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U.S. Chemical Output Edges Up in March

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U.S. chemical output showed a meager increase on a monthly basis in March as declines in Gulf Coast and Ohio Valley were eclipsed by higher production in other regions, according to the latest monthly report from the American Chemistry Council (ACC).

The Washington, DC-based chemical industry trade group said that the U.S. Chemical Production Regional Index (:CPRI) inched up 0.2% in March, following a revised 0.5% increase a month ago, with gains witnessed across five out of 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, ticked up 0.3% in the reported month, an improvement from a 0.2% gain in February. Within this sector, gains were witnessed in several chemistry end-user markets including aerospace, construction supplies, machinery, fabricated metal products, computers, semiconductors, plastic products and rubber products.
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.
According to the ACC, chemical production was mixed across the segments in March. Gains across consumer products, industrial gases, pharmaceuticals, inorganic chemicals, adhesives and chlor-alkali were capped by declines in organic chemicals, plastic resins, coatings, pesticides, fertilizers and manmade fibers.
Overall chemical production went up 1.3% year over year in the reported month. On a region-by-region basis, gains were witnessed across all regions barring Gulf Coast.
March reading showed that chemical output in the Gulf Coast, where key building block materials are produced, clipped 0.5% on a monthly comparison basis. Output rose 0.5% across Mid-Atlantic and West Coast. Production went up 0.2% in Midwest and Southeast while Ohio Valley saw a 0.3% fall. Output increased 0.4% in the Northeast.

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.
Chemical makers including majors such as DuPont (DD), Dow Chemical (DOW), Eastman Chemical (EMN) and Celanese (CE) had a tough 2013 as a weak European economy, effects of sequestration in the U.S. along with certain industry-specific challenges led to subdued demand for chemicals for most of the year.
While a still-challenging economic backdrop in Europe remains a roadblock, the chemical industry is expected to fare relatively better in 2014, aided by a shale gas boom in the U.S., healthy Chinese demand and significant capital investment.
The ACC envisions national chemical output to rise 2.5% in 2014 and further improve to a 3.5% gain next year. Growth will be supported by strong agricultural market fundamentals, healthy demand from light vehicles market and a recovery in the housing market manifested by increase in building permits and a steady pick-up in home prices.

On the global front, the ACC sees production to move up 3.8% in 2014 and 4.1% in 2015 with healthy gains expected across North America and emerging markets. It expects strong capital spending in the coming years, stemming from new investments in petrochemicals and derivatives.

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