U.S. Chemical Output Ticks Up in January

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U.S. chemical output rose narrowly on a monthly basis in January as activity across a host of key end-use industries was stymied by harsh winter weather, according to the latest monthly report from the American Chemistry Council (ACC).

The Washington, DC-based chemical industry trade group noted that the U.S. Chemical Production Regional Index (:CPRI) moved up 0.3% in January, following a 0.6% rise a month ago with gains witnessed across all seven regions.

Created by Moore Economics to track chemical production in seven regions nationwide, the U.S. CPRI is comparable to Federal Reserve’s industrial production index for chemicals. The CPRI is measured using a three-month moving average.
 
Output from the U.S. manufacturing sector, the biggest consumer of chemical products, was flat in the reported month as bad weather hindered activities across a number of industries. Nevertheless, within this sector, output rose in several chemistry end-user markets including fabricated metal products, computers, semiconductors, rubber products, printing, textile products and apparel.
 
The manufacturing sector serves as a barometer to gauge the overall health of the U.S. economy and is a major driver for the chemical industry which touches around 96% of manufactured goods.
 
The ACC said that chemical output was mixed across the segments in January. Production gains across chlor-alkali, industrial gases, synthetic dyes and pigments, adhesives, coatings, synthetic rubber, consumer products, plastic resins, pesticides and other specialties were masked by declines in manmade fibers, organic chemicals and fertilizers.
 
Overall chemical production inched up 0.3% year over year in the reported month. On a region-by-region basis, gains were witnessed across Midwest, Ohio Valley and Southeast regions.
 
On a monthly comparison basis, January reading showed that chemical production in the Gulf Coast region, where key building block materials are produced, moved up 0.4%. Output rose 0.3% across Mid-Atlantic, Southeast and West Coast regions. Ohio Valley raked in the highest monthly gain of 0.5%. Production rose 0.4% and 0.2% in Midwest and Northeast, respectively.  

The roughly $770 billion U.S. chemical industry is cyclical by nature and heavily linked to the overall condition of the nation’s economy. It has been consistently leading the U.S. economy’s business cycle due to its early position in the supply chain.
 
Last year, Europe’s debt crisis, effects of sequestration along with weakness across some key end-use markets weighed on companies in the chemical space including majors such as DuPont (DD), Dow Chemical (DOW), Eastman Chemical (EMN) and Celanese (CE).
 
While a still soft European market coupled with other industry-specific challenges continues to pose downside risks, the global chemical industry is expected to fare relatively better this year, aided by healthy Chinese demand, significant capital investment and a shale gas boom in the U.S.
 
The ACC envisions U.S. chemical production to rise 2.5% in 2014 and further improve to a 3.5% gain next year. Growth will be backed by strong agricultural market fundamentals, healthy demand from light vehicles market and a gradual recovery in the housing market. On the global front, the trade group sees production to move up 3.8% in 2014 and 4.1% in 2015 with healthy gains expected across North America and emerging markets.

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