Wednesday, February 14, 2018

Data on Countries’ International Trade in Chemicals



The table below show the chemical trade ratio for the 20 countries with the highest gross domestic product (GDP) (determined by the World Bank).  The chemical trade ratio is the total chemical trade (exports plus imports) divided by the GDP.  I would think that the trade ratio is a good indicator of the degree of the role that international trading in chemicals plays in a country’s overall economy.   Three countries (Switzerland, Germany, and The Netherlands) have trade ratios that significantly exceed the other countries.

country
 chemical exports (in millions USD)
 chemical imports (in millions USD)
 GDP (in millions USD)
trade ratio
 exports as % of imports
 total chemical trade (in millions USD)
switzerland
 $      93,276
 $          42,709
 $         659,827
21%
218%
 $     135,985
germany
 $    162,775
 $        116,197
 $     1,466,757
19%
140%
 $     278,972
netherlands
 $      55,296
 $          41,579
 $         770,845
13%
133%
 $       96,875
france
 $      72,793
 $          63,682
 $     2,465,454
6%
114%
 $     136,475
spain
 $      29,204
 $          36,349
 $     1,232,088
5%
80%
 $       65,553
italy
 $      45,237
 $          50,508
 $     1,849,970
5%
90%
 $       95,745
south korea
 $      36,075
 $          35,197
 $     1,411,246
5%
102%
 $       71,272
uk
 $      61,972
 $          61,292
 $     2,618,886
5%
101%
 $     123,264
saudia arabia
 $      14,962
 $          14,150
 $         646,438
5%
106%
 $       29,112
canada
 $      25,847
 $          34,770
 $     1,529,760
4%
74%
 $       60,617
mexico
 $         9,600
 $          26,298
 $     1,045,998
3%
37%
 $       35,898
india
 $      33,472
 $          33,317
 $     2,263,522
3%
100%
 $       66,789
russia
 $      13,866
 $          23,147
 $     1,283,162
3%
60%
 $       37,013
turkey
 $         4,708
 $          17,002
 $         847,749
3%
28%
 $       21,710
australia
 $         9,582
 $          17,694
 $     1,204,616
2%
54%
 $       27,276
indonesia
 $         6,895
 $          13,898
 $         932,259
2%
50%
 $       20,793
japan
 $      47,977
 $          56,873
 $     4,939,384
2%
84%
 $     104,850
brazil
 $         9,144
 $          28,823
 $     1,796,187
2%
32%
 $       37,967
united states
 $    153,231
 $        197,631
 $   18,569,100
2%
78%
 $     350,862
china
 $      99,163
 $        108,583
 $   11,199,145
2%
91%
 $     207,746
total
 $ 2,004,774




The table also shows the percentage that chemical exports are of chemical imports.  Percentages greater than 100 indicate countries exporting more chemical products than they import.

The total chemical trade for the 20 countries represent about 73% of the total world chemical trade (which is about $2.7 trillion).

The export and import data given above were obtained from the World Bank’s World Integrated Trade Solution (WITS) website. (Click here to go to that website’s section dealing with chemical trade.)     The GDP data was obtained from a Wikipedia site (click here to go to that site).  Chemical products are those identified in the United Nations’ system “Standard International Trade Classification – Chemicals (Section 5)”.

Thursday, February 1, 2018

Chemical and Metal Shortage Alert – January 2018

The purpose of this blog is to identify chemical and metal shortages reported on the Internet.  The sources of the information reported here are primarily news releases issued on the Internet.  The issue period of the news releases is January 2018.

Section I below lists those chemicals and metals that were on the previous month’s Chemical and Metal Shortage Alert list and continue to have news releases indicating they are in short supply. Click here to read the December 2017 Chemical and Metal Shortage Alert list.

Section II lists the new chemicals and metals (not on the December alert).  Also provided is some explanation for the shortage and geographical information.  This blog attempts to list only actual shortage situations – those shortages that are being experienced during the period covered by the news releases.  Chemicals and metals identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   Natural gas: China; supply not keeping up with demand
      
Section II.   Shortages Reported in January not found on the Previous Month’s List

Citral derivatives: Europe; production not keeping up with demand.
Cobalt: Japan; sources no longer available
Fracking Sand: Texas; mining not keeping up with demand
Iron ore: Odisha, India; mining not keeping up with demand
Palladium: global; supply not keeping up with demand
Vitamin A and E: global; production not keeping up with demand

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: fracking sand; iron ore
2.  Production not keeping up with demand:  citral derivatives; vitamin A and E
3.  Government regulations: none
4.  Sources no longer available: cobalt
5.  Insufficient imports:  none
6.  Supply not keeping up with demand:  palladium


Wednesday, January 24, 2018

Some Comments on the US Ethane Supply Surplus

A 2017 US Energy Information Administration webpage (click here) indicates that the US production of ethane is expected to be approximately 1.7 million barrels per day (m b/d) by the end of 2018.   However, the ethane US domestic consumption is expected to be approximately 1.4 m b/d, leaving a 300,000 b/d surplus of ethane.

