Chemical Industry News – April 2013

 

Chemical Industry News

The American Chemistry Council (ACC) US Chemical Production Index declined by 0.1% in March 2013 following a revised 0.4 % increase in February. Compared to March 2012, chemical production rose in all regions by 0.9% following February’s 0.8% year to year increase. Comparing the first three months of 2013 to those of 2012, total chemical production rose 0.8% nationally.

The ACC’s Chemical Activity Barometer (CAB) slipped by 0.1% in March, following a revised 0.4% gain in February. The year over year monthly moving average showed an increase of 0.9% compared with March 2012.

The recent explosion of a fertilizer plant in Texas has caused legislators to focus on the Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards program (CFATS) and its implementation. Senator Frank Lautenberg, D-NJ has called for new legislation on chemical plant safety as a result of this incident.

The Environmental Protection Agency (EPA) chemicals office will use the risk assessments it is developing for an initial group of fourteen chemicals to evaluate, reduce, and manage risks in these and similar compounds that may already be in commerce, an EPA senior chemicals officer said on April 18.

The EPA has significantly reduced its estimate of the amount of methane emissions generated by hydraulic fracturing (fracking) operations. The agency now says that the tighter pollution controls put in place by the oil/gas industry resulted in an annual decrease of 41.6 million MT of methane emissions from1990 through 2010, or more than 850 million MT in total. During the same period production grew by close to 40%.

According to a recent EPA analysis, emissions of greenhouse gases (GHG) decreased slightly in 2011, dropping 1.6% year to year. Since 2005, levels have gone down nearly 7%. The agency cited improvements in automobile fuel efficiency, reduction of coal consumption and a relatively mild winter for this decline.

The EPA’s Office of Chemical Safety and Pollution Prevention would get $686.2 million in fiscal 2014 under the White House budget proposal.

The ACC has expressed concern about how budget cuts could affect the EPA’s permitting activities for industrial facilities, with possible delays in capital projects as a result.

In the most recent activity around BPA, on April 19 a judge in California ordered on April 19 that the chemical be removed from the state’s list of reproductive toxicants.

Methanex plans to move a second plant from Chile to Geismar, Louisiana. The two facilities will hire a total of 165 employees. Kinder Morgan Energy Partners will invest $58 million to expand its methanol storage capacity in Geismar, LA near the Methanex site.

Cytec has completed the sale of its coating resins business to Advent International, a private equity company. The price was reported as $1.13 billion.

DuPont reported that profit more than doubled in the first quarter from the year-ago period as the company shifts its focus from paint pigments to agriculture.

BASF leads other European industrial companies in US investment, driven largely by favorable natural gas prices. Since 2009, BASF has invested more than $5.7 billion in US facilities.

LyondellBasell Industries could add a polyethylene (PE) line with approximately one billion pounds annual capacity, and a PE debottlenecking project in North America. These projects are in addition to other ethylene capacity expansions in Texas and are based on abundant supply of natural gas and natural gas liquids.

US chlor-alkali operating rate for February 2013 was reported at 82% of capacity, compared with 85% a year earlier. January operating rate was 78% according to the Chlorine Institute.

Chinese first quarter GDP figures showed an increase of 7.7% year to year. This was lower than the target of 8%.

Unemployment across the seventeen European Union countries that use the euro hit a new record high of 12.0% for the first two months of 2013.

According to figures published on April 25, the number of unemployed workers in Spain and France has reached all-time highs. Spain’s unemployment rate was 27.16%. In France’s unemployment rate stands at 10.6%, with youth unemployment hitting 25%. German Finance Minister Schaeuble said he will discuss a “bilateral investment program” with his Spanish counterpart, which is hoped that will become a model for the rest of Europe. Germany’s unemployment rate was 6.9% in March.

EU exports of chemical products increased by 8% year-on-year in 2012 according to the EU statistics body Eurostat.

Russian statistics agency Rosstat said that Russia’s overall production of chemical and petrochemical products was up year on year in January and February. Plastics and synthetic rubber outputs were up significantly.

