U.S. chemical output flattened in April on mixed production results across the chemical producing regions – 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") was flat for the reported month following an upwardly revised flat growth a month ago and a 0.2% rise in Feb 2015. 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.
According to the ACC, activity for the U.S. manufacturing sector – the largest consumer of chemical products – was flat in April after declining in the previous two months. The sector is a major driver for the chemical industry which touches around 96% of manufactured goods.
U.S. manufacturing activity stalled in April as an uptick in new factory orders was offset by a contraction in employment. A stronger dollar is putting pressure on the U.S. manufacturers as it is making American-made products costlier in other nations.
Within the manufacturing sector, production rose in several chemistry end-user markets in April including appliances, motor vehicles, aerospace, rubber products, printing and textile products.
The April reading showed mixed chemical production across all seven regions. Production in the Gulf Coast, where key building block materials are produced, were up 0.2% on a monthly comparison basis in the reported month. Production fell 0.2% across Mid-Atlantic and West Coast. Output was flat across Midwest and Southeast while declining 0.1% in Northeast. Production went up 0.4% in Ohio Valley.
By segments, gains across coatings, chlor-alkali, pesticides, adhesives, consumer products, other specialties, industrial gases, synthetic rubber, plastic resins and organic chemicals were masked by lower production of fertilizers, acids, phosphates, sulfates, synthetic fibers, and pharmaceuticals.
Overall chemical production moved up 4.4% year over year in April with all regions notching up gains.
The U.S. chemical industry, a more than $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 chemicals industry has embarked on the road to recovery after being in a rut for long. While some industry-specific challenges, concerns over China’s future growth and sluggishness in some parts of Europe remain sources of uncertainties, the industry is expected to continue to recuperate this year on strength in the automotive market and significant shale-linked capital investment. The upturn is also expected to be backed by healing across housing and non-residential construction markets.
The outlook for the U.S. chemical industry paints an encouraging picture as the ACC envisions national chemical production to rise 3.7% in 2015 (up from a 2% increase in 2014) and 3.9% in 2016. Growth is expected to be driven by healthy demand from the light vehicles market and a recovery in the housing market.
The shale gas boom in the U.S. has been a huge driving force behind chemical investment on plants and equipment in the country over the last few years. The shale revolution has made the U.S. an attractive investment hotspot and incentivized a number of chemical companies to invest billions of dollars to beef up capacity in the country. According to an ACC report, domestic chemical investment related to shale gas has reached as high as $138 billion, over 60% which is from firms outside of the U.S.
Chemical makers including Dow Chemical DOW, DuPont DD, LyondellBasell Industries LYB, Eastman Chemical EMN, Celanese CE and Westlake Chemical WLK are ramping up investments in shale gas-linked projects to take advantage of ample natural gas supplies which are expected to boost capacity and export over the next several years.
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