Chemical Industry News – February

Chemical Industry News - FEBRUARY 2014

Chemical Industry News – February 2014

The American Chemistry Council (ACC) US Chemical Production Index rose by 0.8% in December, following a gain of 0.3% in November. The gain was seen to be driven by increases in the Gulf Coast and Ohio Valley regions. Production increased in all seven regions of the US for the second consecutive month. Compared to December 2012, total chemical production in all regions increased by 1.4% year-over-year, following a gain of 1.5% in November. Comparing twelve months of 2013 to those of 2012, total chemical production rose 1.2% nationally.

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.

A House Energy and Commerce subcommittee hearing in early February was expected to discuss chemical testing and reporting under the Toxic Substances Control Act. Work continues on a bipartisan bill from Sens. David Vitter, R-LA and the late Frank Lautenberg, D-NJ. Senator Vitter is also hopeful that a revised version of the Chemical Safety Improvement Act will be introduced soon and will clear Congress this year.

The European Commission has determined that the use of high molecular weight phthalates in certain toys and child care products poses no risk to infants. The decision was in line with the conclusions presented last August by the European Chemicals Agency (ECHA).

Dow Chemical reported a net income or $963 million for the fourth quarter of 2013 compared to a net loss of $761 million for the same period a year earlier.
BP and the Chinese Academy of Sciences have formed a joint venture to build two methanol plants in the State of Washington. Each facility is expected to cost $1 billion. The plants will be used to process natural gas into methanol for export to China.

The Celanese-Mitsui joint venture methanol plant start-up may be delayed until the third quarter of 2015, instead of the planned second quarter because of delayed EPA approval.
BASF entered into a joint venture with Sinopec to produce isononyl alcohol (INA) in Maoming, China. The plant is expected to start up in 2015.
BASF has announced a reduction, based on decreased demand, of 120,000 MT/year latex capacity for paper production. The company also plans to build a world-scale methylglycinediacetic acid (MGDA) plant at Evonik’s facility in Theodore, AL. The $90 million project is expected to start up in the second half of 2015.
SABIC is discussing possible investment in the U.S. shale gas industry, and is expected to enter the market this year. No estimates of size or type of investment were given.
US chlor-alkali average operating rates declined to 84% in December 2013 from November’s 85%.
The EPA notified oil industry groups on January 23 that it would reconsider its target for advanced ethanol made from grasses and trees, as producers struggle to produce it. The industry had petitioned the EPA to reconsider a mandate of 6 million gallons based on capability of one million gallons.

European countries dependent on Russia for natural gas are forming a group to lobby Washington in an effort to loosen export restrictions so that they can buy the fuel from the US. Most of the countries involved are in Eastern Europe. Their efforts are supported by America’s Natural Gas Alliance and the American Petroleum Institute.

The EPA published re-proposed carbon dioxide limits for new power plants on January 8, setting separate standards for coal-fired and natural gas-fired generating units. The rule revised an April 2012 proposal, in which the EPA had intended to set a single standard for both types of plants. According to the EPA, modern natural gas plants are essentially able to meet the new standard. The rule will make it very difficult for new coal-fired plants to be built in the US; utilities will only be able to build them if they are able to capture 20 to 40% of the carbon they emit and store it underground. The technology to do this is carbon capture and storage (CCS). Members of Congress and fossil fuel industry leaders are on record as saying that the CCS technology needed to meet the standard isn’t ready for commercial use. A 60 day comment period was established on the proposal. Legal challenges from industry are expected.

A Wall Street Journal report on California’s new Ivanpah solar energy plant noted that costs are approximately four times as much as a conventional gas-fired plant, but will produce less electricity. There are concerns about wildlife with dozens of dead birds being reported at the site. The project cost is estimated at $2.2 billion. It covers a desert area over roughly five square miles.

Legislation introduced in the Rhode Island House of Representatives intends to extend the life of the state’s central landfill by redirecting food waste for the production of energy and compost. The measure would phase in a requirement that all non-residential food waste be separated.

The US Postal Service lost $354 million in the financial quarter ending December 31 but was far less than the $1.3 billion loss in the comparable quarter for the previous fiscal year. The cost of a first class stamp was increased from 46 to 49 cents on January 26. The Postal Service lost $5 billion in the past fiscal year, down from $15.9 billion in 2012. Congress continues to work on fixing the agency’s financial problems.

The latest information available indicated that Russian production of chemicals and petrochemical products increased 3.3% year over year in the first half of 2013.
China’s economy grew by a healthy 7.7% in 2013, although signs of a slowdown emerged late in the year. This reflected a cooling in economic growth from the double-digit rates reported in the past.
China’s producer price index in December was 1.4% lower year to year and was viewed by some as a sign of slowness in the manufacturing sector.
China’s consumer price index increased at an annual rate of 2.5% in December down from 3.0% in November.

China’s exports rose an unexpected 10.6% from a year earlier in January, while imports increased 10%, resulting in a trade surplus of $31.9 billion.

Germany indicated that it is preparing a third rescue package for Greece provided that Greece implements austerity measures. The new loan would be worth between €10 and €20 billion. The IMF has been at odds with Germany and other lenders over the need to write off Greece’s debt.

Germany’s business climate continued to grow, but slightly, in January. Munich-based Ifo, an economic research group, reported that its monthly business climate index for Germany rose to 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 December. It was 11.9% a year earlier. The lowest rates among member states were Austria at 4.9%, Germany at 5.1% and Luxembourg at 6.2%. The highest rates among member states were Greece at 26.1% and Spain at 25.8%. However, during the same period sales rebounded 1.6% versus a year ago.

Inflation in the Euro zone was reported at 0.8%, down from 0.9% in November. This was less than half of the European Central Bank’s ceiling, which indicated economic weakness in parts of the region.
The Railway Supply Institute Committee on Tank Cars has called on the US Department of Transportation (DOT) to consider new safety measures for tank cars carrying crude oil and ethanol. The committee proposed additional safety requirements on newly-built railway tank cars, a prohibition on other older cars. It was estimated that it will take ten years to modify many existing tank cars.

The National Transportation Safety Board has recommended rules that it said will protect people and the environment along routes where trains haul crude oil.
Total carload rail volume for January increased 0.4% overall compared with January 2013. Intermodal volume was up 1.3% compared to the same period in 2013 and was highest weekly average for any January on record. Petroleum products shipments were up 10.4%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 0.6% in December after surging 4.7% in November. The index was 6.2% higher year to year. Trucking serves as a barometer of the US economy, representing 68.5% of tonnage carried by all modes of domestic freight transportation.

 

SHALE OIL & GAS RELATED

Gas PricesAccording to a report from the IHS Cambridge Energy Research Associates, thanks to shale production, natural gas prices in North America will remain in the range of $4 to $5 per thousand cubic feet for at least twenty years.