The same webpage shows an increase in ethane production of approximately 80% (from 1.0 m b/d to 1.8 m b/d) during the period 2013 to 2018.   This production increase surge has been driven by lower US prices for ethane (due to fracking and other technical developments associated with shale gas availability).   The lower ethane prices have greatly increased ethane demand for producing ethylene.


The ethane supply – demand balance seems to be working well over the last several years in maintaining current low prices of ethane compared to its price in other countries.  But, as demand is increased due to new US ethylene-producing plants coming on line and other countries seeking imports of US ethane because of its lower price, can ethane production maintain sufficient supply to exceed the demand and keep ethane prices low?   Huge investments have been made based on continued excess ethane supplies and low prices for ethane.  At what point would ethane prices have to rise to make these investments a lot less attractive?  A ICIS article has a discussion related to this question (click here).

Thursday, January 18, 2018

Does Institutional Economics Affect Fossil Energy Company Outcomes?

The institutional economic theory emphasizes the role that institutions play on economic outcomes.  Institutions can be: social norms; pollical interactions; government agencies; non-government organizations; rules, regulations, and the law; and more.  

Another economic theory is neoclassical economic theory.  In this theory, economic outcomes are determined (in contrast to institutional economic theory) by supply and demand of products, the desires of consumers to want products, and the perspective that the consumer uses rational thinking in deciding whether to purchase products.   Rational thinking implies that the consumer makes a choice on whether to buy a product, based strictly on whether it is in the consumer’s best interest to do so.   In this theory, there seems to be little, if any, role for institutions to play in determining economic outcomes.

Knowing whether institutional economic theory influence the economic performance outcomes of companies is of interest to me as an analyst evaluating companies’ economic performances.  I am especially interested in materials and energy-related companies.

Do differences exist in institutional impacts on fossil fuel companies that operate primarily in the European Union (EU) compared to the institutional impacts on fossil fuel companies that operate primarily in the United States (US)?   If so, based on the intuitional economic theory, one would expect that these institutional impacts would cause different economic outcomes for the companies in each area.

To test this expectation, I have compared the profit rate (net profit divided by total asset value) of 10 primarily EU fossil fuel companies to 10 primarily US fossil fuel companies.  The following table shows the average profit rate for each of the EU and US companies over the last 3 years (net profit and total asset value data taken from the companies’ annual reports) and the average of the 10 companies in each area:


european union fossil fuel companies
profit rate (net profit/ total assets)
united states fossil fuel companies
profit rate (net profit/ total assets)
omv
0.031
anadarko
-0.081
ina
-0.050
apache
-0.212
total
0.023
cabot
-0.028
hellenic
0.001
chesapeake
-0.402
mol
-0.011
chevron
0.029
shell
0.020
conocophillips
-0.009
statoil
-0.062
hess
-0.083
pkn orlen
0.015
marathon
0.059
lundin
-0.120
occidental
-0.061
respol
0.012
valero
0.034
average
-0.014
average
-0.075
as a %
-1.4%
as a %
-7.5%


The table shows that the average profit rate for the 10 EU companies (-1.4%) to be much better (even though still negative) than for the US companies (-7.5%).  The EU companies have about a 6% better profit rate than the US companies.  This data does not show that institutional impacts account for the differences in these economic performances, but such a difference allows for the possibility.

Another test is determining the fossil fuel use per person for the EU and the US.  EU and US fossil fuel use and population data were obtained from EU and US government websites (click here and here to go to the EU websites) (click here and here to go to the US websites).  Using a fossil fuel use of 1.22 million tons oil equivalent (mtoe) and 508 million EU population gives a fossil fuel use per person of 2.4 toe.   Using a 2.03 mtoe fossil fuel use and a 318.6 million population for the US gives 6.4 toe per person.  If only the neoclassical economic theory governed energy fuel-type choices by individuals in the EU and US, I believe you would expect the toe/person values to be much closer.  That they are not suggest other economic considerations, such as the institutional economic theory, are at work.

In conclusion, both economic outcomes for EU and US fossil fuel companies and the EU and US fossil fuel per person data, given above, suggest that institutions impact the outcomes and that the institutional economic theory has validity and should be considered when evaluating companies.