Global chemical operating rates remain below SuperCycle levels

Economic growth


ACC OR Jun14Operating rates (OR%) rose to 84% in the global chemical industry in April, according to data from the excellent American Chemistry Council (ACC) weekly report. As the chart shows:

  • This was back at January’s rate, after 83.6% in February and 83.7% in March (orange line)
  • But rates are still below the minimum 88% rates seen in the SuperCycle (red)
  • And they are a long way below the long-term average of 92% between 1987 – 2013

The key is the move into today’s New Normal of lower demand growth.  The blog has added a red line to the ACC graph, showing the lowest OR% seen during the SuperCycle. at around 88%.  Since 2009, OR% have never managed to reclaim this level, with the initial post-Crisis rally running out of steam in 2011.

Also interesting is that OR% growth was only up 1.3% in N America, despite the shale gas cost advantage.  This is yet further confirmation that lowest cost is now no longer the key driver for OR%.    Instead the highest growth was seen in China, up 11.1%.  This highlights China’s move into export markets, to replace slowing domestic demand, as the blog has identified in core products such as PVC and PTA.

The ACC also report that global chemical industry production is only up 14.6% today versus average 2007 levels, again confirming the lacklustre nature of the recovery despite the $33tn of policymaker stimulus.  April data shows that relatively strong areas included coatings, consumer products and pharmaceuticals, whilst inorganic chemicals, petrochemicals and plastic resins were weaker.

US specialty markets are seeing the same trends.  ACC data for April shows production up just 8.9% versus average 2007 levels, and again the market seems to be finding it difficult to gain momentum:

  • Total production was flat in April, with only 10 segments expanding compared to 23 in March
  • 17 segments actually saw declining production, with 1 segment flat
  • Adhesives & sealants and anti-oxidants remain the best performers, up around 10% versus 2013
  • Paper additives and plasticisers are the laggards, down around 5%

The data continues to highlight how GDP growth is no longer an accurate guide to future growth levels.  Companies who focus instead on age range and income level are likely to see the best results in future decades.


The blog’s weekly round-up of Benchmark price movements since January 2014 is below, with ICIS pricing comments:
PTA China, down 5%. “Demand in the downstream polyester markets saw weaker sales, resulting in end-users being unable to pass down the additional cost to their customers”
Benzene, Europe, down 1%. “Rising crude prices led to higher global prices and a number of trades with short-covering said to be strong”
US$: yen, down 3%
Brent crude oil, up 1%
S&P 500 stock market index, up 6%
Naphtha Europe, up 6%. “Prices have spiked on a steep rise in upstream ICE Brent crude oil futures. Supply is less tight on a closed arbitrage window to Asia and increased imports from the US. Domestic gasoline blending demand is healthy, but this has been more than offset by slow petrochemical demanduted”
HDPE US export, up 7%. “Prices still slightly too high to really compete in the international market”


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