The U.S. specialty chemical industry remains on the path to recovery from the disruptions caused by the winter storm as volumes expanded in May, according to the latest report from the American Chemistry Council (“ACC”).
Volumes Recover to Pre-Storm Levels
The Washington, DC-based chemical industry trade group said that U.S. specialty chemicals market volumes increased 0.7% in May on a monthly comparison basis. This follows a 1.1% increase a month ago. Volumes are now above the pre-winter storm levels of January, the ACC noted.
Of the 28 specialty chemical segments monitored by the ACC, 20 saw growth in May, an improvement from the expansion of 16 witnessed in April. Activities declined in seven segments while remaining flat in one. Per the ACC, the overall specialty chemicals volumes went up 13.7% on a year-over-year basis in May, recovering from the depressed level witnessed last year. Volumes stood at 99% of their average 2017 levels in May, which is equivalent to 3.29 million metric tons. Growth was witnessed in 26 segments on a year-over-year basis in May. Notably, after a solid start to 2021, the winter storm hurt U.S. specialty chemicals volumes in February. The storm in the U.S. Gulf Coast curbed chemical production in that region and other parts of the country due to raw material and supply chain disruptions as well as power outages. However, activities started to recover from March. Upswing in Manufacturing, End-Market Strength Bode Well
The U.S. specialty chemical industry reeled under the effects of the virus crisis for much of the first half of 2020. Shutdowns and travel restrictions to blunt the spread of infection paralyzed industrial and economic activities, leading to a slump in demand for specialty chemicals across major markets including automotive and construction.
However, economic activities have picked up pace in the United States with the gradual reopening of the economy as the vaccination drive is in full swing. Notably, the U.S manufacturing sector is gaining momentum on strong demand recovery and an upturn in the overall economy. Manufacturing activities continued to gather steam in May on a surge in demand notwithstanding raw material and labor shortages. The U.S. Manufacturing Purchasing Managers’ Index clocked 61.2% in May, rising from 60.7% in April on a surge in new orders, per the Institute for Supply Management. A reading above 50 indicates expansion in activity. New orders rose for the 12th straight month in May. Inoculation of a sufficient number of people will allow the U.S. economy to fully open up, which would provide further boost for the manufacturing sector. The sector is a major driver for the chemical industry which touches around 96% of manufactured goods. Thus, the upswing in manufacturing activity is expected to act as a tailwind for the U.S. specialty chemical industry. A rebound in demand in key end-use markets also augur well for the industry. The automotive sector has regained its mojo after the virus-led slump last year on the back of a rebound in customer demand. Despite the semiconductor crunch, U.S. vehicle sales have witnessed a year-over-year rise this year. Strong pent-up demand, low auto loan interest rates and rising preference for private transportation in the wake of the pandemic have contributed to a pick-up in U.S. auto sales. Moreover, the resumption of several projects that were stalled earlier due to disruptions has supported the revival in the construction sector. Residential construction is picking up, supported by lower interest rates and higher demand for new properties due to the rising trend of work from home amid the pandemic. As these major markets recover, demand for specialty chemicals is expected to go up moving ahead. The ACC expects U.S. chemical production volumes to rise this year on a recovery in end-use markets and export customers from the pandemic-led slowdown. The trade group expects specialty chemicals volumes to expand 3.8% in 2021. Specialty Chemical Stocks Worth a Look
A few stocks currently worth considering in the specialty chemical space are
Celanese Corporation ( CE Quick Quote CE - Free Report) , Element Solutions Inc ( ESI Quick Quote ESI - Free Report) , Ingevity Corporation ( NGVT Quick Quote NGVT - Free Report) and Quaker Chemical Corporation ( KWR Quick Quote KWR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Celanese has expected earnings growth rate of 71.2% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 19.1% upward over the last 60 days. Element Solutions has expected earnings growth rate of 42.7% for the current year. The consensus estimate for the current year has been revised 15.1% upward over the last 60 days. Ingevity has expected earnings growth rate of 9% for the current year. The Zacks Consensus Estimate for the current year has been revised 4.7% upward over the last 60 days. Quaker Chemical has expected earnings growth rate of 52.7% for the current year. The consensus estimate for the current year has been revised 3.8% upward over the last 60 days. Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale. Download FREE: How to Profit from Trillions on Spending for Infrastructure >>