Analysis: Global chemicals industry moderated in Sept

20 October 2004 16:19  [Source: ICIS news]

WASHINGTON (CNI)--Global chemical industry activity moderated in September amid high energy costs, some cooling of the Chinese economic engine and multiple hurricane blasts in North America, a top industry economist said Wednesday.

 

Kevin Swift, senior director and chief economist at the American Chemistry Council (ACC), reported today on the ACC’s global index of the chemicals industry, showing a “stable” September following gains of 0.4% in August and 0.2% in July.

 

The ACC global index for September stands at 128.6% of the 1997 base-line comparison year, and the global chemicals industry shows a 5.5% improvement last month compared with September 2003.

 

“The improvement in activity during August was broad-based,” Swift reported, “with all regions except Asia-Pacific participating.  However, activity improved during September for Western Europe, Africa & the Middle East, and Asia-Pacific, with a hurricane induced reduction occurring in North American (largely US) activity. Central & Eastern Europe also witnessed a decline in activity.”

 

Swift said that in North America the continuing recovery of manufacturing pulled all three of the continent’s nations along with it in July and August, but in August and September four major hurricanes struck the US and “reduced 0.3 percentage points off from overall industrial production growth as oil and gas output, oil refining, and chemicals all suffered.”

 

“Indeed,” Swift noted, “full resumption of oil and gas operations in the Gulf of Mexico has still not occurred.”  In large part due to the barrage of hurricanes, the US chemicals industry declined 1.1% in September, Swift said, resulting in a decline in regional production of 1%.

 

“In Canada,” Swift said, “high oil prices increase the uncertainty about the outlook, although the energy-producing sector is clearly benefiting. The housing sector continues to foster demand for construction materials and domestic demand remains firm.” 

 

In Mexico, “industrial production continues to improve,” Swift said.  But, due to weather-related effects in the US, North American production as a whole is up only 4.8% from a year ago, down from a 7.2% comparison in July.

 

In Latin America, Swift said, “chemical industry growth appears to have slowed in September, increasing just 0.1%, a marked deceleration from earlier in the year. The recovery in the Brazilian industry continues apace and, with the exception of Peru, other nations (Argentina, Chile, Colombia, Venezuela, etc.) appear to be continuing to experience gains in activity.   Overall, production in Latin America is up 6.6% from a year ago.”

 

“In Western Europe,” Swift said, “it appears that activity rose again in September, following a strong 0.8% gain in August.  Production in France has been particularly vibrant in recent months, out-performing the rest of the euro zone and offsetting slower gains in Germany and Italy. During August production in the United Kingdom rebounded after three months of decline.”

 

Swift said that despite a modest economic recovery in Europe and high oil prices, “a tentative chemical industry recovery does appear to be taking hold in Western Europe” although “it will continue to lag that of much of the rest of the world.”  Western European production is up 4.1% from a year ago and up from a 2.4% comparison in August, Swift said.  But he added the caveat that “This improvement largely reflects a decline in activity during September 2003 rather than sustained strong growth.”

 

For Central & Eastern Europe, Swift said, “the latest data suggest that September was a negative month, with output falling after a year of relatively strong gains. This was particularly the case in Russia.  Production in the region is up 5.2% from a year ago, down from a 7.2% comparison in August. A particularly strong gain occurred in the Czech Republic, but elsewhere results were more mixed. Growth has been driven by exports to Western Europe as membership in the EU benefits a number of these nations.”

 

“In Africa & the Middle East, chemical industry output is now 7.4% above last year's level and has accelerated recently,” Swift reports.  “New capacity is coming on-stream and petrochemical and derivative production has been aided by strong economic growth in East Asia, especially China. Outside the Persian Gulf nations, growth has continued in South Africa, Israel, and Turkey.”

 

In the Asia-Pacific region, production appears to have improved during September, Swift said.  “Regional activity had decreased in both July and August, largely the result of the Chinese government’s efforts to cool the economy. This affected nations in the region exporting to China as well.  Recently, India's industrial expansion has picked up its pace and, as a result, chemical industry activity improved during August.  Elsewhere, activity improved in Japan, Korea, Malaysia, Singapore, and Taiwan. Chemical industry production in the Asia-Pacific region was up 7.2% in September, representing continued moderation in year-over-year comparisons since May.”

 

In conclusion, Swift said:  “The global business of chemistry appears to have reached a new stage of the chemicals cycle, one consistent with an evolution of the cycle from that of recovery to one of expansion.  The industry continues to move ahead at a pace where occasional monthly declines may be interspersed within more modest monthly gains. The major risk to the global economy and the business of chemistry at this point of the chemistry cycle is high oil prices. In North America, this is further complicated by volatile natural gas prices.  A hard landing in China is the other risk. It appears that a soft landing is occurring.”

 

The member companies of Arlington, Virginia-based ACC account for some 90% of US basic industrial chemicals productive capacity.

By: Joe Kamalick
+1 713 525 2653

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