Hess Corp. said that it plans to spend $2.85 billion for exploration and production on unconventional shale resources, primarily in North Dakota’s Bakken area.
ExxonMobil Corp plans to move up to 100,000 barrels per day of Canadian oil sands crude using a new rail terminal in Alberta that should be running by 2015.
Great Britain’s Prime Minister David Cameron has approved a move to encourage hydraulic fracturing. He predicted that developing the country’s shale reserves will cut energy costs, create 74,000 jobs, and boost investments by more than $4 billion.

The continuing Keystone XL oil pipeline issue cleared a major hurdle on January 31 when the State Department reported no major environmental objections to the proposed $7 billion project. The report stopped short of recommending approval. Canadian tar sands are likely to be developed regardless of U.S. action on the pipeline, with China the most probable customer. President Obama still wants to hear from other federal agencies before making his decision. Former Interior Secretary Ken Salazar has said that the pipeline is a ‘win-win” project and would be in the national interest. The White House has denied claims from former Energy Secretary Steven Chu that the decision is a political one.

Replacing the Keystone XL pipeline with freight trains could result in an average of six additional rail-related deaths per year, according to a State Department report. The fatality and injury estimates were based on data from both the Federal Railway Administration and the Pipeline and Hazardous Material Safety Administration.

 

THE ECONOMY

EconomyThe 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 February 10, 2014 the federal debt was $17.262 trillion. The national debt has increased an average of $2.40 billion per day since September 30, 2012.
The CBO reported on February 4 that the economic effects of the Affordable Care Act (Obamacare) will result in a bigger reduction in working hours than previously estimated. The report said that by 2017, due partly to smaller companies reducing worker hours to avoid requirements that full time workers be offered health insurance, there will be the equivalent of 2 million fewer full time equivalent workers. In 2011 the CBO had estimated that the law would cause a reduction of 800,000 full time equivalent workers.
Personal income in December increased $2.3 billion or less than 0.1% according to the Bureau of Economic Analysis. In November, personal income increased 0.2 % or $29.8 billion.

The Bureau of Economic Analysis “advance” estimate showed an increase in Gross Domestic Product of 3.2% in the fourth quarter of 2013, that is, from the third quarter to the fourth quarter. 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 4.6% or $189.6 billion in the fourth quarter to a level of $17,102.5 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 0.1% in December to 99.4 (2004 = 100), following a 1.0% increase in November, and 0.1% increase in October.

The Conference Board Consumer Confidence Index which had increased in December, increased again in January. The index now stands at 80.7 (1985 = 100) up from 77.5 in December. November was reported at 72.0.

The Institute for Supply Management’s January Manufacturing Index registered 51.3%, a decrease of 5.2% from December’s seasonally adjusted reading of 56.5%, which was 0.3% below the November reading of 57.3%. This was after seven consecutive monthly increases. The Non-Manufacturing Report for January was 54%, an increase of 1.0% over December’s 53%, which was a decrease of 0.9% from November’s 53.9%.

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 December were at a seasonally adjusted annual rate of 986,000, which was 3.0% below the revised November rate 1,017,000, but is 4.6% above the December 2012 figure of 943,000.3.1% Single family authorizations in December were at a rate of 610,000, which was 4.8% below the revised November figure of 641,000.

Sales of new single family houses in December were at a seasonally adjusted rate of 414,000. This was 7.0% below the revised November rate of 445,000 but is 4.5% higher than the December 2012 number of 396,000.

The National Association of Realtors reported that total sales of existing homes increased 1.0% in December to a seasonally adjusted annual rate of 4.87 million from a downwardly revised November rate of 4.82 million and were 0.6% below the December 2012 rate of 4.90 million. The national median existing home price for 2013 was 11.5% above 2012. Distressed homes, foreclosures and short sales, accounted for 14% of December sales, at no change from October and November. They were 24% in December 2012.
New orders for manufactured durable goods in December decreased $10.3 billion or 4.3% to $229.3 billion. This decrease, down two of the three last months, followed a 2.6% increase in November.
December unfilled orders for manufactured durable goods increased $3.9 billion or 0.4% to $1061.5 billion. This number has increased for ten of the last eleven months.
Consumer Price Index for all urban consumers was increased 0.3% in December 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 rose 0.1% and has not posted a monthly increase larger than 0.1% since June 2013. The gasoline index increased 3.1% and fuel oil and electricity rose as well, accounting for a 2.1% increase in the energy index.
The seasonally adjusted Producer Price Index for finished goods increased slightly 0.4% in December. Prices for finished goods declined 0.1% in November, 0.2% in October and 01% in September. On an unadjusted basis, prices for finished goods increased 1.2% for the twelve months ended in December 2013, compared with a 1.4% increase in 2012.
Interest rate: Prime at 3.25%, unchanged since 12/16/08.

Industrial production increased 0.3% in December, for a fifth consecutive monthly increase. For the fourth quarter of 2013, it increased at an annual rate of 6.8%, the largest quarterly increase since the second quarter of 2010. The November gain was the largest since November 2012. Capacity utilization rate for total industry increased 0.1% to 79.2%, a rate 1.0% below its 1972 – 2012 average.
Unemployment: The January unemployment rate was little changed at 6.6% from the December 2013 rate of 6.7% as reported by the Bureau of Labor Statistics. The number of unemployed persons was reported at 10.2 million. Since October, the jobless rate has decreased by 0.6%. The long-term unemployed, i.e., jobless for 27 weeks and over was reported at 3.6 million in January, a decline of 232,000. Those individuals accounted for 35.8% of the unemployed. The number of long-term unemployed has declined by 1.1 million in the past twelve months; part of the decline has been attributed to people dropping out of the labor force. In December, North Dakota continued to lead the nation with the lowest state unemployment rate of 2.6%; Rhode Island and Nevada were highest at 9.1 % and 8.8% respectively.
The US Census Bureau and the Bureau of Economic Analysis through the Department of Commerce announced on February 6 that total December exports of $191.3 billion and imports of $230.0 billion resulted in a goods and services deficit of $38.7 billion, up from the November figure of $34.6 billion.

Extremely cold weather continued to drive up natural gas pricing. Henry Hub spot price rose on February 5 to $7.90/MMBTU an increase of $2.70/MMBTU. This was the highest Henry Hub has been since September, 2008. Regional price variations were pronounced and fluctuated with temperature shifts. March futures declined to the $5.00/MMBTU range. Working natural gas in storage at the end of January decreased and was 28.8 % lower than last year at that time, and 22.4% lower than the five year average.
Crude Oil: WTI trading at ~$100/bbl, little changed from a year earlier.

Inflation: Inflation rate for the twelve months ended in December reported at 1.5%; November was reported at 1.3%, October was reported at 1.0%, September at 1.2%. A rate of 1.8% for 2014 is foreseen by some economists. An average rate of 2.1% was reported for 2012.

