’s 81%. In January, the UN Environmental Program’s Mercury Convention passed a set of legally binding measures accepted by more than 140 countries. It was agreed that there will be a mandatory deadline for phasing out mercury cells in chlor-alkali production by 2025. The EU deadline is 2020.

The federal government is implementing procedures to stop China, Russia, India, and other nations from stealing trade secrets worth billions of dollars from US businesses. Thefts of information from DuPont and Dow Chemical were cited as examples.

Officials from the US and the European Union stated on February 13 that they were moving ahead on major issues to resolve a US-Europe trade agreement. Such an agreement would lower/reduce import duties as well as reach agreement on regulations governing many industries including chemicals and drugs. The UN is moving towards this with its Globally Harmonized System of Classification and Labelling. Finalization is possible before the end of 2014. The ACC has strongly endorsed the initiative.

The European Commission has said that REACH chemical legislation has affected the prices of some chemicals in Europe. It was reported that the cost of complying with this legislation has discouraged some companies from competing.

Great Britain’s pound sterling has fallen 4% against the dollar and 8% against the euro since October 1, 2012 in spite of the government’s success in reducing expenditures. From 2009 to 2012 UK government expenditures rose a total of 1.6% compared to the US rate of 7.9%. The country’s credit rating was recently downgraded by Moody’s from Aaa, the highest possible, to Aa1.

Unemployment in the eurozone was reported at 11.7 % in December.

The German economy registered a contraction of 0.6% in the fourth quarter and grew by 0.7% for all of 2012, compared with a positive 3% in 2011. Economists are confident that the German economy will start expanding again in the first quarter.

In France, the economy shrank by 0.3% in the fourth quarter, which was weaker than expected. France’s economic growth for 2012 was zero.

Russia has become the world’s largest gold buyer, with its central bank having acquired 570 metric tons in the past decade. The Russian cache of 958 tons is the world’s eighth largest; the US is first with approximately 8,000 tons.

China surpassed the US last year in order to become the world’s largest trading nation as measured by the sum of imports and exports. US exports and imports of goods totaled $3.82 trillion in 2012; China’s government reported trade in goods of $3.87 trillion. China’s export growth in January rose 25% from a year earlier.

Since 2008, China’s total public and private debt has grown to more than 200% of GDP, yet the consensus shows little risk to continued economic growth.

The recent announcement of the merger of American Airlines and US Airways will be the world’s largest air carrier, keeping the American Airlines name. It will be run by US Airways CEO Doug Parker. When the merger is completed, American, United, Delta, and Southwest will control about 75% of US airline traffic.

One of the worst droughts in decades along the Mississippi River caused mounting concern in the new year among shippers and navigation experts who were faced with the threat of a halt or reduced barge traffic on the river. If river traffic were shut down, industry experts said that 8,000 jobs could be affected, cost $54 million in wages, and halt the movement of 7.2 million tons of commodities with a value of $2.8 billion.

The Association of American Railroads announced that US Class I railroads originated a record 233,811 carloads of crude oil in 2012, up 256% from the 65,751 carloads in 2011. Mixed carload traffic on major US railroads for the week ending 2/16/13 declined 1.2% year over year. Intermodal volume was up 13.6% compared with the same week last year.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 2.9% January after increasing an adjusted 2.4% in December.


Company representatives stated that BASF and Lanxess are reviewing building petrochemical facilities in the US in order to take advantage of cheap natural gas.

New York Governor Cuomo missed another deadline for completing a report on the environmental impact of hydraulic fracturing (fracking.) Some observers say that nothing will happen until 2014.

Occidental Petroleum Corp. (Oxy) has applied to build an ethylene plant in Ingleside, Texas, the latest company to consider new capacity in the region as generous gas supplies cut costs for chemical producers. Construction is expected to start in December 2014 with production beginning in early 2017.

The Institute for Energy Research has said that potential revenues from giving oil and natural gas drillers more access to public lands are much greater than the Congressional Budget Office’s estimates. According to the IER, the nation’s gross domestic product would increase by $127 billion annually for the next seven years through expanded development.

Shell Chemicals is still considering moving ahead with construction of a petrochemical plant in Pennsylvania.

Researchers at MIT have developed a process of treating water byproducts from the oil and natural gas industry through humidification dehumidification.



The Congressional Budget Office reported that the federal government incurred a budget deficit of $295 billion for the first four months of the fiscal year 2013 (that is, October 2012 through January 2013), $54 billion less than the shortfall recorded in the first quarter of last fiscal year. The US Treasury Department reported that on February 25, 2013 the federal debt was $16.62 trillion. It was $5.7 trillion in 2001.

The White House missed the legal deadline of February 4 for sending a fiscal 2014 budget to Congress. A budget official said that submission will happen in mid-March. The Senate last passed a budget resolution in 2009.

As of February 27, there was a continuing impasse between the Congress and the White House regarding automatic budget cuts (sequestration) scheduled to be implemented on March first. Sequester focuses on the portion of the budget that funds operating accounts for federal agencies and departments, including the Department of Defense.

