UpdateHealth of US chemical industry turns positive

23 October 2009 23:23  [Source: ICIS news]

US chem health improves(adds paragraphs 10-17)

HOUSTON (ICIS news)--The American Chemistry Council (ACC) gave the US chemical industry its most positive economic rating for the first time since February 2008 - as companies have resumed restocking, the trade group said on Friday.

Indeed, many industries have started restocking following a massive liquidation that occurred during much of the year, the ACC said.

As such, chemical companies are increasing production, the group said. Utilisation rates rose to 72.3% in September, compared with a low of 67.2% in December 2008.  

US chemical production rose by 0.6% in September versus August, the group said.

Year-over-year comparisons continued to improve - although the September production figure was still off 8.8% when compared with September 2008, the ACC said.

Worldwide, global production in the chemical industry rose for the sixth time in the last seven months, suggesting that a sharp recovery has started, the ACC said.

However, the recovery in the US and western Europe continues to lag behind the world's, said Kevin Swift, chief economist for the ACC.

The recovery, though, is still taking place, and the ACC gave the business of chemistry a green flag. That is the most optimistic of the group's three ratings.

The ACC also gave the general economy a green flag.

The group made its comments in a weekly economic report, issued just as chemical companies have started releasing their third-quarter earnings.

Dow Chemical reported third-quarter sales that fell 22% year over year but rose 6% over the second quarter.

DuPont posted a net profit of $409m (€274m), up from $367m in the same period last year, which included net hurricane-related charges of $146m.

Deutsche Bank said US chemical firms would likely report third-quarter earnings that exceed estimates from analysts.

Prices and raw material costs have remained more less stable while sales volumes have increased throughout the year, Deutsche Bank said. In fact, operating margins could exceed expectations.

The decline in the US housing market is slowing down, Deutsche Bank said. Automobile production could actually increase in the fourth quarter.

Upcoming conference calls will focus on whether producers can maintain cost savings and if they can maintain pricing power if raw material costs increase.

For the fourth quarter, Deutsche Bank expects US GDP growth to drop to 2.5% from 4.0% in the third quarter. Export demand would likely decline after peaking in the third quarter, due, in part, to new capacity coming on line in the Middle East.

($1 = €0.67)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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