U.S. Dollar: Trading at 102.6 Japanese yen; $Canadian 1.09; $1.36 = euro; The British pound sterling = $1.66.

Current U.S. Gold Price: Quoted at $1292.00/ounce. The record price of $1920/ounce was recorded in September, 2011.

 

Chemical Industry News – January

Chemical Industry News

Chemical Industry News - January 2014 - The Chemical Company

The American Chemistry Council (ACC) US Chemical Production Index rose by 0.3% in November, following three consecutive monthly declines. Production increased in all seven regions of the US during the month.  Compared to November 2012, chemical production in all regions increased by 1.5% year-over-year, following a revised gain of 1.7% in October. Comparing the first eleven months of 2013 to those of 2012, total chemical production rose 1.3% nationally, with six of the seven regions posting gains.

The ACC’s Chemical Activity Barometer (CAB) rose by 0.1% in December. Following an increase of 0.1% in November, the CAB remains up 2.8% over a year earlier and is at its highest point since June 2008.

The ACC issued a report in December entitled “2013 Chemical Industry Situation and Outlook: American Chemistry is Back in the Game”, saying that chemical sales in the US will reach $1 trillion by 2018 and that R&D spending will rise to $68.7 billion. The outlook for Europe is less optimistic with a Eurozone growth of 1% in 2014.

WR Grace announced that it had completed the acquisition of Dow Chemical’s polypropylene licensing and catalyst business in a $500 million cash transaction.

Nova Chemicals is moving forward with several projects in the Sarnia, Ontario, Canada area and is evaluating options for a new $1 billion polyethylene plant.

Phillips 66 will sell Phillips Specialty Products to Berkshire Hathaway for approximately $1.4 billion in stock. The company produces chemicals related to pipeline flow potential. The agreement is expected to be finalized by mid-year.

Axiall is planning a $3 billion ethane cracker in Louisiana pending approval from their board of directors.

Cargill announced that it is to built a new ethanol plant in Saxony Anhalt, Germany, with an investment of ~$82 million. The new facility will serve the beverage, cosmetics, and pharmaceuticals industries.

On December 8, 2013 Sysco Corp. of Houston agreed to purchase US Foods of Rosemont, IL in a deal valued at approximately $3.5 billion.

The Society of Chemical Manufacturers and Affiliates (SOCMA) has called for the re-authorization of the miscellaneous tariff bill, which provides tariff relief for US companies that import chemicals not available in this country. SOCMA stated that chemical import duties can add 5 – 25% to total cost.

Andrew Liveris, Chairman, President and CEO of Dow Chemical was once again named number one chemical industry power player by ICIS.

It has been reported that Exxon’s new cracker in Singapore allows the company to bypass the refining process and to process crude oil directly into petrochemicals. This new technology helps to reduce raw material costs, energy consumption, and carbon emissions. According to Exxon, it is the most feed-flexible cracker that they’ve ever built.

US chlor-alkali average operating rates rose to 85% in November 2013 from October’s 79%.

The EPA was scheduled to publish re-proposed carbon dioxide limits for new power plants on January 8, setting separate standards for coal-fired and natural gas-fired generating units. The rule would revise an April 2012  proposal,  in which the EPA had intended to set a single standard for both types of plants. The new standards aren’t expected to result in significant CO2 reductions because the power generating sector is already investing in lower cost, cleaner natural gas-fired generating units.

The US Navy has announced that it is moving rapidly toward making regular purchases of biofuel for its warships and jet aircraft by 2015.  The Secretary of the Navy said that this was part of a joint venture with the US Agriculture Department.

Odebrecht, Brazil’s major contractor, is considering the development of an ethane cracker and three polyethylene plants in a project called Ascent, according to Governor Tomblin of West Virginia. In addition, Braskem, also a Brazilian company, would be responsible for petrochemical related activities as well as marketing the polyethylene

Russian production of chemicals and petrochemical products increased in the January – November 2013 period according to Rosstat, the national statistical agency.

China became the world’s largest trading nation in 2013, overtaking the US. This ranking is based on annual trade in goods, and China passed the $4 trillion mark for the first time last year. Exports were reported to have risen 7.9% to $2.21 trillion and imports to have risen 7.3% to $1.95 trillion. Total trade rose 7.6% over the year to $4.16 trillion. US data for 2013 hasn’t yet been published but with trade totaling $3.15 trillion in the first eleven months of the year, it’s unlikely to beat China. Economists forecast that the Chinese economy will expand 7.5% in 2014.

On January 9 US lawmakers proposed a bill to give the White House the power to fast-track international trade agreements as 2014 looks to be a hectic year of trade negotiations. The proposed legislation would allow an up-or-down vote without amendments.

China’s consumer price index decreased at an annual rate of 1.5% in December. Producer prices remained level.

China’s monthly industrial output in excess of 10% continues to exceed the government annual target of 7.5%.

Germany’s business climate continued to grow, but slightly, in December. Munich-based Ifo, an economic research group, reported that its monthly business climate index for Germany rose to 109.5 in November from 109.3 in October. The survey represents responses from firms in construction, manufacturing, wholesaling and retailing. Their expectations regarding business developments rose to their highest level since spring 2011.

Unemployment across the seventeen European Union countries that use the euro was reported unchanged at 12.1% for November. The lowest rates among member states were Austria at 4.7%, Germany at 5.2% and Luxembourg at 5.9%. The highest rates among member states were Greece at 27.4% and Spain at 26.7%. However, during the same period sales rebounded 1.6% versus a year ago.

Inflation in the Euro zone was reported at 0.8%, down from 0.9% in November. This was less than half of the European Central Bank’s ceiling, which indicated economic weakness in parts of the region.

The head of safety for CN Rail says that the rail industry wants to phase out older model tank cars that have been implicated in several recent accidents. This problem could involve as many as 80,000 sub-standard cars in use across North America. The Association of American Railroads (AAR) and Regional Railroad Association has proposed a new safety standard that would require shippers to upgrade tank cars. The Canadian and US governments have been reluctant to deal with this huge number of cars, in part because of the cost and logistics of an overhaul.

Total carload rail volume for 2013 was down 0.5% from 2012. Intermodal volume was up 4.6% compared to the same period. Petroleum products shipments were up 29.8%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 2.7% in November, after falling 1.9% in October. Compared with November 2012, year-over-year increase was 8.1%.

Kinder Morgan Energy Partners entered into an agreement to purchase American Petroleum Tankers and State Class Tankers for $962 million in cash. This will result in Kinder Morgan adding maritime tanker service.

Shale Oil and Gas Related

The Chemical Company - Chemical Industry News - Shale Oil and Gas RelatedThe New York State Energy Planning Board long-term plan, which was supposed to have been completed in September 2012 was released on January 7, 2014 for a 60 day public comment period. It calls for expanding the use of natural gas for heating and power generation, but takes no position on the use of hydraulic fracturing. Over the past year Governor Cuomo has said that he’s waiting for his health commissioner to complete a review, with no deadline for a decision.

