INSIGHT: Chemicals production growth weak in July

Nigel Davis

02-Sep-2015

By Nigel Davis

LONDON (ICIS)–Chemicals growth globally is under pressure and shows signs of further contraction. Former fast-growing economies have slowed markedly and while the US stands out as beacon of (economic) growth, that growth has been below trend and looks increasingly uncertain in a troubled world.

Chemicals growth looked shaky in July, the latest data show. Capacity utilisation slipped by 0.3 percentage points to 81.9%, the American Chemistry Council said last week. “This is off from 82.4% last July and is still below the long-term (1987-2014) average of 90.9%,” it added.

Global Chemical Capacity Utilisation

The ACC’s Global Chemical Production Regional Index, its Global CPRI, has been re-based to 2012 and now shows cumulative growth of 7.8% to date. That is hardly encouraging but reflects sluggish global economic growth over the past three years.

Global Chemical Production Regional Index

The Global CPRI is said to have entered the third quarter of 2015 “on a soft note” with the headline index rising just 0.1% on a three month moving average basis. That helps to flatten out sharp peaks and troughs in the monthly data. The performance was comparable in June, the ACC said, and marks the slowest pace this year.

Year on year on a three month moving average basis the index was up 3.8% in July with growth in all regions of the world apart from Latin America where the cutback in production appears to have slowed. Nationally, however, output this year has dropped in Japan and South Korea as well as in Sweden.

Chemicals production growth has slowed markedly in China and has slowed in the US but Europe generally has picked up. The three month moving average chemicals production growth rate was 4.0% year on year in western Europe in July. It was 8.2% in central and eastern Europe – 13.4% in Russia.

“Chemical production in North America has generally been on an upward trend since December 2008 but the pace of growth has been very slow,” the ACC said.

“In the US, production of basic chemicals rose with weakness in plastic resins, synthetic rubber and manufactured fibres offset by gains in inorganic chemicals and bulk petrochemicals and organic intermediates. Production of US specialty chemicals rose in July, with strength centred in coatings.”

This chemicals type breakdown is informative. US producers are making more plastics. The output of the major plastics in the US was up 7.0% year on year in July and was up 3.8% in the year to date.

Chlorine production was up 4.3% year on year with a chlorine industry operating rate of 90% – caustic soda output was up 3.0%.

Earlier last month the ACC released data on US speciality chemicals markets which showed volume growth moderating somewhat in July, driven down largely by the contracting market for oilfield chemicals, for mining chemicals, pigments, plasticizers, plastics additives and paper additives. Year earlier comparison, even for some of the faster growing segments, have been moderating.

Looking back to the 2008/09 crash it is clear that the most cyclical chemical industry segments have led the recovery although it is the pressure on growth in these segments that currently is so marked. “During July, results were mixed, with production of inorganic chemicals, plastic resins and coatings increasing while other segments declined or were flat,” said the ACC.

The data show petrochemicals production improving slightly since April but plastics output growth contracting month to month. Synthetic rubber output has been relatively flat by around 4% higher than over the same periods of 2014.

Production volumes
(% change year on year – 3 month moving average)

April

May

June

July

Chemicals total*

2.9

3.4

3.5

3.2

Agricultural chemicals

1.3

1.9

2.1

1.9

Consumer products

4.6

4.1

3.8

3.2

Basic chemicals

1.9

2.5

2.7

2.7

      Inorganic chemicals

1.2

1.9

2.0

1.9

      Petrochemicals

-0.9

0.4

1.2

1.9

      Plastics

5.0

5.0

4.3

3.5

      Synthetic rubber

4.2

4.0

4.5

4.3

      Man-made fibres

5.7

5.6

5.0

4.2

Specialty chemicals

5.4

6.0

6.0

5.6

      Coatings

0.7

1.9

2.8

3.2

      Other specialities

7.4

7.8

7.2

6.4

*Excluding pharmaceuticals.
Source ACC

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