|Wholesale Chemical Inventories||Chemical Trade Surplus||Consumer Prices|
Running tab of macro indicators: 16 out of 20
The number of new jobless claims was unchanged at 884,000 during the week ending 5 September. Continuing claims rose by 93,000 to 13.39 million and the unemployment rate for the week rose 0.1 percentage points to 9.2%.
Consumer prices rose by a slightly faster-than-expected 0.4% in August, following 0.6% gains in June and July. Gains were broad-based with the largest gains in energy and used vehicles. Excluding the volatile food and energy components, core consumer prices rose 0.4%, following a 0.6% gain in July. Compared to a year ago, headline prices were up 1.3% while core prices were up 1.7% Y/Y, suggesting that price pressures remain muted. Producer prices rose 0.3% in August and follow a 0.6% gain in July and a 0.2% decline in June. The rise was led by higher prices for services. Prices less food and energy (or core producer prices) also rose 0.3% in August. Among goods experiencing large gains were plastic resins and nonferrous scrap. Overall producer prices were off 0.2% Y/Y while core prices were off 0.3% Y/Y.
After easing in July, the NFIB measure of small business optimism rose 1.4 points to 100.2 in August, a level slightly above the historical 46-year average and a gain above expectations. Seven of the 10 index components improved and included sales, earnings and employment trends.
Wholesale trade rose 4.6% to $479.2 billion in July. With the exception of machinery there were gains in every sector. Total inventories of merchant wholesalers (except manufacturers’ sales branches and offices) eased 0.3% to $632.3 billion at the end of July. The inventories-to-sales ratio fell from 1.38 in June to 1.32 in July. A year ago, the July ratio was 1.34. Wholesale trade was off 4.0% Y/Y and inventories were off 5.6% Y/Y. The imbalance is repairing.
With households’ aversion to debt, consumer credit outstanding rose 0.3% to $4.139 trillion at the end of July. Revolving credit (i.e., credit cards) eased slightly while non-revolving credit (loans for motor vehicles, education, etc.) rose 0.4%. Credit outstanding was up 0.7% Y/Y while personal income was up 8.2% Y/Y and consumer spending was off 3.1% Y/Y.
The rig count rose by one to 253 rigs during the week ending 4 September. Oil prices moved lower this week on concerns about the durability of the global economic recovery. In its Short-Term Energy Outlook, EIA expects that global oil markets shifted from building liquid fuel inventories at a 7.2 million bpd rate in Q2 to withdrawals at a 3.1 million bpd rate in Q3. EIA expects further inventory draws in Q4, before becoming more balanced in 2021. Natural gas prices also moved lower during the week as inventories rose above the five-year historic range.
For the business of chemistry, the indicators still 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, fell by 2.1% to 30,290 railcars the week ending 5 September (week 36). Loadings were down 1.9% Y/Y and down 4.9% YTD/YTD. Loadings have been on the rise for 7 of the last 13 weeks. The 13-week moving average, which is used to smooth out volatility, was down 6.7%, but continues to edge up slightly.
The U.S. Geological Survey reported that estimated monthly production of soda ash in June was 628 thousand tons, the lowest monthly total in USGS’ history (which dates back to 1994). This was down 15.0% compared to May and down 33.6% Y/Y. Stocks rose 18.5% over the previous month to 454 thousand tons at the end of the month, a 9-day supply. Ending stocks were up 15.4% Y/Y. According to the USGS, “The ongoing worldwide COVID-19 pandemic has weakened demand for soda ash, which has resulted in reductions in production and exports, and increases in stocks.”
Wholesale trade in chemicals rose 2.6% to $9.83 billion in July and follows a 6.3% gain in June. Inventories fell 2.5% to 12.10 billion at the end of July, pushing the inventories-to-sales ratio down from 1.29 to 1.23. A year earlier the ratio was 1.22. Wholesale trade was off 9.5% Y/Y and inventories were off 8.7% Y/Y.
At the producer level, chemical prices rose 0.4% in August, following a 0.8% gain in July. Prices among segments were mixed: there were gains in plastic resins, synthetic rubber, other specialty chemicals and consumer products which were offset by declining prices for inorganic chemicals, bulk petrochemicals, manufactured fibers, and coatings. Prices for agricultural chemicals were flat. Compared to a year ago, chemical prices remained off 3.4%.
At $17.5 billion, total U.S. chemicals trade was 9% lower in July YTD/YTD. After stabilizing in June, U.S. chemicals exports fell 2% in July to $9.4 billion, a level 16% lower than July 2019. Compared to July 2019, chemical exports were down dramatically in every category excluding agricultural chemicals. Chemical imports were up 1% in July to $8.1 billion, a level 9% lower than July 2019. Higher imports of consumer products led the gain. The trade surplus narrowed by $249 million to $1.3 billion in July.
Since mid-2017, following the announcement of China’s National Sword policy severely limiting imports of plastic waste, members of the Advanced Recycling Alliance for Plastics (ARAP) and the broader recycling community have increased domestic project initiatives to convert plastic waste into usable products. These new investments are critical to the evolution of a more circular economy for plastics and provide jobs and economic activity in local communities. ACC is tracking announced investments in plastics recycling capacity and, as of early September 2020, ACC is following 64 projects in the U.S. (announced since July 2017) valued at $5.3 billion. The projects represent a wide mix of technologies, product slates, and scale. Collectively, these projects have the potential to divert more than 4.0 million tons (approximately 8.9 billion pounds) of waste from landfills each year. These projects include traditional mechanical recycling, in addition to new advanced recycling project that convert waste plastics into fuels and building block chemicals through pyrolysis and other technologies. More than 28% of these projects represent foreign direct investment. Based on the available data, nearly one-third of these projects have been completed or are under construction. The remaining two-thirds are planned, though in some cases, pilot or demonstration-scale facilities are already operational. ACC counts modern recycling projects in 24 states, with California having the largest number of projects, followed by Pennsylvania, Texas, Indiana, South Carolina, Arizona and Ohio. Visit the Advanced Recycling Alliance for Plastics website for more information.
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The 10th ICIS World Surfactants Virtual Conference
16-18 September 2020
ADI Chemical Market Resources
22 September 2020
“Growth Plans for the Largest Market Cap USA Chemical Company”
Seifi Ghasemi | Chairman, President and CEO of Air Products.
29 September 2020; 11:00 am to 12:00 pm ET
Chemical Marketing & Economics
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.