Canadian Prime Minister Stephen Harper recently said that he remains confident that the Keystone XL pipeline will eventually be built even as President Obama delays making a decision on the $5.4 billion project. Oil sands developers are planning to double output by 2025 and are counting on Keystone XL to connect their crude oil to the Gulf Coast, the world’s largest refining center. According to the American Petroleum Institute, buying oil from Canada makes sense because for every US dollar spent on Canadian products, such as oil, up to 89 cents is returned in the form of imports of US goods to Canada.

The operator of the $2.3 billion pipeline between Cushing, OK and the Gulf Coast expects to begin shipping oil on January 22.

Royal Dutch Shell has renewed its option to buy the Horsehead site in Monaca, PA as it continues to evaluate whether or not to proceed with a $2 billion ethylene plant in the area. However, demolition of a zinc oxide plant at the site is taking place.

The Economy

Chemical Industry News - January 2014 - The EconomyThe Congressional Budget Office estimated that the federal government incurred a budget deficit of $182 billion for the first three months of fiscal year 2014, $111 billion less than the shortfall reported for the same period a year ago. The federal government incurred a $680 billion deficit in fiscal year 2013. This was $409 billion less than the deficit in fiscal year 2012. The US Treasury Department reported that on January 4, 2014 the federal debt was $17.312 trillion. The national debt has increased an average of $2.67 billion per day since September 30, 2012.

An omnibus spending bill of $1.012 trillion was revealed on January 13; a House vote on it was expected on January 14 and for it to be before the Senate by the weekend. The bill covers the entire federal discretionary budget for fiscal 2014 and fills in the details of the earlier agreement between Democrats and Republicans. Passage of the bill will ensure that the government will stay open until October 1.

Personal income in November increased $30.1 billion or 0.2% according to the Bureau of Economic Analysis. In October, personal income decreased 0.1% or $10.8 billion.

China, the largest foreign creditor of the US, bought more Treasuries in October than any other foreign investor. This was taken as a sign that the US is still considered a global financial safe haven in spite of the recent shutdown and threat of default. China’s holdings increased by $10.7 billion to $1.305 trillion, according to Treasury Department data. The US government debt held by foreign entities continues in excess of $5.6 trillion.

The Bureau of Economic Analysis third estimate showed an increase in Gross Domestic Product of 4.1% in the third quarter of 2013, that is, from the second quarter to the third quarter. In the second quarter, real GDP increased 2.5%. First quarter data showed an increase of 1.1%. 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 6.2% or $251.9 billion to a level of $16,912.9 billion. In the second quarter, current dollar GDP increased 3.1% or $125.7 billion to a level of $16,661 billion. In the first quarter current dollar GDP increased 2.8% or $115.0 billion.

A report by the National Association for Business Economics estimated that US GDP should grow by 2.8% in 2014.

The Conference Board’s Leading Economic Index increased 0.8% in November to 98.3 (2004 = 100), following a revised 0.1% increase in October, and a 1.0% increase in September.

The Conference Board Consumer Confidence Index which had decreased in November rebounded in December to 78.1 from 72.0 in November.

The Institute for Supply Management’s December Manufacturing Index registered 57%, the second highest reading for the year and just 0.3% below the November reading of 57.3%. The December reading is the seventh consecutive monthly increase. The Non-Manufacturing Report for December was 53%, a decrease of 0.9% from November’s 53.9%, but indicating continued growth in the non-manufacturing sector at a slower rate.

In November, retail and food services sales adjusted for seasonal variations were $432.3 billion, an increase of 0.7% from October and 4.1% above November 2012.

Privately owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,007,000, which was 3.1% below the revised October rate of 1,039,000, but is 7.9% above the November 2012 rate of 933,000. Single family authorizations in November were at a rate of 634,000, which was 2.1% above the October figure of 621,000.

Sales of new single family houses in November were at a seasonally adjusted rate of 464,000. This was 2.1% below the revised October rate of 474,000 but is 16.6% higher than the November 2012 number 398,000.

The National Association of Realtors reported that total sales of existing homes declined 4.3% in November to a seasonally adjusted annual rate of 4.9 million from an October rate of 5.12 million and were 1.2% below the November 2012 rate of 4.96 million. Prices continue to increase and were up 9.4% from November 2012. Distressed homes, foreclosures and short sales, accounted for 14% of November sales, at no change from October.

New orders for manufactured durable goods in November increased $8.2 billion or 3.5% to $241.6 billion. This increase, up three of the last four months, followed a 0.7% decrease in October.

November unfilled orders for manufactured durable goods increased $10.5 billion or 1.0% to $1058.5 billion. This number has increased for nine of the last ten months.

Consumer Price Index for all urban consumers was unchanged in November on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.2% before seasonal adjustments. Food index rose slightly, after an increase of 0.1% in October, and no change in September. The gasoline index dropped 1.6% and natural gas fell as well, offsetting increases in electricity and heating oil.

The seasonally adjusted Producer Price Index for finished goods decreased slightly 0.1% in November. Prices for finished goods fell 0.2% in October and 01% in September. On an unadjusted basis, prices for finished goods increased 0.7 % for the twelve months ended in November 2013.

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

Inflation: Inflation rate for the twelve months ended in November reported at 1.2%; October was reported at 1.0%, September at 1.2%. An average rate of 2.1% was reported for 2012.

Industrial production increased 1.1% in November, after having edged up an adjusted 0.1% in October and 0.7% in September. The November gain was the largest since November 2012.  Capacity utilization rate for total industry increased 0.8% to 79.0%, a rate 1.2% below its 1972 – 2012 average.

Unemployment: The December unemployment rate declined to 6.7% from the November 2013 rate of 7.0% as reported by the Bureau of Labor Statistics. The number of unemployed persons was reported at 10.4 million, down from the 10.9 million from a month earlier. Employers added an unexpectedly low 74,000 jobs in December and a reported 374,000 people left the work force. Most economists had projected a 200,000 jobs gain. The long-term unemployed, i.e., jobless for 27 weeks and over was reported at 3.9 million in December, down from 4.1 million. Those individuals accounted for 37.7% of the unemployed. The number of long-term unemployed has declined by 894,000 in the past twelve months. North Dakota continued to lead the nation with the lowest state unemployment rate in November of 2.6%; Rhode Island and Nevada were highest at 9.0 % with Michigan, and Illinois not far behind.

The US Census Bureau and the Bureau of Economic Analysis through the Department of Commerce announced on January 7 that total November exports of $194.9 billion and imports of $229.2 billion resulted in a goods and services deficit of $34.3 billion, down from the October figure of $40.6 billion.

Crude Oil: WTI trading at ~$93/bbl, little changed from a year earlier.

