Fitch Publishes 'North American Chemicals Handbook'

Fitch Ratings has published its 'North American Chemicals Handbook'. It provides an analysis of trends in the North American chemicals industry as well as individual company snapshots.

The North American shale gas boom has been a boon for chemical manufacturers reliant on natural gas and natural gas liquids (NGL) feedstocks, and prices are expected to remain relatively low versus crude oil-priced feedstocks such as naphtha. Low feedstock costs have helped chemicals manufacturers' operating margins in spite of modest volume and pricing growth.

Seeking to take advantage of low-cost feedstocks, chemical manufacturers of all types have begun numerous expansions. Healthy operating margins are expected to provide cash flow to cover increased capex until the bulk of currently scheduled capacity is completed in 2017 and 2018. However, capital spending could eat into cash balances if operating cash flows decline, in the case of a recession, while capital projects are underway.

While the recovery in certain end markets has continued, low GDP growth and general demand sluggishness is weighing on more broadly used chemicals. U.S. housing is rebounding from historic lows, albeit well below historic average new home construction. Auto sales continue to grow with seasonally adjusted annualized sales recently outpacing pre-recession averages. Farm economics also remain healthy. These developments are allowing chemical manufacturers reliant on those end markets to profit.

The report has detailed information for 29 companies, providing key credit strengths and concerns, as well as a summary of key operating and financial metrics.

The North American Chemicals Handbook' is available on the Fitch web site at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: North American Chemicals Handbook

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