LONDON (ICIS)--The latest (November 2018) chemicals production data collected by the American Chemistry Council (ACC) throw up some challenging and worrying trends.
The general chemicals year on year production slowdown reflects a weak Europe and Latin America, a still relatively strong US, but reduced output from China.
Chemicals production in China fell 3.2% year on year in November because of weak industrial demand and the closure of some capacity. Reduced consumer demand in China had, by that month, begun to impact chemicals output in a big way.
Simultaneously, there were capacity shutdowns, due in part to seasonal factors, and environmental pressure as well as worsening market fundamentals.
Capacity utilisation rates were lowered while product prices fell against the backdrop of lower priced crude. Oil prices had been falling from early October.
The ACC says that its Global Chemical Production Index (or CPRI) was up 0.1% year on year in November but down 0.1% on a three month moving average basis, reflecting weaker activity earlier in the year.
Sector output has clearly come off from its peak. Meanwhile, global capacity utilisation continued to fall in November, dropping 0.1 percentage points to 83.1%. That compares with a much stronger rate of 86.0% in November 2017 and a long-term average (1987-2017) of 86.5%.
Companies make more money when capacity utilisation rates are high while margins are squeezed when capacity is used less efficiently.
Petrochemicals and plastics output, alongside the output of basic chemicals, continued to grow strongly in November compared with other segments of the industry, driven in part by the ongoing investment in shale-gas based production capacity in the US.
Indeed, the US and Canada were the stand-out countries in North America last year in terms of chemicals production growth, with output in the region rising by 0.1% month on month in November (4.8% year on year) 3.8% in the year to date.
By contrast, production in Europe was falling month to month and year on year, with sharp annual declines in Germany, France and the Netherlands, key locations for the industry.
Source: American Chemistry Council
By Nigel Davis