5 Chemical Stocks To Snap Up On Global Manufacturing Revival

The chemical industry bore the brunt of coronavirus fallout during the first half of 2020. The pandemic brought industrial activities to a grinding halt globally, sapping demand for chemicals across major end-markets including automotive and construction.

The industry also faced headwinds from the short supply of raw materials as a result of the contagion. The closure of a large number of factories across China to stem the spread of the virus disrupted the global supply chain and impaired logistics.

However, the chemical industry appears to have crawled out of the worst of the coronavirus impact on the back of a return of global economic activities and an economic rebound in China, a top consumer of chemicals.

Manufacturing Recovery Puts Wind Back Into Industry’s Sails

With the easing of restrictions on business activities across the world, demand for chemicals has recovered of late across major end-use industries. The global economy is gradually pulling out of its coronavirus-induced rut as businesses reopen following lockdowns and restrictions. Notably, recent positive manufacturing data from the United States, Eurozone, and China signaled a recovery in global manufacturing activities. The rebound in manufacturing is welcome news for the chemical industry.

The recovery strengthened for the U.S. manufacturing sector in August with activities rising at the fastest pace since November 2018. According to the Institute for Supply Management, the U.S Purchasing Managers’ Index (“PMI”) clocked 56% in August, rising from July’s reading of 54.2% on strong growth in new orders. A reading above 50 indicates expansion in activity.

New orders rose for the third straight month in August on the back of growth in new export orders. ISM's New Orders Index registered 67.6% in August, rising from 61.5% in July. Out of the 18 manufacturing industries, 15 reported growth in new orders in August.

The manufacturing sector serves as a barometer to gauge the overall health of the U.S. economy and has a major influence on the chemical industry. Manufacturing activity is also a key indicator for chemical demand. As such, the rebound in manufacturing activities augurs well for the U.S. chemical industry.

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