UpdateChems surge as US Dow Jones Industrial Average gains 423 pts

11 August 2011 21:30  [Source: ICIS news]

US stocks rise(adds updated numbers, paragraphs 12-23)

HOUSTON (ICIS)--North American chemical stocks surged on Thursday, with several outperforming the overall market as the Dow Jones Industrial Average rose by 423.

The index reached 11,143.31, up 3.95%.

The jump followed a report issued by the US Department of Labor, which showed that unemployment claims for the week ended 6 August fell 7,000 to reach 395,000.

The figure is seasonally adjusted.

The four-week moving average was 405,000, down 3,250 from the previous week's revised average of 408,250, the department said.

The rise in the Dow Jones sent several chemical stocks soaring. In the past few days, chemical stocks have been outperforming the average during its wild swings up and down.

Only one company followed by ICIS fell. Compounder Spartech dropped by 0.65%.

Butadiene (BD) producer TPC Group gained the most, rising 23%. The jump followed the company's release of its second-quarter earnings, which showed a 138% rise in net income.

Polyvinyl chloride (PVC) producer Georgia Gulf rose nearly 16% and specialty chemicals producer Ferro rose 10%.

Base-oils producer Calumet rose nearly 7%.

Among the majors, Dow Chemical rose by nearly 5% and DuPont rose by nearly 6% on Thursday.

Industrial gasses producer Praxair gained 5% and fertilizer producer PotashCorp rose by nearly 7%.

The overall gains in stocks, though, do not make up for the recent losses in the market. Near the end of July, the Dow Jones Industrial Average was more than 12,500. The fall in the stock market has renewed concerns about another recession.

The American Chemistry Council (ACC) put the chances of another recession at one and three.

Investment bank Jefferies & Co put it at one in four, according to a research note by Laurence Alexander, an analyst who follows the chemical industry.

He noted a few possible trends that could strengthen the prospects of the chemical industry.

The US government could intervene, stabilising the market, he said.

Overall, companies have lower inventories of product, which should mitigate any risks of customers delaying purchases in hopes of securing lower prices, Alexander said.

Many companies are in the middle of productivity programmes that should improve their margins, he said.

Also, chemical producers are more disciplined about managing maintenance shutdowns, Alexander said. For example, planned shutdowns in the US and Asia should improve margins in the ethylene chain.

The ACC and others noted that the feedstock advantage in the US could allow chemical producers to rely on exports to offset lower demand.

US producers mostly rely on ethane and other natural gas liquids (NGLs) to produce ethylene as a feedstock. Much of the rest of the world's chemical makers instead rely on oil-based naphtha.

The advent of shale gas has increased the US supply of NGLs, and many chemical companies have announced that they are considering or will build new crackers. Others have announced expansion plans.

Thursday was another day of huge swings on the stock market.

On Wednesday, the Dow Jones Industrial Average closed at 10,719.94, down 4.62%.

It posted a huge 430-point gain on Tuesday.

On Monday the Dow Jones fell 635 points or 5.55%. Chemical stocks suffered even steeper declines, with several posting drops of more than 10%.

On Thursday last week, the Dow fell nearly 513 points.

Both days were the worst for the index since December 2008, when it fell 680 points.

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


By: Al Greenwood
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