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Chemical and advanced materials maker Celanese Corporation (CE - Analyst Report) has announced its support for the Domestic Alternative Fuels Act of 2013 introduced by Congressman Pete Olson to the U.S. House of Representatives on May 15.

The bill has been designed to amend section 211(o) of the Clean Air Act to allow ethanol production from domestic natural gas and help fuel blenders meet their obligations under the federal Renewable Fuels Standard (RFS). It is co-sponsored by Representative Jim Costa and has bipartisan support in the U.S. House of Representatives.

While endorsing the legislation, Celanese emphasized the necessity of an energy policy which uses every available source of domestic energy. It further noted that the bill will promote the use of the abundant natural resources available in the country, free market economics and technical innovation to attain America’s critical energy security goals as well as fuel economic growth and job creation.

Celanese has developed an advanced technology dubbed “TCX Technology” that produces fuel and industrial-grade ethanol from natural gas. This breakthrough technology is built on the company’s industry-leading acetyl platform and uses basic hydrocarbons as feedstock instead of agricultural crops.  

TCX is ideal for producing ethanol for the fuels market and applications such as paints, coatings, inks and pharmaceuticals. Other companies are also developing innovative and advanced technologies for producing ethanol from non-biomass feedstocks.    

Celanese is among the world’s largest producers of acetyl products as well as the leading global producer of high-performance engineered polymers. The company’s strong presence in emerging markets will enable it to deliver incremental earnings in 2013.

Celanese’s first quarter results, reported on Apr 18, were a mixed bag with adjusted earnings topping expectations while sales missing the same. The company expects the challenging economic conditions to persist throughout 2013. For 2013, Celanese expects earnings growth on the back of company-specific initiatives and to be consistent with its long-term growth objective of 12% to 14%.

Celanese is aggressively expanding capacity in the emerging Asian markets. Its expansion initiatives in China are expected to support earnings growth. We are also upbeat about the prospect of its TCX technology.

However, Celanese is witnessing weak demand and pricing in its core acetyl business. The challenging economic conditions in Europe and sluggish growth in Asia may impact the company’s results.

Celanese currently carries a short-term (1 to 3 months) Zacks Rank #1 (Strong Buy).

Other companies in the chemical industry that are worth considering include Shin-Etsu Chemical Co., Ltd. , Methanex Corp. (MEOH - Analyst Report) and FMC Corp. (FMC - Analyst Report). While both Shin-Etsu Chemical and Methanex retain a Zacks Rank #1 (Strong Buy), FMC holds a Zacks Rank #2 (Buy).

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