Summary
The freefall in US chemical demand has come to an end, now inventories have been reduced down the value chain. Latest figures on housing and auto demand show we are bouncing along the bottom, but give no sign of any green shoots of recovery.
Analysis
The good news from the latest reports on US house prices and auto sales was simple – things have stopped getting worse. US house prices saw “some stabilisation in some regions” according to the S&P/Case Shiller Index for April. Equally, June saw auto inventories finally back under control, with both GM and Ford having reduced stocks by 210,000 over the past year.
The bad news in terms of house prices was that the decline is really only just getting underway in some key markets. Chicago and New York, for example, “posted record annual declines in April”, and are now down 19% and 13% respectively. By comparison, Phoenix, the worst market, was down 35% versus last April, and 54% from the 2006 peak.
The auto market is also showing diverging trends. Ford seems to be on a bit of a roll, with June sales "only" down 11%, and it claims to be reducing price incentives. But other producers fared less well, with Chrysler increasing its incentives by up to $750, as it seeks to stabilise demand. And overall, the market was down 29% in June versus last year.
Seasonally, the first half of the year is usually strong for chemical and polymer demand. So in the absence of any real sign of green shoots, we should expect H2 performance to be relatively weak, indicating further challenges for already hard-pressed chemical and polymer companies.