Extremely cold weather in the Northeast drove up natural gas pricing. Henry Hub spot price closed on January 7 at $4.35/MMBTU, with a reported increase up to $4.54. Regional price variations were pronounced.  February futures reported in the $4.20/MMBTU range. Working natural gas in storage at the beginning of January decreased and was 15.1% lower than last year at that time, and 10.1% lower than the five year average.

The U.S. Dollar trading at 104.8 Japanese yen; $Canadian 1.09; $1.37 = euro; . The British pound sterling = $1.65.

Current U.S. gold price quoted at $1247.00/ounce. The record price of $1920/ounce was recorded in September, 2011.

Chemical Industry News – November

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The American Chemistry Council (ACC) US Chemical Production Index declined by 0.4% in September, following a revised 0.2% decline in August and a gain of 0.2% in July. Compared to September 2012, chemical production in all regions increased by 1.4%, following an August 1.8% year to year increase. Comparing the first nine months of 2013 to those of 2012, total chemical production rose 1.1% nationally, with five of the seven regions posting gains.

The ACC’s Chemical Activity Barometer (CAB) rose by 0.6% in October, representing the fourth consecutive monthly increase in the CAB. The year over year monthly moving average showed an increase of 2.8% over a year ago.

A House Energy and Commerce subcommittee was to review the Chemical Safety Improvement Act during the week of November 11. The legislation was introduced by Senators David Vitter, R-LA, and the late Frank Lautenberg, D-NJ. This will be the first time that the House panel considers reform of the Toxic Substances Control Act (TSCA).

DuPont announced on October 24 that it will spin-off its titanium dioxide unit into a separately traded public company within 18 months. DuPont expects that the new business will have annual sales of about $7.2 billion, with the remaining businesses showing $28 billion in annual sales.

US chlor-alkali average operating rates were 85% in August, 1.7% lower than a year earlier.

Dow Chemical is selling it polypropylene licensing and catalyst operation to W. R. Grace for $500 million. This was seen as part of a $1.5 billion divestiture program announced by Dow earlier this year.

Plastic bottles returned for recycling increased by 161 billion pounds in 2012.  The recycling of polyethylene bottles increased by 45.3 million pounds during the same period.

ICIS named Westlake Chemical as the ICIS Company of the Year for 2013. The award was made for outstanding financial performance in 2012. Westlake net income reached a new record, having increased by 49% from 2011 to $396 million.

Methanex has sped up the schedule for the relocation of one of its methanol plants from Santiago, Chile to Geismar, LA. It is expected to be on-line next year.

BASF and Yara International ASA (Norway) announced on October 18 that they are considering a joint venture to invest in a world scale ammonia plant on the US Gulf Coast. BASF and Yara said that Yara has expertise in the global ammonia network and BASF is a major ammonia consumer for its downstream manufacturing operations.

Swiss-based Clariant will sell its detergents and intermediates business to International Chemical Investors Group for $64 million.

Brenntag CEO Steve Holland recently stated that the company plans to spend between €200-250 million on acquisitions. Approximately 45% of Germany-based Brenntag’s revenue comes from Europe, 40% from North America and the remainder from Asia-Pacific and Latin America. Brenntag now has over 450 sites in 70 countries.

The Grangemouth, UK INEOS oil refinery and petrochemicals complex appears to have averted a complete shut-down with last-minute union concessions.

The US Supreme Court agreed to review parts of the EPA’s greenhouse gas rule and will probably hear the case early in 2014, with a ruling in July. The court is expected to decide whether the EPA can require greenhouse gas permits for stationary sources of pollution, e.g., power plants, factories, and refineries.

The EPA’s chief air pollution regulator and Sen. Joe Manchin, D-WVA were expected to testify on November 13 on a draft bill that would limit the agency’s proposed carbon emissions rules for power plants. Manchin was quoted as saying that the EPA’s proposed regulations are not attainable because the technologies to achieve them aren’t yet viable.

According to the Department of Energy, US carbon dioxide (CO2) emissions dropped by 3.8% last year, falling to the lowest level in almost twenty years. Part of the reduction was attributed to increased natural gas production, making the US the biggest developer of natural gas in the world.

The Japanese government on November 15 announced a decision to reduce targeted greenhouse gas emissions after its nuclear power industry was shut down as a result of the Fukushima disaster. The government’s new target is a 3.8% cut versus 2005 levels by 2020. This is the reverse of the previous target of 25%. The Japanese decision was criticized at UN climate talks in Warsaw. Natural gas and coal consumption in Japan were up as compensation for the shutdown of fifty nuclear plants.

The EPA announced that it is scaling back its 2014 ethanol blending requirement. The amount of ethanol that must be blended into US fuel supplies has been reduced from 16.55 billion gallons to 15.21 gallons. Earlier this year the refining industry warned the EPA that refiners were reaching the maximum amount of ethanol that could be safely blended into the fuel supply, known as the “blendwall.” The continually increasing ethanol mandate has been blamed for driving up food and fuel costs, as about 40% of US corn supply is diverted to ethanol production. The volume of nitrogen fertilizer used in corn production increased by one billion pounds from 2005 to 2010, and an additional billion pounds are estimated to have been used since then.

With the focus on the government shutdown and avoidance of default on the national debt, little attention was paid to the US Postal Service default on a mandatory $5.6 billion payment for the health care of future retirees. This was the third default in slightly over one year. Postmaster General Patrick Donahoe has stated the need for Congress to implement administrative reforms in the system. The Postal Service was expected to report a fiscal year 2013 loss of approximately $6 billion.

Chinese exports increased 5.6% in October from a year earlier. The Chinese General Administration of Customs reported a trade surplus of $31.1 billion for October , the biggest this year.

China’s consumer price index increased at an annual rate of 3.2% in October, below the government target of 3.5% for the 10th month. Producer prices fell at 1.5%, the 20th straight monthly decline, and more than estimated earlier.

The Chinese government has a growth target of 7.5% for 2013, which would be the smallest rate of increase in more than twenty years. Beijing has said that it would accept slower growth as it tries to move the economy to domestic consumption rather than reliance on investment and exports.

China’s industrial output rose 10.3% in October.

Germany’s business climate continued to grow in October for the fifth month in a row. Munich-based Ifo, an economic research group, reported that its monthly business climate index for Germany rose to 107.7 in September from 107.6 in August. 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 for September at 12.2%. The September, 2012 reading was 11.6%.  The lowest rates among member states were Austria at 4.9% and Germany at 5.2%. The highest rates among member states were Greece at 27.6% and Spain at 26.6%.

Inflation in the Euro zone was reported at 0.7% in October, the lowest since November, 2009.

Shippers dependent on a single railroad to move their freight have asked regulators and legislators for relief. Commodity producers in some rural locations complain that the lack of transport options leaves them at the mercy of a single carrier, which is able to set its own rates. The shippers argue that the Surface Transportation Board, which is supposed to be looking after their interests, favors railroads in its rulings.

