Plastic, petchem demand slows in Texas - Fed

16 January 2008 23:16  [Source: ICIS news]

HOUSTON (ICIS news)--Demand fell for plastics and petrochemicals produced in the US region including Texas during November and December, the Federal Reserve (Fed), reported on Wednesday in its Beige Book.

Nearly all of the Fed's Dallas district is made up of Texas, the prime petrochemical producer in the US. The district also includes parts of Louisiana and New Mexico.

The Dallas district said that weak sales to automobile makers and house builders caused domestic plastic and petrochemical sales to drop in the final months of 2007. In addition, there has been a recent softening of export demand for several important petrochemicals and plastics.

Many US producers have relied on exports to help compensate for sluggish domestic demand.

In other news, refinery utilisation in the Dallas district held at about 90%, which is typical for the final months of the year, according to the report.

Global demand for energy remained strong, and the Texas rig count sharply increased in November and December, the Fed said.

The Atlanta, Kansas City and Minneapolis districts also reported increased activity in the energy sector, according to the Fed. In fact, rising energy costs were expected to push up petrochemical prices further, the book said.

Overall, economic growth slowed in the US in the final months of 2007, according to the Beige Book.

Most of the 12 reporting districts said that holiday spending was subdued and auto sales fell further. Retailers' outlook for 2008 is cautious, according to the report.

Retailers are an important consumer of packaging products, which provide an end market for several plastics, according to the American Chemistry Council (ACC). Each automobile contains an average of $2,441 (€1,635) in chemistry.

House sales remained weak in all of the districts, the book said.

The housing industry is a key downstream consuming sector for chemicals and chemicals-based products such as roofing materials, adhesives, insulation, siding, paints and coatings, synthetic materials, polyvinyl chloride (PVC) pipes and a broad range of other construction materials.

Each house contains an average of $16,600 worth of chemicals, according to the ACC.

Commercial real-estate activity varied among the districts, with some districts reporting signs of softening.

Commercial real estate has performed well through much of 2007, making up for some - though not all - of the slowdown in the US housing market. The sector began showing several signs of slowing down near the end of the year.

($1.00 = €0.67)

By: Al Greenwood
+1 713 525 2653

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