Russia’s SIBUR polypropylene plant is due to come on stream in the near future, which could double the company’s basic polymers capacity.

Saudi Acrylic Polymers Co. (SAPCO) is on schedule for a September start-up of its 80,000 MT/year superabsorbent polymers plant in Al-Jubail, Saudi Arabia. This will be the first SAP plant in the Middle East.

Trinidad and Tobago and a group led by Mitsubishi Gas Chemical signed an agreement to build a methanol to petrochemical project in a new industrial area in the country. The cost is estimated at $850 million.

Carload rail volume was down 2% annually as of the week ending April 20 on major US railroads. Intermodal volume was up 0.6% compared with the same week last year. Petroleum products shipments were up 40%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 0.9% in March after decreasing an adjusted 0.7% in February. Tonnage has increased in four of the past five months.

In a deal expected to end long delay for fliers caused by sequestration, Congress speedily approved a bill to revoke the furlough of air traffic controllers.

Shale oil and Gas-related

 

Pennsylvania State University is creating the Institute for Natural Gas Research in order to study natural gas developments in the Marcellus Shale. The project involves more than seventy faculty members.

Phillips 66 finalized agreements with energy logistics companies to increase supplies of lower cost US and Canadian crude oil, including Bakken shale product, to its US refineries.

The US east coast has seen a rejuvenation of refinery activities due to shale-based crude oil. Oil companies have begun to bring domestic shale east by rail then ship it down the coast. The Carlyle Group is building a high-speed rail facility as well.

The House Science, Space and Technology Committee was to have held a hearing on April 25 on the federal government’s studies of fracking. Officials from all concerned agencies were expected to testify.

Interior Secretary Sally Jewell was recently quoted saying that based on her experience fracking is a safe drilling procedure.

News that the UK government is to promote shale gas exploration is expected to be greeted positively by the European chemical industry, which is struggling with a non-competitive feedstock market.

Royal Dutch Shell and Williams Partners are forming a joint venture to supply natural gas and liquids to petrochemical facilities in northwest Pennsylvania, including a possible ethane cracker. The company will be called Three Rivers Midstream and will be operated by Williams, with Shell having the right to increase its investment.

David Spence of the University of Texas recently wrote that state-based regulation of fracking is more effective than federal oversight. He stated that the benefits and costs of fracking fall mostly on local and state communities.

China reportedly has about twice the amount of shale gas reserves as does the US and Chinese firms are eager to learn shale technology. Analysts expect a Chinese shale gas boom possibly as soon as three years from now.

The Economy

The Congressional Budget Office reported that the federal government incurred a budget deficit of $601 billion for the first half of fiscal year 2013 (that is, October 2012 through March 2013), $178 billion less than the shortfall recorded for the same period last year. The deficit in March 2013 amounted to $107 billion. The US Treasury Department reported that on April 27, 2013 the federal debt was $16.77 trillion. The national debt has increased an average of $3.81 billion per day since September 2007.

March personal income increased by $30.9 billion, or 0.2% compared to February. Consumer spending rose 0.2% in March. In February personal income increased $151.2 billion or 1.1% and spending increased $81.6 billion, or 0.7%.

It’s been reported in The Wall Street Journal that Congressional leaders were in confidential talks to exempt themselves and their staffs from Obamacare.

The US government debt held by foreign entities is in excess of $5.5 trillion, with China holding $1.23 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 estimate of the first quarter 2013 Gross Domestic Product showed an increase of 2.5%, that is from the fourth quarter of 2012 to the first quarter of 2013. 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 rate of 3.7% or $146.1 billion in the first quarter of 2013 to a level of $16,010 billion. In the fourth quarter current dollar GDP increased 1.3% or $53.1 billion.

The Conference Board’s Leading Economic Index declined 0.1% in March to 94.7 (2002=100) following a 0.5% increase in February and an increase of 0.5% in January.

The Conference Board Consumer Confidence Index which had improved in February, declined in March. It stands at 59.7 (1985=100) down from an adjusted 68.0 in February.

