Chemical and Material Shortage Alerts – January 2014

The purpose of this blog is to identify chemical and material 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, 2014.

Section I below lists those chemicals and materials that were on previous Chemical and Material Shortage Alerts lists and continue to have news releases indicating they are in short supply. Click here to read the December 2013 Chemical and Material Shortage Alerts list.

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

Section I.   Chemicals and materials that continue from December to be reported as in short supply are: iron ore.  See the December alert (click here) for explanations for the shortages and for geographical information.

Section II.   Shortages Reported in January not found on the Previous Month’s List

Bauxite.  A shortage of bauxite, needed for producing aluminum, was reported in India.  Apparently government regulations are restraining bauxite mining.

Construction Materials.  Shortages of construction materials were reported in January in several areas: southwest Florida; the United Kingdom; and Malaysia.  Increased construction activity in these areas is exceeding supplies.

Natural Gas.  Natural gas shortages were reported in southern France. Apparently, suppliers were getting much higher prices from exports to Asia, limiting supplies to southern France.

Newsprint.  Reports out of Venezuela indicate a shortage of newsprint, due to government restrictions on imports.

Para xylene.  China is experiencing a shortage of para xylene due to increased demand not being met by available internal production and insufficient imports.

Petro feed stocks.  A methanol production plant in Malaysia reported a petro feedstock problem due to a supplier’s production shutdown.  A methanol production plant in Iran is also limiting its production due to gas feedstock shortages.

Propane.  Propane shortages hit the Midwest and other areas of the United States because of high demand in these areas due to extremely cold weather.   Local supplies could not keep up with the demand, and shipments from into the areas were hindered due to government regulations.

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: none

2.  Production not keeping up with demand: construction materials

3.  Government regulations: bauxite; newsprint; propane;

4.  Sources no longer available: natural gas; petro feedstock

5.  Insufficient imports:  para xylene

Chemical Transport Costs – Benchmarking Data

A September 2013 report from the Association of American Railroads (AAR) provides data on rail chemical transport costs (per ton mile). Using this data and data from the United States Department of Transportation, chemical transport costs for truck and barge can be estimated.

The AAR data indicates that, in 2011, rail revenue (costs to the customer) for chemical transport was approximately 6.1 cents per ton mile.  Click here to go to the report with this data.  Data from the DOT indicates that from 1990 to 2007 truck transport (all materials, not just chemicals) averaged approximately 5.6 more than rail transport (all materials).  Click here to see this DOT data.   Assuming that the same truck increase (5.6x) over rail (all materials) applies reasonably well to just chemical transport, then this suggests that truck chemical transport in 2011 was approximately 34.2 cents (5.6 times 6.1 cents) per ton mile.  In the same manner, it can be shown that chemical transport on barges was approximately 4 cents per ton mile (in 2011).

If the data, assumptions, and computations are correct, then 2011 benchmark chemical transport costs are 6.1 cents per ton mile for rail; 4 cents per ton mile for barge; and 34.2 cents per ton mile for truck.

The AAR report also provides approximate 2012 total tonnage of chemicals and total revenues (costs to customers) for this transport using all transportation modes (truck; water; pipeline; air; and rail).  The report also provides the approximate percentages of the total tonnage and revenues attributed to the 5 transportation modes.  From this data and the per ton mile cost data shown above (assuming the 2011 costs are reasonably close to 2012 costs), an average length of transport trip for rail, truck, and barge can be computed.  My computations, if correct, show that the average rail transport trip was about 865 miles; the average truck trip about 190 miles; and the average barge trip about 500 miles.  These mileages might also be useful benchmarking data.

Using Mineral Demand and Supply Annual Production Rate Percentages to Determine Mineral Demand versus Supply

A recent report, “Review of Selected Global Mineral Industries in 2011 and an Outlook to 2017”, issued by the United States Geological Survey (USGS), provides historic production quantities from 2000 to 2010 for several minerals.  The report, which was issued in 2013, also provides estimates of future production quantities for some of these minerals between 2013 and 2017.  Click here (PDF file) to read this report.

From the historic production quantities, an average per year production growth rate, from 2000 to 2010, can be computed. Production amounts in a year generally do not equal consumption amounts in that year, but I suspect, on average, over several years, the differences are relatively small.  Therefore, I am assuming that the average per year production growth rate approximates reasonably-well the average per year consumption growth rate for a mineral.

One reasonable method of estimating annual production and consumption quantities is to use the historic average annual percentage production (consumption) rate.  Take the current annual amount of the material produced and multiply it by the historic average growth production rate to come up with the estimated production for the following year.

However, this is not what the USGS report does in its estimates of future production quantities.  Using only the historic average production rates does not account for expected external events, such as new mines opening or current mines being closed.  The USGS report does take into account such expected external events.  And therefore, the estimated production quantities that the USGS report shows have different annual growth percentage increases from the historic annual production percentage increases. 

Assuming that the historic production annual growth rate reasonably approximates the historic consumption annual growth rate (as discussed above), it seems to me that this rate represents a historic demand and, because it is an average over several years, the historic rate is likely to be as accurate for a future consumption demand as one is able to come up with. (Any possible external events in future consumption demands have already been accounted for, since possible future external events are no more or less likely than historic external events already accounted for in the historic quantities.)

