US plastic, chemical demand remains soft, margins stay depressed

Author: Al Greenwood

2020/07/15

HOUSTON (ICIS)--Demand for plastics and basic chemicals in the US was soft, while margins remained depressed, the Federal Reserve said on Wednesday.

The anecdote was among several that the US central bank collected in its recent Beige Book, a summary of US economic activity during the past six weeks among the Fed's 12 districts. The latest Beige Book contains information collected through 6 July.

The comments about demand came from the 11th Federal Reserve District, which includes northern Louisiana and all of Texas, and has many of the nation's refineries and petrochemical plants.

Utilisation rates modestly rose for refiners, although their margins remain depressed, the Fed said.

Chemical companies said demand remains strong for personal protective equipment (PPE) and disinfectant products.

Declines in the oil and gas industry remain a significant hurdle, the Federal Reserve said.

Oil and gas producers in the sixth district, which includes southern Louisiana, expect US crude production will take one or two years before returning to pre-coronavirus levels.

The energy industry in the sixth district continued to report weak demand, oversupply and limited global storage capacity for oil, liquefied natural gas (LNG) and refined products.

Fuel distributors in the district said there was little to no demand from cities, transit authorities, schools or airlines. Demand from wholesalers and grocery stores remained solid.

For all of the US, economic activity increased in almost all of the 12 districts of the Federal Reserve, although it remains well below the levels before the pandemic.

  • Consumer spending rose as nonessential businesses were allowed to reopen.
  • Automobile sales rebounded and growth continued in home improvement, as well as food and beverages.
  • Spending rose in leisure and hospitality, but remained well below year-ago levels.
  • Demand rose, but remained weak, for professional and business services.
  • Transportation rose because of higher volumes in trucks and air cargo.
  • Construction rose in some districts, but remained subdued.
  • House sales rose moderately.
  • Commercial real estate activity remained low.
  • Financial conditions in agriculture continued to be poor.
  • Activity in the energy sector fell further because of limited demand and oversupply.
  • Price changes were small. Those for new and used automobiles rose because of low inventories.

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