The Institute for Supply Management’s Manufacturing Index decreased 2.9% to 51.3% in March, showing expansion for the fourth consecutive month but at a slower rate. A reading above 50% indicates that the manufacturing economy is generally expanding. The Non-Manufacturing Report for March was 54.4%, or 1.6% lower than the 56% reported for February, but reflecting growth for 44 consecutive months.

In March, retail and food services sales adjusted for seasonal variations were $418.3 billion, a decrease of 0.4% from February and 2.8% above March 2012. January through March 2013 sales were up 3.7% from the same period a year ago.

Privately owned housing starts in March of 1,036,000 were 7.0% above the revised February estimate of 968,000 and were 46.7% above the March 2012 rate of 706,000. Single family housing starts in March were at a rate of 619,000 or 4.8% below the revised February figure of 650,000. New single home sales were at a seasonally adjusted annual rate of 417,000. This was 1.5% above the revised February rate of 411,000 and 18.5% above the March 2012 estimate of 352,000.

The National Association of Realtors reported that sales of existing homes edged down 0.6% in March to a seasonally adjusted annual rate of 4.92 million units. Sales of existing homes in March were 10.3% higher than the same period a year earlier.

New orders for manufactured durable goods in March decreased $13.1 billion or 5.7% to $216.3 billion. This decrease, down two out of the last three months, followed a 4.3% increase in February.

March unfilled orders for manufactured durable goods decreased $6.4 billion or 0.6% to $991.2 billion. This followed an increase of 0.7% in February.

Consumer Price Index for all urban consumers decreased 0.2 % in March on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.5 % before seasonal adjustments. Food index was unchanged in March, and the gasoline index decreased 4.4% in March.

The Producer Price Index for finished goods decreased 0.6 % in March, seasonally adjusted, following increases of 0.7% in February and 0.2% in February. Unadjusted basis prices for finished goods increased 1.1 % for the twelve months ended in March 2013, the smallest twelve month increase since a 0.5% rise in July 2012.

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

Inflation: Inflation rate in March reported at 1.5%. The February rate was 2.0%, January rate was 1.6%, and the December rate was 1.7%. The average rate of 2.1% was reported for 2012. It is expected to rise slightly in 2013 to approximately 2.3%.

Industrial production 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%m the largest gain since the first quarter of 2012. At 99.5% of its 2007 average, total industrial production in March was 3.5% above its year-earlier level. Capacity utilization rate for total industry increased to 78.5%, a rate 1.2% above the level of a year earlier, but 1.7% below its 1972 – 2012 average.

Unemployment: The March 2013 rate was little changed at 7.6%, and has shown little movement since September 2012. The number of unemployed persons was reported at 11.7 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 4.6 million in March. Those individuals accounted for 39.6% of the unemployed. North Dakota continued to lead the nation with the lowest state unemployment rate in March of 3.3%; Nevada was reported highest at 9.7%, Illinois, Mississippi, and California close behind.

The goods and services deficit decreased to $43.0 billion in February, from $44.5 billion in January as exports increased more than imports. President Obama recently told his advisory council on exports that the US is on target toward his goal of doubling US exports before 2015. He said that the best way to increase exports is to move ahead with free trade agreements in Asia and Europe.

Crude Oil: Present WTI spot price ~$93/bbl, compared to ~$100+/bbl a year earlier. OPEC outlook continues to show a slight reduction in demand in 2013.

Natural Gas: Henry Hub spot price closed on April 23 at $4.25/MMBTU. May 2013 contract reported at $4.40/MMBTU. Working natural gas in storage is lower than last year and the five year average.

The US dollar trading at 98.0 Japanese yen; $1.30 = euro. The British pound sterling = $1.54. The Canadian dollar trading at US$1.01.

Current US gold price quoted at $1463.60/ounce, down from $1597.00/ounce approximately one month earlier. The record price of $1920/ounce was recorded in September, 2011.

Chemical Industry News February 2013

CHEMICAL INDUSTRY NEWS

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.

SHALE OIL & GAS-RELATED

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 ECONOMY

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.