The Association of American Railroads(AAR) on November 14 urged the Department of Transportation to press for improved federal tank car regulations by requiring that all tank cars used to transport flammable liquids be retrofitted or phased out, and that new cars be built to more stringent standards. The AAR estimates that approximately 92,000 tank cars are now moving flammable liquids, with 78,000 of them requiring retrofit or phase out based on its proposal.

Total carload rail volume for the first 45 weeks of 2013 was down 0.5% from the same point in 2012. Intermodal volume was up 4.1% compared to the same period. Petroleum products shipments were up 25.4%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 1.4%, matching the August gain.

Wind farm and greenhouse gas farm, together

Shale Oil and Gas Related

OPEC has dismissed its earlier prediction that North American shale oil production will be “a source of marginal additions” to global supply.

Growing production from the Eagle Ford shale formation is helping to fuel a renaissance in Texas oil. Production in August yielded approximately 664,000 barrels of crude per day, compared with a rate of 446,000 barrels per day a year earlier.

The International Energy Agency (IEA) annual World Energy Outlook issued on November 12 said that the US will surpass Russia and Saudi Arabia as the world’s top energy producer by 2015 and will be close to energy self-sufficiency within the next twenty years. The IEA stated that crude oil prices will increase to $128/barrel by 2035, with a 16% increase in consumption.

TransCanada Corp. expects a US ruling on the 1700 mile $5.3 billion Keystone XL pipeline project, pending since 2008, to be made in the first quarter of 2014. The US State Department has also asked rail industry executives about delivering 830,000 barrels per day of Canadian crude to Gulf Coast refineries, as Keystone would do.

The IEA reported that Marcellus Shale natural gas production is growing faster than expected. Daily volume is 12 billion cubic feet, the equivalent of about 2 million barrels of oil per day, and more than six times the 2009 production rate.

The Economy

MoneyThe Congressional Budget Office reported that the federal government incurred a budget deficit of $680 billion in fiscal year 2013. This was $409 billion less than the deficit in fiscal year 2012. The fiscal year that just ended was the first since 2008 in which the deficit was less than $1 trillion. As a share of GDP, the deficit declined from 6.8% in 2012 to 4.1% in 2013. In 2007, the deficit was 1.1% of GDP.

Net spending by the government was $84 billion less in 2013 than in 2012. It was 20.8% of GDP in 2013, lower than the 22% recorded in 2012, but still above the 40 year average of 20.4%. The US Treasury Department reported that on November 10, 2013 the federal debt was $17.16 trillion. The national debt has increased an average of $2.69 billion per day since September 30, 2012.

The US Treasury has reported $9.7 billion loss on the sale of nearly all of the shares it received from its $49.5 bailout of General Motors.

Personal income in September increased $67.4 billion or 0.5% according to the Bureau of Economic Analysis. In August, personal income increased 0.5% or $65.6 billion.

The Census Bureau reported on November 6 that the number of people living in poverty last year held steady at nearly 50 million. But government programs appear to have lessened the impact, especially on children and the elderly.

The US government debt held by foreign entities is in excess of $5.6 trillion, with China holding $1.3 trillion of it. China remains the top creditor. Japan is a close second, holding $1.1 trillion.

The Bureau of Economic Analysis advance estimate showed an increase in Gross Domestic Product of 2.8% at an annual rate during the third quarter of 2013, that is, from the second quarter to the third quarter. In the second quarter, real GDP increased 2.5%. First quarter data showed an increase of 1.1%. 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 4.8% or $16,857 billion. In the second quarter, current dollar GDP increased 3.1% or $125.7 billion to a level of $16,661 billion. In the first quarter current dollar GDP increased 2.8% or $115.0 billion.

The Conference Board’s Leading Economic Index increased 0.7% in September, to 97.1 (2004=100), following a 0.7% increase in August and a revised 0.4% increase in July.

The Conference Board Consumer Confidence Index which had decreased in September to 80.2 (1985=100) decreased sharply in October to 71.2.

The Institute for Supply Management’s October Manufacturing Index registered 56.4%, an increase of 0.2% from the September reading of 56.2%. The October reading is the highest of the year. The Non-Manufacturing Report for October was 55.4%, up from September’s 54.4% indicating continued growth in the non-manufacturing sector.

In September, retail and food services sales adjusted for seasonal variations were $425.9 billion, a decrease of 0.1% from August but 3.2% above September 2012. July through September 2013 sales were up 4.5% 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. No data for September and October will be available for total privately owned housing starts, new residential sales, single family housing starts until the end of November. Single family housing starts in August were at a rate of 627,000 or 3.0% above July. New single home sales in August of 421,000 were 7.9% above July’s adjusted annual rate of 390,000. July was 14.1% below the revised June rate of 455,000.

After hitting the highest level in almost four years, the National Association of Realtors reported that sales of existing homes declined 1.9% in September to a seasonally adjusted annual rate of 5.29 million from a downwardly revised 5.39 million in August, but are 10.7% above the September 2012 rate of 4.78 million. Prices were up 11.7% from September 2012, and reflected the tenth consecutive month of double-digit year-to-year increases. Distressed homes, foreclosures and short sales, accounted for 14% of September sales, up from 12% in August.

New orders for manufactured durable goods in September increased $8.2 billion or 3.7% to $233.4 billion. This increase, up for five of the past six months, followed a revised 0.2% August increase.

September unfilled orders for manufactured durable goods increased $8.6 billion or 0.8% to $1041.2 billion. This number has increased for seven of the last eight months.

Consumer Price Index for all urban consumers increased 0.2% in September on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.2% before seasonal adjustments. Food index was unchanged in September after rising 0.1% in August. The gasoline index increased 0.8% in September after a decline of 0.1% in August and an increase of 1.0% in July.

The seasonally adjusted Producer Price Index for finished goods decreased 0.1% in September after an increase of 0.3% in August and no change in July. On an unadjusted basis, prices for finished goods increased 0.3 % for the twelve months ended in September 2013.

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

Inflation: Inflation rate for the twelve months ended in September reported at 1.2%. August reported at 1.5%. This followed a July rate of 2.0%. The average rate of 2.1% was reported for 2012.

Industrial production increased 0.4% in September after an increase of 0.4% in August and having been unchanged in July. The level of the index for total industrial production in September was equal to its 2007 average and was 3.2% above its year-earlier level. Capacity utilization rate for total industry increased 0.4% to 78.3%, a rate 3.2% above the level of a year earlier, and 1.9% below its 1972 – 2012 average.

Unemployment: The October unemployment rate was little changed from the September 2013 rate of 7.3% as reported by the Bureau of Labor Statistics. The number of unemployed persons was reported at 11.3 million. Employers added 204,000 jobs in October. The long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.1 million in October. Those individuals accounted for 36.1% of the unemployed. North Dakota, with its booming energy industry, continued to lead the nation with the lowest state unemployment rate in September of 3.0%; Nevada was highest at 9.5% with Illinois, Rhode Island and Michigan not far behind.

