Low natural gas prices equal positive commodity chemicals forecast

Low natural gas prices equal positive commodity chemicals forecast




The U.S. commodity chemical industry that manufactures chemicals linked to natural gas is expected to have a strong 2012, according to a Moody's report issued today. The Houston Chronicle reports rapid growth of the natural gas supply and low prices are driving the commodity chemicals boom domestically, even as economic slowdowns in Europe and China may well dampen the industry's performance worldwide. "Strong pricing power across many sub-sectors of the chemical industry has helped to offset year-on-year volume declines in Europe," Moody's writes. "U.S. volumes remain robust and are supported by exports." Domestic producers are taking advantage of the natural gas glut to produce a range of commodity chemicals and natural gas liquids, including ammonia, methanol, ethylene and chlor alkali. There is a strong link between industrial production growth and the commodity chemicals industry, and the report's projection of 3.7% growth in domestic industrial production will help drive demand for commodity chemicals, Moody's says. While the U.S. commodity chemicals market looks strong in the near future, Moody's expresses concern that a growth slowdown in China could have a dampening effect on petrochemicals worldwide. The economic slowdown in Europe has also led to weaker-than-expected growth of commodity chemicals worldwide. "While our current forecast for Chinese industrial production growth is 13.3% for 2012 and 12.5% for 2013, a decline towards 7% to 8% would be troubling and might change our outlook for the industry," the report says.



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