CHICAGO, Dec. 17, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Chemicals, including Dow Chemical (NYSE:DOW-Free Report), DuPont (NYSE:DD-Free Report), LyondellBasell Industries (NYSE:LYB-Free Report), Eastman Chemical (NYSE:EMN-Free Report) and Celanese (NYSE:CE-Free Report).
Industry: Chemicals
Link: http://www.zacks.com/commentary/36134/chemical-industry-looking-up-amid-a-few-worries
The chemical industry -- a roughly $5 trillion global business -- is clawing its way back after staying down for most part of last year. The industry has fared reasonably well this year amid a still-exigent global operating backdrop that has been exacerbated by lumpiness in Europe and a cooling Chinese economy.
With the U.S. economy springing back to life, the first three quarters of 2014 showed healthy demand trends for chemicals and continued healing across key end-use markets such as housing, commercial construction and electronics. The momentum is expected to continue into 2015 despite some headwinds.
U.S. Looks Bright, Europe & China Cloudy
According to the latest monthly report from the American Chemistry Council (ACC) -- an industry trade group -- U.S. chemical production rose on a monthly basis for the tenth straight month in Oct 2014, providing further evidence that the industry remained on the road to recovery in the second half. Growth has been witnessed across all key producing regions this year.
The outlook for the U.S. chemical industry paints an encouraging picture as the ACC recently said that national chemical production moved up 2% in 2014 (up from a 1.6% increase in 2013) and is expected to further rise to a 3.7% gain next year and 3.9% in 2016. Growth is expected to be backed by healthy demand from light vehicles market and a recovery in the housing market.
The ACC expects strong capital spending in the coming years, stemming from new investments in petrochemicals and derivatives. U.S. capital spending has jumped 12% this year to reach $33 billion, boosted by a raft of chemical projects. The shale gas boom is driving investment on plants and equipment in the U.S.
Chemical makers including majors like Dow Chemical (NYSE:DOW-Free Report), DuPont (NYSE:DD-Free Report), LyondellBasell Industries (NYSE:LYB-Free Report), Eastman Chemical (NYSE:EMN-Free Report) and Celanese (NYSE:CE-Free Report) are currently ratcheting up investment on shale gas-linked projects to take advantage of ample natural gas supplies which is expected to boost capacity and export over the next several years. The U.S. has emerged as an attractive investment hotspot and chemical makers are aggressively expanding capacity in the country.
The ACC expects U.S. chemical industry to rake in trade surplus of $77 billion by 2019, supported by a significant share of gas-driven chemical investments. Accelerated growth in U.S. chemical exports are expected to lead to continued generation of trade surplus. With the revival across most export markets, strong growth is expected in inorganic chemicals, organic chemistry, plastic resins and synthetic rubber. The ACC sees domestic chemical sales to cross the $1 trillion milestone by 2019.
Agriculture and health and nutrition have emerged as attractive markets and major chemical makers are increasingly switching their focus on these markets to cut their exposure on businesses that are grappling with weak demand and input costs pressure. Moreover, strategic actions including cost containment and acquisitions/divestments remain the prime focus of chemical companies to stay afloat in a still difficult macro environment.
Outlook for Europe, however, is not so bright at the moment given fresh signs of slowdown in the region. According to the European Chemical Industry Council (CEFIC) -- which represents the European chemicals industry -- chemical output rose just 0.9% year over year in Europe in the first three quarters of 2014, stymied by lower pricing and a reduction in petrochemical output.
CEFIC now expects European chemical output to rise 1% next year, slower than 1.5% expected earlier. Fresh reports of weakness in the Eurozone economy, hurt by sluggishness in the region's major economies (such as Germany, France and Italy) have renewed concerns about the recovery prospects of the chemical industry in that region. The European chemical industry also remains hobbled by high energy costs.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Get the full Report on DOW - FREE
Get the full Report on DD - FREE
Get the full Report on LYB - FREE
Get the full Report on EMN - FREE
Get the full Report on CE - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/zacks-industry-outlook-highlights-dow-chemical-dupont-lyondellbasell-industries-eastman-chemical-and-celanese-300011107.html
SOURCE Zacks Investment Research, Inc.
Share this article