UpdateUS Dow Jones Industrial loses 420 pts; chemical index falls 6%

18 August 2011 21:41  [Source: ICIS news]

US stocks fall(adds updated numbers, paragraph 4)

HOUSTON (ICIS)--Chemical stocks plunged on Thursday as the Dow Jones Industrial Average fell by 3.68%.

The Dow Jones US Chemicals Index fell 6.07% on Thursday as the index's total industrial average fell by almost 420 points.

The chemical index closed at 304.17, down 19.66 points. Based on percentage, it did worse than the Dow Jones Industrial Average, which closed at 10,990.58.

The plunge followed a report released by the US Department of Labor, which showed that 408,000 people filed for jobless claims for the week ended 13 August, up 9,000 from the previous week.

Also, US sales of existing homes fell by 3.5% in July from June, a drop attributed to overly tight lending standards. The report was the latest in a series of gloomy statistics released this week about the nation's struggling residential market.

Unlike recent days with wide swings, many stocks in North American chemical companies performed worse than the Dow Jones Industrial Average.

None of the chemical companies followed by ICIS rose.

Butadiene (BD) producer TPC Group and specialty chemicals producer Ferro were among the biggest losers. Both fell by more than 11%.

Several companies fell by more than 8%, including catalyst producer Albemarle; compounder Spartech; pigment producer Kronos Worldwide; refiner and petrochemicals producer LyondellBasell; acetyls producer Celanese; refiner Valero; and specialty chemicals producers Chemtura, Rockwood Holdings, Quaker Chemical and Cytec Industries.

Lubricants additives producer Lubrizol closed flat and specialty chemicals producer Arch Chemicals fell the least, dropping by less than 1%. Both, however, are being acquired.

Outside of the acquisition targets, base oils producer Calumet suffered the least damage, falling 1.84%.

Among the majors, Dow Chemical dropped by 9% and DuPont fell by 5%.

Industrial gases producer Praxair was off by 5% and fertilizer producer PotashCorp nosed down 6%.

US chemical stocks had been performing better than the market as some consultants and economists expected that the nation's feedstock advantage could help the industry weather a slowdown in the economy.

Unlike much of the world, US chemical producers rely mostly on ethane and other natural gas liquids (NGLs) as feedstocks versus oil-derived naphtha.

The advent of shale gas has increased production of NGLs.

However, Laurence Alexander, analyst with US-based investment bank Jefferies & Co, has cut 2012 earnings per share estimates on chemical companies across the board, but still expects profit growth versus 2011.

He noted that leading indicators “suggest downside risk to 2012 consensus, consistent with a ‘soft patch’ rather than a global recession”.

Additional reporting by Joseph Chang and Joe Kamalick

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

By: Al Greenwood
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