U.S. Chemical Production Nudges Higher - Analyst Blog
U.S. chemical output ticked up on a monthly basis in February
as a decline in the Gulf Coast was neutralized by higher
production in other areas, according to the latest monthly report
from the American Chemistry Council (ACC).
The Washington, DC-based chemical industry trade group said that the U.S. Chemical Production Regional Index (CPRI) went up 0.3% in February with gains witnessed across six out of seven regions. This represents an improvement over flat production in January which was affected by tough winter weather.
Created by Moore Economics to track chemical production in seven regions nationwide, the U.S. CPRI is comparable to Federal Reserve's industrial production index for chemicals. The CPRI is measured using a three-month moving average.
Output from the U.S. manufacturing sector, the biggest consumer of chemical products, was flat in the reported month as bad weather and distribution disruptions thwarted manufacturing activities. Within this sector, gains were witnessed in several chemistry end-user markets including aerospace, machinery, computers, plastic and rubber products, paper and printing.
The manufacturing sector serves as a barometer to gauge the overall health of the U.S. economy and is a major driver for the chemical industry which touches around 96% of manufactured goods.
The ACC noted that chemical production was mixed across the segments in February. Rise across chlor-alkali, industrial gases, dyes and pigments, acids, consumer products, coatings, adhesives, pesticides and pharmaceuticals and other specialties were capped by declines in organic chemicals, fertilizers, plastic resins, synthetic rubber and manmade fibers.
Overall chemical production moved up 0.4% year over year in the reported month. On a region-by-region basis, gains were witnessed across Midwest, Ohio Valley, Southeast and West Coast regions.
February reading showed that chemical output in the Gulf Coast, where key building block materials are produced, fell 0.2% on a monthly comparison basis. Output rose 0.5% across Mid-Atlantic, Northeast and West Coast. Production went up 0.3% in Midwest and Southeast while Ohio Valley saw a 0.2% gain.
The roughly $770 billion U.S. chemical industry is cyclical by nature and heavily linked to the overall condition of the nation's economy. It has been consistently leading the U.S. economy's business cycle due to its early position in the supply chain.
Chemical makers including majors such as DuPont ( DD ), Dow Chemical ( DOW ), Eastman Chemical ( EMN ) and Celanese ( CE ) had a tough 2013 as a weak European economy, effects of sequestration in the U.S. along with certain industry-specific challenges muffled a meaningful upturn in chemical demand for the most part of the year.
While recovery in the European chemical industry continues at a sluggish pace, the global chemical industry is expected to fare relatively better in 2014, aided by healthy Chinese demand, significant capital investment and a shale gas boom in the U.S. Chemical makers are ratcheting up investment on shale gas-linked projects to take advantage of ample natural gas supplies which is expected to boost capacity and export over the next several years.
The ACC envisions national chemical output to rise 2.5% in 2014 and further improve to a 3.5% gain next year. Growth will be backed by strength in the agricultural space, healthy demand from light vehicles market and a gradually convalescing housing market. On the global front, ACC sees production to move up 3.8% in 2014 and 4.1% in 2015 with healthy gains expected across North America and emerging markets.
CELANESE CP-A (CE): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
EASTMAN CHEM CO (EMN): Free Stock Analysis Report
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