The US government debt held by foreign entities is a record $5.55 trillion, with China holding $1.20 trillion of it, or approximately 21.6% 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 $1.12 billion.

The Bureau of Economic Analysis advance estimate of the fourth quarter 2012 Gross Domestic Product showed a decrease of 0.1% at an annual rate that is from the third quarter to the fourth quarter. 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 rate of .05% or $18 billion in the fourth quarter to a level of $15,829 .0 billion. In the third quarter current dollar GDP increased 5.9% or $225.4 billion.

The Conference Board’s Leading Economic Index rose 0.2% in January to 94.1 (2004=100) following a 0.5% increase in December and no change in November.

The Conference Board Consumer Confidence Index which had declined in November and December fell again in January. It stands at 56.8 (1985=100) down from an adjusted 66.7 in December.

The Institute for Supply Management’s Manufacturing Index increased 2.9% to 53.1% in January, showing expansion for the second consecutive month. A reading above 50% indicates that the manufacturing economy is generally expanding. The Non-Manufacturing Report for January was 55.2%, 0.5% lower than the 55.7% registered in December but still indicating continued growth.

In January, retail and food services sales adjusted for seasonal variations were $416.6 billion, an increase of 0.1% from December 2012 and 4.4% above January 2012. November 2012 through January 2013 sales were up 4.5% from the same period a year ago.

Privately owned housing starts in January of 890,000 were 8.5% below the revised December estimate of 973,000 and were 23.6% above the January 2012 rate of 720,000. Single family housing starts in January were at a rate of 613,000 or 0.8% above the revised December figure of 608,000. New home sales increased 15.6% in January to a seasonally adjusted annual rate of 437,000. This was 28.9% above the January 2012 estimate of 339,000.

The National Association of Realtors reported that sales of existing homes rose in January and left the supply of homes at its lowest level in 13 years. This was taken as a sign that steam is gathering in the US housing market. Sales of existing homes rose 0.4% in January to a seasonally adjusted annual rate of 4,920,000 units. The national median existing home prices rose in January, up 12.3% from a year earlier.

New orders for manufactured durable goods in January decreased $11.8 billion or 5.2% to $217 billion. This followed four consecutive monthly increases.

January unfilled orders for manufactured durable goods decreased $2.1 billion or 0.2% to $989.2 billion. This followed four consecutive monthly increases.

Consumer Price Index for all urban consumers was unchanged in January on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.6 % before seasonal adjustments. The energy index fell 1.7% in January, but other indices such as food and shelter increased, resulting in the all items index being unchanged. However, the gasoline index was on its way up in February.

The Producer Price Index for finished goods increased 0.2% in January, seasonally adjusted, following a decrease of 0.3% in December and 0.4% in November. On an unadjusted basis, prices for finished goods increased 1.4 % for the twelve months ended in January 2013.

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

Inflation: Inflation rate in January reported at 1.6%. The December rate was 1.7%, November rate was 1.8%. The October rate was 2.2%, September rate was 2.0% and the August rate was 1.7%. The average rate was 2.1% was reported for 2012. It is expected to rise slightly in 2013 to approximately 2.3%.

Industrial production decreased 0.1% in January, after having risen 0.4% in December. At 98.6% of its 2007 average, total industrial production in January was 2.1% above its year-earlier level. Capacity utilization rate for total industry decreased to 79.1%, a rate1.1% below its 1972 – 2012 average.

Unemployment: The January 2013 rate was essentially unchanged at 7.9% as reported by the Bureau of Labor Statistics. The number of unemployed persons increased 157,000 to12.3 million. The BLS stated that the long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.7 million. Those individuals accounted for 38.1% of the unemployed. North Dakota continued to lead the nation with the lowest state unemployment rate in December of 3.2%; Nevada and Rhode Island were both reported highest at 10.8%. The Federal Reserve announced on December 20 that it would hold interest rates near zero until it hit the target of 6.5% unemployment.

The goods and services deficit was $540.4 billion in 2012, down from $559.9 billion in 2011. As a percentage of US gross domestic product, the goods and services deficit was 3.4% in 2012, down from 3.7% in 2011. Both imports and exports increased during the year.

Crude Oil: Present WTI spot price ~$93 – 96/bbl, compared to ~$100+/bbl a year earlier.  OPEC has reduced production and that isn’t likely to change short term. OPEC outlook shows a reduction in demand.

Natural Gas:  Henry Hub spot price closed on February 22 at $3.34/MMBTU.  February 2013 contract reported at $3.28/MMBTU. Working natural gas in storage is lower than last year and remains above the five year average

The US dollar trading at 92.5 Japanese yen; $1.31 = euro. The British pound sterling = $1.52. Canadian dollar trading at US$1.03.

Current US gold price quoted at $1595.00/ounce compared to the record price of $1920/ounce in September, 2011.