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Coatings and Plastics Lead Production Growth in June

Posted on August 22nd, 2017 by in Chemicals Industry News and Analysis

coatings

Coatings, plastics, pharmaceuticals and synthetic rubber led year on year chemicals production growth in June, the latest analysis from the American Chemistry Council (ACC) shows. But the data also illustrate the fact that sector growth remains broad-based.

It is true that the more cyclical products have shown the most marked improvement from their collapse during the great recession. The lackluster growth profile for specialties has tended to reflect far from consolidated growth for the industrial and consumer segments they tend to serve, such as consumer electronics and automobiles, mining and oilfield chemicals.

production volumes 1

Source: ACC

The ACC said in an 18 July release that US specialty chemical market volumes had shown stronger growth in June than in May. Volumes, in general, had moved up since May 2016 with the return to growth in mining and oilfield chemicals (the latter linked to the upturn in the fracking business) a key factor.

The trade group’s overall specialty chemicals volume index was 4.9% higher year on year in June on a three-month moving average basis. Comparisons had been negative from the second quarter of 2015 to the second quarter of 2016 also because of a more widespread industrial malaise.

“Led by the recovery in the oil and gas sector, headline volumes are now positive and strong,” the ACC said. “On a Y/Y [year on year] basis, there were gains among 20 market and functional specialty chemical segments.”

Chemical companies globally, however, have had the chance to capitalize on growth.

In the first six months, production volume increases were led by coatings, commodity inorganic chemicals, and plastics.

production volumes 2

Source: ACC

Geographically, June year to date gains in production was strong in Russia and elsewhere in Central and Eastern Europe and in Western Europe. Asia Pacific growth has slowed this year with growth in South Korea and Japan making the most significant gains in June year to date and China continuing to show strongly, although at a much slower pace than in the past.

It is the US that has been flat for a large part of this year. In June the weakness in the US was in inorganics, plastics, synthetic rubber, manufactured fibers, coatings and agricultural chemicals, in other words across a broad swathe of the sector. Petrochemicals and intermediates were growing as were certain specialties and consumer chemicals.

Of concern in the US has to be the narrowing differential between shipments (the dollar value of chemicals) shipped from producers to inventory. The former was 0.5% lower year on year in June according to the data highlighted by the ACC’s chief economist, Kevin Swift, recently on Twitter.

Inventories were up 3.7% year on year in what he described as a “classic imbalance”.

On the negative side also, the ACC analysis continues to show weakened chemical industry capacity utilization. Although global chemical industry capacity utilization rose 0.1 percentage points to 80.1% in June, that level of utilization was down from 80.5% last year and well below the 1987-2016 average of 88.8%. It has been tracking down generally since 2011.

global chemical capacity

 

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All opinions shared in this post are the author’s own.

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