V-shaped recovery for chemicals at hand?

Continued strength in production data points to a "sharp V‐shaped recovery" for the global chemical industry. In its weekly economic update, the American Chemistry Council (ACC) reports that U.S. chemical production was up in all seven regions for the fourth consecutive month and global chemical industry production also rose in December for its 10th consecutive gain. The ACC says its running tab of positive indicators remains at 17 out of 20.

The report shows that global chemical industry production rose 0.6% in December, with broad-based production gains. Compared to year-ago levels, production rose 4.2% and stood at 126.9% of its average 2002 level. The report finds that year‐earlier comparisons are improving in every region and most leading indicators of global industrial production suggest further recovery. For 2009 as a whole, however, it appears that global production fell 3.8%.

The ACC says Asia‐Pacific production would indicate a V‐shaped recovery, led by China, India, Korea, Malaysia, Taiwan, and Thailand. Regional production has improved nine out of the last 10 months and is up 8.7% year over year.

The ratio of oil prices to natural gas prices was stable at 13.7:1. One year ago, the ratio registered 9.0:1. Generally speaking, when the ratio is above a band between 6 and 7, Gulf Coast‐based petrochemicals and derivatives are more competitive than those from other producing regions, since North American production is more reliant on natural gas than oil.

According to the U.S. Federal Reserve, industrial production increased 0.6% in December, driven primarily by an increase of 5.9% in electric and gas utilities due to unseasonably cold weather. Manufacturing production edged down 0.1%, while the output of mines rose 0.2%. For the fourth quarter of 2009 as a whole, total industrial production increased at an annual rate of 7.0%. At 100.3% of its 2002 average, output in December was 2.0% below its year-earlier level. Capacity utilization for total industry edged up to 72.0% in December, but remains 8.9 percentage points below its 1972-2008 average. —mpweditorial@cancom.com