Global expansion unravels while US chemical growth continues—ACC, South Carolina Ports break records, Maintenance spend led to Pascagoula closure

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U.S. exporters are utilizing other ports beyond Texas and Louisiana, leading to growth in South Carolina. Image: South Carolina Ports Authority

South Carolina has record November, plans additional $60 million investment

South Carolina Ports Authority (SCPA) announced the strongest November in its history, with 15% growth over the same month last year.

The Port handled 188,585 twenty-foot equivalent units (TEU) in November. SCPA has moved 985,981 TEUs across the docks of its Wando Welch and North Charleston container terminals since the fiscal year began in July, an increase of 11% over the same period last year.

"While the US economy remains strong, there is increasing evidence that U.S. beneficial cargo owners advanced shipments from Asia in an effort to avoid tariffs,” said Jim Newsome, SCPA president and CEO. “Although mostly to the U.S. West Coast, in view of the shorter transit times, there were 25 extra loaders employed by container shipping lines to meet this peak demand.

Most of these ships will arrive in December which indicates that December will be a busy month. The first calendar quarter of 2019, however, is much more uncertain in terms of outlook and considering strong volumes achieved in the same period in 2018, the SCPA said.

As measured in pier containers, or boxes handled, SCPA moved a record 107,762 boxes in November. Fiscal year-to-date, pier container volume is up nearly 12% with 562,185 boxes moved since July.

Inland Port Greer handled 9,558 rail moves in November, pushing fiscal year-to-date volumes to 51,476. Last month, 16,977 finished vehicles rolled across the docks at Columbus Street Terminal.

The SCPA Board recently approved a capital expenditure of $60 million to complete the outfitting of the Wando Welch Terminal with neo-Panamax cranes.

SC Ports will purchase four more cranes from Shanghai Zhenhua Heavy Industries (ZPMC) with 155 feet of lift height for delivery in mid-2020. Once delivered and commissioned, the Wando Terminal will have 15 cranes of similar capability, giving it the ability to handle three 14,000 TEU ships at once.

This combined with efforts to densify the container yard, implement a new operating system (Tideworks), and expand gate and chassis capacity, the Wando Terminal will gain an additional 700,000 TEU of capacity.

“The port continues to build critical infrastructure to ensure both reliability and fluidity for our customers, both shipping lines and beneficial cargo owners,” Newsome said. “Further big-ship deployments are anticipated in advance of the International Maritime Organization (IMO) 2020 sulfur cap and once more clarity is achieved relative to the current trade dispute between the U.S. and China.”

The Board acknowledged with gratitude the award of a Better Utilizing Investments to Leverage Development (BUILD) grant in the amount of $25 million to assist in the expansion of Inland Port Greer and the enhancement of the Norfolk Southern linehaul rail infrastructure between Columbia and Greenville.

Shale growth may push oil prices lower, force another OPEC production cut

Oil prices have plunged nearly 30% since reaching 2018 highs of more than $86/barrel in October. The drop is attributed to concerns of global oversupply and weakening demand. The U.S.-China trade war, political turmoil across European markets and fears of a slowdown in global growth have also clouded the demand outlook.

The U.S. Energy Information Administration (EIA) has upgraded its supply growth outlook for American crude. U.S. domestic oil production is now expected to increase by 1.18 million barrels/day next year, up slightly from November's estimate of 1.16 million bpd, with output averaging 12.06 million bpd.

Price and demand forecasts for 2019 vary among analysts, but each prediction point to the rise of the U.S. as the world’s top oil producer.

Bank of America Merrill Lynch forecasts Brent at $70/barrel for 2019. Capital Economics expects an average of $63/barrel. 

OPEC's recently cut 1.2 million barrels/day of production, but analysts warn this may may not be enough to support prices.

Weak demand outlook and booming U.S. shale output could prompt the need for another OPEC production cut by April, CNBC reported in December. 

Maintenance spend led to Chevron Phillip’s PX Pascagoula closure

Nearly 60 years of paraxylene production will cease at Chevron Phillip’s Pascagoula, Mississippi plant at the end of 2018 as the producer embarks on a major maintenance spend at the asset.

The history of paraxylene (PX) production in the Pascagoula refinery goes all the way back to the 1960s.