The US Census Bureau and the Bureau of Economic Analysis through the Department of Commerce announced that total August exports of $189.2 billion and imports of $228.0 billion resulted in a goods and services deficit of $38.8 billion, up from $38.6 billion in July.

Crude Oil: WTI trading at ~$95/bbl, up from ~$86 a year earlier; prices expected to trend lower near year-end.

Natural Gas: Pipeline expansions to New York City and New Jersey were completed on schedule on November 1, increasing consumer access to the Marcellus Shale field. Prices for New York customers have come down. With the advent of colder weather, Henry Hub spot price closed on November 3 at $3.68/MMBTU, up $.23 from the beginning of the week. December 2013 contract reported in the $3.56/MMBTU range. Working natural gas in storage at the end of October was 2.0% lower than last year at that time, but 1.5% higher than the five-year average.

The US dollar trading at 99.3 Japanese yen; $1.34 = euro. The British pound sterling = $1.60. The Canadian dollar trading at US$1.05.

Current US gold price quoted at $1277.30/ounce. The record price of $1920/ounce was recorded in September, 2011.

Chemical Industry News

Chemical Industry News

The American Chemistry Council (ACC) US Chemical Production Index was unchanged in June following an increase of 0.1% in May. Compared to June 2012, chemical production rose in all regions by 1.1% following May’s revised 0.9% year to year increase. Comparing the first six months of 2013 to those of 2012, total chemical production rose 0.8 % nationally.
The ACC’s Chemical Activity Barometer (CAB) rose by 0.2% in June, following a revised 0.1% increase in May. The year over year monthly moving average showed an increase of 3.9% over a year ago.

The ACC showed support for President Obama’s recent executive order to review US chemical safety regulations. It seeks to work with the EPA, Department of Homeland Security, Department of Labor, and OSHA in order to formulate best practices.
The US chemical industry is in a period of resurgence due mainly to inexpensive natural gas. Prices have fallen by three-fourths since 2005 and a number of companies are either expanding or moving to the US.

In her first public speech as new head of the EPA, Gina McCarthy urged companies to “embrace the opportunity of climate change” as reason to invest. The EPA has a deadline of September for issuing a new proposal for the first-ever rules limiting carbon dioxide emissions from new power plants.

According to a survey by Chemical and Engineering News the chemical industry slowed worldwide after a strong showing in 2011. The top fifty global chemical companies had 2012 sales of $961.8 billion, a drop of 1.8% from 2011. The sales growth for those same companies from 2010 to 2011 was 13.7%.

The US Chemical Safety Board, an independent investigative agency, said that it will consider identifying OSHA inaction regarding seven recommended moves as unacceptable. They want to see action to make changes to make refineries, chemical factories, and sugar plants safer. The Board investigates industrial accidents and issues recommendations to regulatory agencies such as the EPA and OSHA, as well as to companies, states and local authorities.

The Food and Drug Administration will no longer permit the use of bisphenol A (BPA) in packaging for baby formula. Its use was banned from baby bottles and cups in 2012. The FDA said that it still considers BPA to be safe for packaging, but took the action because manufacturers have already stopped its use in baby formula packaging. Industry people said that the move had more to do with market forces than chemical safety. BPA had been used as an ingredient in the epoxy lining material used in the metal cans used to package baby formula.

Dow Chemical Co., the largest US chemical manufacturer by sales, is considering selling its paint, construction, and chlorine businesses as they are susceptible to commodity price swings. Both Dow and DuPont are moving aggressively in the agricultural sector, where sales have been booming.

DuPont said on July 23 that it planned to exit its titanium dioxide paint pigments business in order to focus on its agricultural unit.
US chlor-alkali operating rates dropped in June, but are expected to climb back shortly. One major US manufacturer reported operating rate of 84% for the month.

Ground was recently broken for the construction of a new ammonia plant in Louisiana, the first new such facility in 25 years. The project consists of construction of Dyno Nobel’s $850 million ammonia plant with Cornerstone Chemical’s $175 million investment in upgrades at its Fortier manufacturing complex. Ammonia capacity has been estimated at 800,000 MT/year. Incitec Pivot, based in Australia, is the parent company of Dyno Nobel. Incitec manufactures a range of industrial explosives and fertilizers while Dyno Nobel manufactures industrial explosives and blasting services. Cornerstone makes key intermediate chemicals.

BASF plans additional investment for the production of fiber and plastics intermediates at its facilities in Geismar, LA and Caojing, China. No specifics were available but the investment was estimated to be in excess of 10 million euros.

Renewable chemicals company Myriant is in discussions with various companies to build its first commercial scale bio-based butanediol plant in Asia. Volume is estimated at 65,000 MT/year.

Chinese exports fell 3.1% year-on-year in June, down from a 1% growth factor in May.
China’s consumer price index increased by 2.7% in June, year on year.

Chinese Gross Domestic Product growth slowed to 7.5% in the second quarter, down from 7.7%. An average annual rate of 7.5% would be the lowest annual growth for China in twenty years.

Germany’s business confidence continued to rise in June. Munich-based Ifo, an economic research group, reported that its monthly business climate for Germany rose in April, May and June.

Germany plans to stop subsidizing solar energy by 2018 at the latest. The country has seen a wave of solar company insolvencies.

Unemployment across the seventeen European Union countries that use the euro fell in June, 24,000 fewer than in May, but remained at 12.1%. Among the member states, the lowest rates were Austria at 4.6% and Germany at 5.4%.
Inflation in the Euro zone remained at 1.6% year to year in July.

After the deadly derailment in Canada in July, the rail industry is dealing with the issue of tank car safety. Tougher standards were adopted several years ago and new tank cars were built to the standard, but existing ones were not retrofitted. It’s estimated that approximately 23% of the 310,000 US tankers meet the new rules. Last year, tank car rail shipments of crude oil were 233,811 carloads, a jump from 9,500 in 2008.

The Federal Railroad Administration issued rules on August 2 meant to prevent the kind of runaway fuel train accident that happened in Canada. Under the rules, rail cars carrying hazardous materials like combustibles may not be left unattended on main tracks or adjacent tracks unless specifically authorized.

Carload rail volume was down 0.3% annually in July on major US railroads. Intermodal volume was up 2.8%. Petroleum products shipments were up 28.0%.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 0.1% in June after increasing 2.1% in May. It fell an adjusted 0.2% in April.

The Energy Information Administration said that world energy consumption will rise 56% in the next three decades, driven by growth in developing nations such as China and India. The report also predicted that fossil fuels will supply almost 80% of world energy through 2040; natural gas will grow 64%; renewable and nuclear will increase by 2.5% per year; coal consumption will rise 1.3% per year.