On the other hand, because the USGS has estimated future production quantities, considering external factors (such as the ones discussed above), the future annual production quantities that the USGS has determined represent reasonable, as reasonable as likely to be determined, estimates of future supply.

So, based on the USGS data, two growth percentages can be determined, one the historic growth rate consumption percentage, which represents a demand rate, and the other a future growth rate percentage, which represents a supply rate.  With these 2 percentages, future demand versus future supply can be estimated, and if correct, an estimate of whether the mineral might be on the short or long-side supply can be made.

For example, based on the USGS data in the report, iron ore had an annual historic (from 2000 to 2010) consumption rate percentage (the demand line) increase of 9.04% ((1,320,000,000 MT- 607,000,000 MT)/607,000,000 MT; over 13 years).  And, using the USGS estimate data on future iron ore quantities, iron ore has an annual future production rate percentage (the supply line) increase of 3.78% ((1,750,000,000 MT – 1,520,000,000 MT)/1,520,000,000 MT; over 4 years).  

Assuming these demand and supply annual production rate percentages are reasonably correct, the significant difference in the percentages (9.04% versus 3.78%) suggests that iron ore supply may not keep up with iron ore demand between 2013 and 2017.

Strengths, Weaknesses, Trends, and Objectives – European Chemical Transport Sector

This blog provides several links to information on strengths, weaknesses, trends, objectives, and other aspects of the European chemical transport sector.  The source of most of this information is the European Chemical Industry Council (CEFIC) and the European Chemical Transport Association (ECTA).  In addition to the links, a few highlights of the information found at the websites linked to are provided.  The date range for the information at the websites is from 2011 to 2013.

Strengths and Weaknesses.   ChemLog, a collaborative group of members from various central and eastern European countries, identify several strengths of chemical logistics in central and eastern Europe.  Click here for information on these strengths.  Weaknesses are also identified.

In a 2012 market intelligence article, ICIS identifies the following European transport problems (weaknesses):  escalating fuel costs; shortages of qualified drivers; poor European inter-operability; and non-harmonization across Europe.  Click here to read more about these and other weaknesses.

A CEFIC presentation identifies several challenges (current weaknesses).  Challenges include: obstacles to using intermodal transport; difficulties in obtaining infrastructure improvements; and poor best practices implementation.  Click here for more details on these challenges.  Strengths (progress made) for the European chemical transport sector are discussed.

The Safety & Quality Assessment System (SQAS), developed by CEFIC, provides chemical companies an assessment tool to evaluate the quality, safety, security, and environmental performances of chemical transport companies.  Click here to read about SQAS.  Such an assessment tool is a strength for a chemical transport sector.

Trends and Objectives.  CEFIC issued a report in 2011, Chemical Logistics Vision 2020, which identifies key trends, as well as suggested solutions.  One trend is the consolidation of the European chemical industry into concentrations of production facilities (bigger, and fewer, clusters), which will affect logistics.  Click here to read about these and other trends.

A list of strategies for improving chemical transport in central and eastern Europe is provided by the collaborative group ChemLog.  This list can be viewed by clicking here.  One objective is the improvement of intermodal transport.

ECTA and CEFIC identify objectives for reducing chemical transport glasshouse gas admissions across Europe in a jointly-issued report.  Click here to read this report.

If you would like further research and more in-depth analysis on the European chemical transport sector, please contact me at rltorian@msn.com.

EPA’s Chemical Facilities Database

The Environmental Protection Agency (EPA) maintains a database of information on US chemical company facilities.  Using this database, facility-related information such as the following can be found:

Address and other contact information

NAICS codes used for the facility

Satellite photographs of the facility (often dated)

Environmental compliance records

Released chemicals from the facility

This database is easily searched at this site (click site).  With the database, information on manufacturing and other facilities (e.g. warehouses) can be found for a specific chemical company.  For example, information described above can be found for five facilities belonging to the chemical company AMVAC (click here to go to AMVAC’s website).  Information at the EPA’s facility database can nicely supplement a company's information provided by the company at its website and in its Securities and Exchange Commission filings.

Chemical and Material Shortage Alerts – December 2013

The purpose of this blog is to identify chemical and material 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 from the middle of November 2013 to December 31, 2013.

Section I below lists those chemicals and materials that were on previous Chemical and Material Shortage Alerts lists and continue to have news releases indicating they are in short supply. Click here to read the November 2013 Chemical and Material Shortage Alerts list.

Section II lists the new chemicals and materials (not on the November alert).  Also provided is some explanation for the shortage and, when appropriate, geographical information.  The blog attempts to list only actual shortages situations – shortages are being experienced currently as of the news release.   Chemicals and materials identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   Chemicals and materials that continue from November to be reported as in short supply are: copra; palladium; and platinum.  See the November alert (click here) for explanations for the shortages and for geographical information.

Section II.   Shortages Reported in December Not Found on the Previous Month’s List

Iron Ore (for steel making).  News accounts from India indicate iron ore supplies are not keeping up with demand for steel from India’s steel mills.   Reasons include insufficient imports.

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: none

2.  Production not keeping up with demand: none

3.  Government regulations: none.

4.  Sources no longer available: none.

5.  Insufficient imports:  iron ore - India