“The closure timing was mainly driven by the imminent requirement for major maintenance spend on the asset,” Gordon Haire, Wood Mackenzie Chemicals Research Director said.

The assets were significantly expanded and developed through the 1990s and were part of the Axens Eluxyl technology deployment where the developments in adsorption technology were added into the existing crystallisation recovery process, according to Wood Mackenzie.

“The paraxylene capacity of the asset is 500 ktpa, which is around 11% of North American capacity and just under 1% of global capacity. Coupled with the start-up of idled PTA capacity in Portugal this year, this will have a material impact on the Western Hemisphere paraxylene industry,” Haire said.

Global expansion unravels while US chemical industry growth continues—ACC

Ending a rare period of synchronized global expansion, the world’s major economies have slowed, while in the U.S., economic growth remains dynamic, manufacturing growth has nearly doubled, and chemicals output has improved, according to the American Chemistry Council’s (ACC) “Year-End 2018 Chemical Industry Situation and Outlook,” released in December 2018.

Gains in manufacturing and exports in 2018 will continue to drive demand for basic chemicals, while most specialty segments will benefit from these factors along with growth in construction markets.

“Expansion across a broad band of industrial sectors is supporting American economic growth this year,” said Kevin Swift, chief economist at ACC and Outlook co-author.

“Housing, business investment, and their supply chains have momentum. Light vehicle sales have likely peaked for this cycle but remain at elevated levels. In 2019, industrial activity will expand, but the slowdown overseas is likely to affect to the U.S. and rising trade tensions present a risk of economic disruption.”

U.S.-based chemical manufacturing remains advantaged in global markets due to abundant energy and feedstock supplies.

Since 2010, 333 projects cumulatively valued at $202 billion have been announced. As this investment comes online, production is growing.

Total chemical production volume (excluding pharmaceuticals) rose by 3.1% in 2018 and is expected to grow by 3.6% in 2019 before easing to 3.1% in 2020 and 2.2% in 2021. Basic chemicals production is expected to increase by 2.1% in 2018, 4.8% in 2019, and 4.3 % in 2020.

Stronger export markets and gains in business investment spending have boosted demand in key end-use markets for chemistry such as light vehicles and housing.

Light vehicle sales have declined from the robust pace of 2015-16 but will remain elevated at 17.1 million in 2018 and 16.8 million in 2019, according to the ACC report.

Housing activity is improving, with 1.27 million starts in 2018 and 1.34 million in 2019 before the level gradually returns to its long-term underlying demand pace of 1.5 million units per year by 2023.

In the specialties chemicals segment, production will pick up by 3.7% in 2018, and another 2.2% in 2019.

Gains in specialty chemicals were led by improvement in oilfield chemicals, electronic chemicals, coatings, adhesives, cosmetic chemicals, and flavors and fragrances. Demand for specialty chemicals is expected to grow in line with industrial and construction sector gains in the years ahead.

The U.S. chemical industry will post a $39 billion trade surplus in chemicals this year as exports rise 10% to $143 billion and imports rise 7.8% to $105 billion.

Assuming no major trade disruptions, there will be a $69 billion trade surplus in chemicals by 2023, according to the ACC analysis. Access to export markets will be critical since export growth will drive industry gains over the next decade.

“American chemistry is set for significant growth in output as new production capacity comes online and demand strengthens in key end-use markets,” said Martha Moore, senior director of policy analysis and economics at ACC and co-author of the Outlook.

“In fact, growth rates in U.S. chemistry over the next five years are expected to surpass average growth over the previous 20 years. Provided that access to export markets remains open to our producers, expanding global demand will be met by shale-advantaged chemistry sourced from the U.S.”

The business of chemistry is a $526 billion enterprise and one of America’s most significant manufacturing industries, accounting for more than 10% of all U.S. exports and 12%  of the world’s chemicals. More than 96% of all manufactured goods are touched by products of chemistry.

Prepared annually by ACC’s Economics and Statistics Department, the “Year-End 2018 Chemical Industry Situation and Outlook” is the association’s annual review of the U.S. and global business of chemistry. It offers global and domestic chemical industry data related to production, trade, shipments, capacity utilization, R&D spending, capital spending, employment and wages.