 

Shale Oil and Gas-related

In a preliminary study, Department of Energy researchers reported that there was no evidence that hydraulic fracturing chemicals contaminate water sources at a drilling site in Pennsylvania.

A Republican-sponsored House bill seeks to block the Department of the Interior’s proposed rules covering fracking on federal land. It proposes that the Department would be barred from imposing new rules in states that already have policies for the drilling process. US Interior Secretary Jewell defended the proposed federal regulations in testimony to the House Natural Resources Committee.

Valero Energy Corp. plans to build a $700 million methanol plant at its St. Charles, LA refinery based on low cost natural gas. This shift to petrochemicals represents a major expansion for Valero.

JBI, Inc., of Niagara Falls, NY announced an agreement with Crayola to take in expired markers from schools and overruns from Crayola and convert them to fuel. Crayola will pay the shipping for schools to send any brand of used markers to JBI. Crayola is reported to make 500 million markers per year at its Easton, PA facility.

Chesapeake Energy agreed to sell shale oil and gas assets in Texas and Louisiana to EXCO Resources for $1 billion. The deal is expected to finalize in the third quarter of 2013.

As shale oil production increases in the US, more natural gas liquids will be produced as well, creating the opportunity for the US to become a major exporter of NGL’s.

The Economy

The Congressional Budget Office reported that the federal government incurred a budget deficit of $512 billion from October 2012 through June 2013 (the first nine months of fiscal 2013), almost $400 billion less than the shortfall recorded for the same period last year. The US Treasury Department reported that on July 2, 2013 the federal debt was $16.75 trillion. The national debt has increased an average of $2.20 billion per day since September 30, 2012.

Personal income in June increased by $45.4 billion, or 0.3% compared to May. In May personal income increased by 0.4%, in April, personal income decreased by $5.6 billion or less than 0.1%.

The US government debt held by foreign entities is in excess of $5.7 trillion, with China holding $1.31 trillion of it, a May year to year increase of 13.1%. 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 advance estimate of the second quarter 2013 Gross Domestic Product showed an increase at an annual rate of 1.7%, 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 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 2.4% or $98.1 billion to a level of $16,633 billion. In the first quarter current dollar GDP increased 2.8% or $115.0 billion.

The Conference Board’s Leading Economic Index was unchanged in June, remaining at 95.3 (2004=100), following a 0.2% increase in May and a 0.8% increase in April.

The Conference Board Consumer Confidence Index which had improved in June decreased slightly in July. It stands at 80.3 (1985=100) down from an adjusted 82.1 in June.

The Institute for Supply Management’s July Manufacturing Index registered 55.4%, an increase of 4.5% from June’s revised number of 50.9%, indicating expansion in manufacturing for the second consecutive month. The Non-Manufacturing Report for July was 56.0%, or 3.8% higher than the 52.2% reported for June, indicating continued growth.

In June, retail and food services sales adjusted for seasonal variations were $422.8 billion, an increase of 0.4% from May and 5.7% above June 2012. April through June 2013 sales were up 4.6% from the same period a year ago.

Privately owned housing starts in June of 836,000 were 9.9% below the revised May estimate of 928,000 and were 10.4% above the June 2012 rate of 757,000. Single family housing starts in June were at a rate of 591,000 or 0.8% below the revised May figure of 596,000. New single home sales in June were at a seasonally adjusted annual rate of 497,000. This was 8.3% above the revised May rate of 459,000 and 38.1% above the June 2012 estimate of 360,000.

The National Association of Realtors reported that sales of existing homes declined in June, but stayed well above year-earlier levels. Existing home sales decreased 1.2% to a seasonally adjusted annual rate of 5.08 million units, an increase of 15.2% from the same period a year ago. Distressed homes, foreclosures and short sales, accounted for 15% of May sales, down from May’s 18%, and are the lowest number since monthly tracking began in 2008. They were 26% in June 2012.
New orders for manufactured durable goods in June increased $9.9 billion or 4.2% to $244.5 billion. This increase, up four out of the last five months, followed a 5.2% increase in May.

June unfilled orders for manufactured durable goods increased $21.4 billion or 2.1% to $1029.4 billion. This followed an increase of 1.1% in May.

Consumer Price Index for all urban consumers increased 0.5% in June on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.8% before seasonal adjustments, higher than the 1.4% reported for May. Food index, which declined in May, increased 0.2% in June. The gasoline index rose sharply in June and accounted for about two thirds of the all items increase.

The Producer Price Index for all finished goods increased 0.8 % in June, seasonally adjusted, following an increase of 0.5% in May and a decrease of 0.7% in April. On an unadjusted basis prices for finished goods increased 2.5 % for the twelve months ended in June 2013, the largest twelve month increase since March, 2012.
Interest rate: Prime at 3.25%, unchanged since 12/16/08.

Inflation: Inflation rate in June reported at 1.8%. The May rate was 1.4%, April rate was 1.1%, March rate was 1.5%, February rate was 2.0%, and January rate was 1.6%. The average rate of 2.1% was reported for 2012. It is expected to rise slightly in 2013 to approximately 2.0%.

Industrial production increased 0.3% in June, having been unchanged in May. For the second quarter as whole, industrial production increased 0.6%. For the first quarter as a whole, output increased at an annual rate of 5.0%, the largest gain since the first quarter of 2012. At 99.1% of its 2007 average, total industrial production in June was 2.0% above its year-earlier level. Capacity utilization rate for total industry increased 0.1% to 77.8%, a rate 0.1% above the level of a year earlier, but 2.4% below its 1972 – 2012 average.

Unemployment: The July 2013 rate edged down to at 7.4%, and has shown little movement since February. The number of unemployed persons was reported at 11.5 million. Employers added 162,000 jobs in July, but part-time work accounted for more than 65% of them. The Bureau of Labor Statistics stated that the long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.2 million in July. Those individuals accounted for 37.0% of the unemployed. North Dakota, with its booming energy industry, continued to lead the nation with the lowest state unemployment rate in June of 3.1%; Nevada was highest at 9.6 % with Illinois, Mississippi, and Rhode Island not far behind. A new analysis by the Congressional Budget Office says that if Congress allows the next round of across the board sequester spending cuts to take place, as many as 1.6 million jobs could be lost.

June exports of $191.2 billion and imports of $225.4 resulted in a goods and services deficit for the month of $34.2 billion, down from a revised number for May of $44.1 billion.

Crude Oil: WTI trading at $104/bbl, up from ~$90 a year earlier.

Natural Gas: Henry Hub spot price closed on July 31 at $3.46/MMBTU. September 2013 contract reported at $3.69/MMBTU.

Working natural gas in storage increased at the end of July, but is still lower than last year and the five year average.

The US Dollar trading at 98.4 Japanese yen; $1.33 = euro. The British pound sterling = $1.53. The Canadian dollar trading at US$1.04.

Current US Gold price quoted at $1285.30/ounce. The record price of $1920/ounce was recorded in September, 2011.