Due to the Thanksgiving Holiday, the Weekly Chemistry and Economic Trends report will not be published next week. The next update will be 6 December.
|U.S. CPRI||Chlorine Production||Leading Economic Indicators|
Running tab of macro indicators: 9 out of 20
Existing home sales rose 1.9% in October, following a decline in September. There was growth in the Midwest and South, but sales in the Northeast and West were lower. Inventories were down from last month and now represent a 3.9-month supply. Compared to a year ago, home sales were up 4.6% Y/Y while inventories were off 4.3% Y/Y. Inventories remain relatively lean. The median sales price was up 6.2% Y/Y.
Following a decline in September, housing starts rose by a better than expected 3.8% in October. Building activity was strongest in the Midwest and West regions. Chemistry-intensive single-family starts were up 2.0%, the fifth consecutive advance, while multifamily starts were also higher for the month. Compared to last October, housing starts were higher by 8.5% Y/Y. Forward-looking building permits rose by 5.0% in October to their highest level in 12 years and were up 14.1% Y/Y. Separately, homebuilder confidence rose to its highest level in nearly two years according to NAHB/Wells Fargo. Lower mortgage rates and continued gains in the labor market have been supportive.
The Philadelphia Fed reported in its Manufacturing Business Outlook Survey that manufacturing activity in the region continued to grow, with the headline current index rising 4.8 points to 10.4 in November. The survey’s broad indicators remained positive, although their movements were mixed this month with new orders, shipments, and employment indicators easing from t last month. The survey’s future activity indexes remained positive, suggesting continued optimism about growth for the next six months.
The Conference Board reported that its index of leading economic indicators (LEI) decreased 0.1% in October. This marks the third consecutive month as a large gain in building permits was to offset by weakness in new orders, average weekly hours, and unemployment claims. The latter is a new development. The LEI suggests the economy will end the year on a weak note. Next week, our Chemical Activity Barometer (CAB) will provide an early look at November.
The oil and gas rig count continued to fall (for a fifth straight week) by 11 to 803 rigs. Unseasonably cold weather across much of the country last week resulted in the first draw from natural gas inventories (94 BCF) of the heating season. This pushed prices upwards but moderating temperatures caused some fallback this week.
It its monthly Short Term Energy Outlook, EIA expects 2019 natural gas production to be up 9.9% to 92.1 BCF and oil production to be up 11.8% to 12.29 million barrels per day. Production is expected to grow in 2020 by 3.0% and 8.1%, for natural gas and oil respectively.
For the business of chemistry, the indicators bring to mind a yellow banner for basic and specialty chemicals
According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, rose by 1.9% to 31,400 railcars during the week ending 16 November (week 46). Loadings were down 1.2% Y/Y, down 0.2% YTD/YTD and have been on the rise for 7 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, was flat compared to last year.
The Chlorine Institute (CI) reported that production of chlorine was 30,393 in October, down 5.2% over the previous month; YTD production was down 2.6% Y/Y. The output of co-produced caustic soda fell 4.9% to 32,313 over September and YTD production was down 2.1% Y/Y.
According to statistics released by the ACC Plastics Industry Producers’ Statistics Group, U.S. production of major plastic resins totaled 7.2 billion pounds during September 2019, up 4.9% Y/Y. Year-to-date production was 65.9 billion pounds, up 2.8% Y/Y. Sales and captive use of major plastic resins was 7.4 billion pounds, up 5.5% Y/Y and YTD sales and captive use was 66.3 billion pounds, a 3.9% increase compared to 2018.
The U.S. Chemical Production Regional Index (U.S. CPRI) edged higher by 0.2% in October, following gains of 0.5% in September and 0.2% in August. During October, chemical output increased at a slower pace across all regions. Compared to October 2018, U.S. chemical production was off by 0.6% on a year-over-year basis. Chemical production was lower than a year ago in the Gulf Coast and Midwest, but production was up slightly in the rest of the country.
Chemical production was mixed over the three-month period. There were gains in the production three-month moving average trend in plastic resins, chlor-alkali, pesticides, organic chemicals, consumer products, adhesives, coatings and other specialty chemicals. These gains were offset by declines in the output of synthetic rubber, miscellaneous inorganic chemicals, synthetic dyes & pigments, industrial gases fertilizers, and manufactured fibers.
Nearly all manufactured goods are produced using chemistry in some form or another. Thus, manufacturing activity is an important indicator for chemical production. On a three-month-moving average basis, manufacturing activity edged lower in October, off by 0.2%. Output expanded, however, in several chemistry-intensive manufacturing industries, including food & beverages, aerospace, computers, semiconductors, iron & steel products, foundries, oil & gas extraction, rubber products, paper, structural panels, and printing.
U.S. specialty chemicals market volumes started the 4th quarter on mixed note, with no change in October (same as in September). All changes in the data are reported on a three-month moving average (3MMA) basis. Of the 28 specialty chemical segments we monitor, 14 expanded in October the same number as in September. Ten markets declined in October (an improvement) and four were flat. During October, large market volume gains (1.0% and over) occurred only in electronic chemicals and rubber processing chemicals. On a sequential basis, diffusion was 57%, up from 52% in September and a recent low of 38% in July.
During October, the overall specialty chemicals volume index was up only 0.2% on a year-over-year (Y/Y) 3MMA basis. Since the 3rd quarter of 2018, year-earlier comparisons have eased. The index stood at 113.1% of its average 2012 levels in October. This is equivalent to 7.71 billion pounds (3.50 million metric tons). On a Y/Y basis, there were gains in 11 market and functional specialty chemical segments. Compared to last year, volumes were down in 17 segments. On a year-earlier basis, diffusion was 39%, a worsening comparison.
The data represent the sales volume of various specialty chemical markets indexed where the average 2012 volume is equal to 100. Thus, the current reading of 113.1 for example, implies that the market volume of that segment is 13.1% above the average 2012 volumes. The data include 28 market and functional specialty chemical segments. A spreadsheet (with monthly history back to January 1997) is available for ACC members on MemberExchange. The spreadsheet also contains notes on the methodology. Note: There were revisions to some segments this month.
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7th ICIS US Butadiene and Derivatives Conference
11 December 2019
Park Central Hotel
New York, NY
The banner colors represent observations about the current conditions in the overall economy and the business chemistry. For the overall economy we keep a running tab of 20 indicators. The banner color for the macroeconomic section is determined as follows:
Green – 13 or more positives
Yellow – between 8 and 12 positives
Red – 7 or fewer positives
For the chemical industry there are fewer indicators available. As a result we rely upon judgment whether production in the industry (defined as chemicals excluding pharmaceuticals) has increased or decreased three consecutive months.