The global chemical industry got off to a positive start in 2017 with January seeing a rise in chemical production on gains across most regions, according to the latest monthly report from the American Chemistry Council ("ACC").

Encouraging January Readings

The Washington, DC-based chemical industry trade group said that the Global Chemical Production Regional Index ("CPRI") rose 0.6% in January on a monthly comparison basis. The Global CPRI, which is measured using a three-month moving average, measures chemical production volumes for 33 major nations, sub-regions and regions. It is comparable to the Federal Reserve Board (“FRB”) production indices.

Gains in production were witnessed across North America (up 0.4%), Western Europe (up 1.2%), Central & Eastern Europe (up 1.7%) and Asia-Pacific (up 0.6%) in January. The results were also positive on a product basis for the reported month. On a year over year comparison basis, strongest growth was witnessed in coatings (up 6.8%). Synthetic rubber saw a 3.4% rise while both plastic resins and inorganic chemicals racked up 2.7% gains.

The ACC also note that the Global CPRI went up 3.3% year over year on a three-month moving average basis. Capacity utilization for the global chemical industry moved up 0.4 percentage points to 79.2% in January.

Chemical Industry Looking Up

The chemical industry – which had long been out of favor – is finally getting its groove back. Despite a spate of headwinds, the highly cyclical industry put up a decent performance in 2016, helped by continued strength across automotive and housing markets – two major end-use markets for chemicals.

The automotive sector continues its healthy run. In particular, U.S. light vehicles market continued to show strength in 2016, supported by an improving job market, rising personal income, low fuel prices and attractive financing options, and the momentum is expected to continue this year.

A recovery across housing and commercial construction markets has been another tailwind for the chemical industry. The underlying demand trends in the housing space remain strong, supported by an improving employment levels, affordable interest/mortgage rates and a rise in income levels. This augurs well for chemical demand in this key market.

Notwithstanding a slew of headwinds including concerns over China’s economy, Eurozone’s tepid recovery and weak demand in the energy space, the chemical industry’s recovery momentum is expected to continue this year, supported by continued strength in the light vehicles market, positive trends in the construction space and significant shale-linked capital investment.

In particular, the U.S. chemical industry is set for solid growth this year and the next. The outlook for the American chemical industry paints an encouraging picture. The ACC sees national chemical production to rise 3.6% in 2017, further accelerating to a 4.8% growth in 2018. The trade group also expects basic chemicals production to expand 4.2% in 2017 on the back of advances in manufacturing and exports.

Moreover, the shale gas bounty is expected to drive investment on plants and equipment in the U.S. Chemical makers are ratcheting up investment on shale gas-linked projects to take advantage of ample natural gas supplies.

Per the ACC, over 275 new chemical projects have been announced by chemical makers (worth more than $170 billion) since 2010, nearly half of which already complete or under construction. Such investments are expected to boost capacity and export over the next several years.

The Zacks categorized ‘Chemicals-Diversified’ industry has also outperformed the broader market over the past year. The industry has gained around 22.4% over this period, higher than S&P 500’s corresponding return of 19.1%.

4 Chemical Stocks to Scoop Up Now

The chemical industry’s upturn is expected to continue in 2017 on continued momentum across major end-markets. Amid such a backdrop, it would be a prudent idea to invest in chemical stocks with compelling growth prospects if you are looking to reap solid returns from your portfolio this year.

We highlight the following stocks with Zacks Rank #1 (Strong Buy) or 2 (Buy) that are good options for investment right now. You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar Inc. (UNVR - Free Report)

Illinois-based Univar carries a Zacks Rank #1 and has long-term expected earnings per share (EPS) growth rate of roughly 9.4%. The company delivered average positive earnings surprise of 18.7% over the trailing four quarters. It has expected earnings growth of 34.3% for the current year. The stock has also gained 98% over the last one year, outperforming the Chemicals-Diversified industry’s gain of 24.4% over the same period.

Albemarle Corporation (ALB - Free Report)

Headquartered in Charlotte, NC, Albemarle sports a Zacks Rank #2 and has a long-term expected EPS growth rate of roughly 12%. The company delivered positive earnings surprise in each of the trailing four quarters with an average beat of 14.3%.The stock has returned 75.7% over the last year, outperforming the Chemicals-Diversified industry’s gain of 24.4% over the same period. The company also has an expected earnings growth of 15.9% for the current year.

Celanese Corporation (CE - Free Report)

Our next pick in the space is Texas-based Celanese, armed with a Zacks Rank #2. The company has surpassed expectations over the last four quarters with an average positive surprise of around 6.8%. Its long-term projected EPS growth rate is 8.8%. The stock has gained 40.9% over the last year, outperforming the Chemicals-Diversified industry, which has gained 24.4% over the same period.

The Chemours Company (CC - Free Report)

Delaware-based Chemours is another attractive choice with a Zacks Rank #2. The company has expected earnings growth of 137.8% for the current year. It delivered average positive earnings surprise of 151.6% over the trailing four quarters. Chemours has a long-term expected EPS growth rate of roughly 15.5%. The stock has also gained a staggering 489.5% over the last year, outperforming the Chemicals-Diversified industry, which has gained 24.4% over the same period.