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U.S. Chemical Output Ticks Higher in July on Market Recovery
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U.S. chemical production advanced in July with gains witnessed across all chemical producing regions barring the Northeast that saw a modest decline in output – 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") ticked up 0.1% in July following a 0.5% fall a month ago. The gain in production for the reported month came on the back of improvement across several major end-use markets, the ACC noted.
The U.S. CPRI, which is measured using a three-month moving average, was created by Moore Economics to track chemical production in seven regions nationwide. It is comparable to the Federal Reserve’s industrial production index for chemicals.
The July reading showed higher chemical production across all regions except the Northeast. The Gulf Coast, where key building block materials are produced, raked in the highest gain of 0.4% for the reported month. Production went up 0.3% in the Ohio Valley and also rose 0.2% across West Coast, Southeast and Midwest. Output edged down 0.1% in the Northeast region while Mid-Atlantic recorded a 0.1% gain.
By segments, chemical production was mixed in July. Gains across pesticides, fertilizers, adhesives, coatings, plastic resins, inorganic chemicals, organic chemicals and pharmaceuticals were neutralized by lower production of consumer products, other specialty chemicals, industrial gases, synthetic rubber and manufactured fibers.
Overall chemical production went up 0.6% year over year in July with all regions logging gains.
According to the ACC, activity for the U.S. manufacturing sector – the largest consumer of chemical products – went up 0.2% in July following a 0.1% gain in June. The manufacturing sector is a major driver for the chemical industry which touches around 96% of manufactured goods.
Within the manufacturing sector, production rose across several chemistry end-user markets in July including appliances, motor vehicles, aerospace, machinery, electronic equipment, semiconductors, petroleum refining, foundries, plastic products, paper and textile mill products.
The U.S. chemical industry, a nearly $800 billion enterprise, is 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.
The chemical industry is clawing its way back after being roiled by the global economic crisis. The industry’s recovery is expected to continue through the balance of 2016, supported by continued strength in the automotive market, positive trends in the construction space and significant shale gas-linked capital investment.
Driven by the ample natural gas supply, chemical makers including Dow Chemical (DOW - Free Report) , LyondellBasell Industries (LYB - Free Report) , BASF (BASFY - Free Report) , Eastman Chemical (EMN - Free Report) , Celanese (CE - Free Report) and Westlake Chemical (WLK - Free Report) are ratcheting up investment on shale-linked projects which is expected to beef up capacity over the next several years. Per the ACC, domestic chemical investment related to shale gas has reached as high as $164 billion, more than 60% of which are from firms outside the U.S. Already 264 projects have been announced by chemical makers to take advantage of abundant natural gas supplies.
Chemical companies also remain actively focused on expanding their reach in high-growth markets and are increasingly looking for cost synergy opportunities and enhanced operational scale through consolidations.
However, the industry still faces certain roadblocks including slowdown in China, sluggish demand in the energy space, soft agriculture market fundamentals and a choppy Europe.
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U.S. Chemical Output Ticks Higher in July on Market Recovery
U.S. chemical production advanced in July with gains witnessed across all chemical producing regions barring the Northeast that saw a modest decline in output – 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") ticked up 0.1% in July following a 0.5% fall a month ago. The gain in production for the reported month came on the back of improvement across several major end-use markets, the ACC noted.
The U.S. CPRI, which is measured using a three-month moving average, was created by Moore Economics to track chemical production in seven regions nationwide. It is comparable to the Federal Reserve’s industrial production index for chemicals.
The July reading showed higher chemical production across all regions except the Northeast. The Gulf Coast, where key building block materials are produced, raked in the highest gain of 0.4% for the reported month. Production went up 0.3% in the Ohio Valley and also rose 0.2% across West Coast, Southeast and Midwest. Output edged down 0.1% in the Northeast region while Mid-Atlantic recorded a 0.1% gain.
By segments, chemical production was mixed in July. Gains across pesticides, fertilizers, adhesives, coatings, plastic resins, inorganic chemicals, organic chemicals and pharmaceuticals were neutralized by lower production of consumer products, other specialty chemicals, industrial gases, synthetic rubber and manufactured fibers.
Overall chemical production went up 0.6% year over year in July with all regions logging gains.
According to the ACC, activity for the U.S. manufacturing sector – the largest consumer of chemical products – went up 0.2% in July following a 0.1% gain in June. The manufacturing sector is a major driver for the chemical industry which touches around 96% of manufactured goods.
Within the manufacturing sector, production rose across several chemistry end-user markets in July including appliances, motor vehicles, aerospace, machinery, electronic equipment, semiconductors, petroleum refining, foundries, plastic products, paper and textile mill products.
The U.S. chemical industry, a nearly $800 billion enterprise, is 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.
The chemical industry is clawing its way back after being roiled by the global economic crisis. The industry’s recovery is expected to continue through the balance of 2016, supported by continued strength in the automotive market, positive trends in the construction space and significant shale gas-linked capital investment.
Driven by the ample natural gas supply, chemical makers including Dow Chemical (DOW - Free Report) , LyondellBasell Industries (LYB - Free Report) , BASF (BASFY - Free Report) , Eastman Chemical (EMN - Free Report) , Celanese (CE - Free Report) and Westlake Chemical (WLK - Free Report) are ratcheting up investment on shale-linked projects which is expected to beef up capacity over the next several years. Per the ACC, domestic chemical investment related to shale gas has reached as high as $164 billion, more than 60% of which are from firms outside the U.S. Already 264 projects have been announced by chemical makers to take advantage of abundant natural gas supplies.
Chemical companies also remain actively focused on expanding their reach in high-growth markets and are increasingly looking for cost synergy opportunities and enhanced operational scale through consolidations.
However, the industry still faces certain roadblocks including slowdown in China, sluggish demand in the energy space, soft agriculture market fundamentals and a choppy Europe.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>