Specialized chemicals, including catalysts, surfactants, special polymers, coating additives and oilfield chemicals, are used in specific areas depending on their performance. They find application in the process of manufacturing a wide range of products, including paints and coatings, cosmetics, petroleum products, inks and plastics.

The industry is expected to skyrocket in 2019

The specialty chemicals industry is expected to surge in 2019 thanks to sustained demand in end-user markets such as construction, electronics, automotive and agriculture . In the United States, the specialty chemicals industry is expected to weather the growth wave this year, as a result of increased industrial activity and increasing demand from the end market.

The American Chemistry Council ("ACC"), a leading industrial group, is considering growth in construction markets as well as gains in manufacturing and exports to boost the specialty chemicals segments.

According to the ACC, the specialty chemicals sector is expected to grow by 2.2% in 2019. The improvement of petroleum chemicals, electronic chemicals, coatings, adhesives, cosmetics and flavors and fragrances fuel the growth of specialty chemicals. The trade group expects the demand for specialty chemicals to grow along with gains in the industry and construction sectors in the coming years.

The CAC expects that improved export markets will contribute to the growth of the national chemical industry. Strong export markets and higher business investment boosted demand in major chemical markets such as light vehicles and housing, by trade group. While the automotive sector remains at high levels, activity in the housing sector is improving with 1.27 million housing starts in 2018 and 1.34 million in 2019. Sales of light vehicles should also remain high at 16.8 million in 2019.

Strategic actions to take advantage of the margin

Companies in the specialty chemicals sector are facing a surge in raw material costs due to a shortage of supply, due in part to production outages and plant closures. China's environmental crackdown has resulted in a tightening of supply of some critical raw materials following plant closures. The disruption of the supply chain has driven up input prices.

However, companies in this sector benefit from strategic measures such as cost reduction and productivity improvement, expansion into fast-growing markets, improved operational efficiencies and profitable acquisitions. In addition, a number of companies are taking aggressive measures of price increases as a result of rising commodity prices. These actions should help them ease any pressure on the sidelines.

Commercial Rates – A damper

Trade tensions between the United States and China continue to blur the prospects of the chemical industry. The Trump administration imposed punitive tariffs on Chinese goods worth $ 250 billion last year, while China imposed customs duties in retaliation for $ 110 billion worth of US goods. Chinese tariffs on US products include a wide range of petrochemicals, specialty chemicals and plastics.

The United States and China reached a temporary tariff ceasefire at the G20 summit in Buenos Aires in December 2018. Under the truce, countries agreed not to levy new tariffs. customs for 90 days. The Trump administration has agreed to delay the projects to increase tariffs (from 10% to 25% to 25%) on Chinese products. However, existing rates remain in place.

Washington and Beijing now have until March 1, 2019 to reach an agreement before additional tariffs are put in place. While recent discussions between the countries have given rise to the hope of a resolution of the trade dispute, the current tariffs already in effect are already harming the chemical industry.

China is one of the major export markets for US chemicals. Beijing's retaliatory trade measures have created an uncertain environment for demand for US chemicals in this major market. Trade groups in the chemical industry are concerned that tariffs will hurt US exports of chemicals and the competitiveness of the US chemical industry. China's retaliatory tariffs touched more than 1,000 US exports of chemicals and plastics valued at $ 10.8 billion by CCA.

5 specialty chemicals to buy

Despite some challenges, including pressure on input costs and tariffs, the specialty chemicals industry is expected to recover this year due to growing demand from the end-market, industry sector growth. and construction and exports.

The specialty industry of Zacks Chemicals is currently ranked 107 by the Zacks industry ranking, placing it in the top 42% of Zacks' more than 250 industries. Our tests revealed that the top 50% of Zacks' top industries outperformed the bottom half by a factor of two to one.

As such, it would be prudent to invest in specialty chemicals stocks offering attractive growth prospects. We highlight the following five actions with Zacks Rank # 1 (strong buy) or 2 (buy) which are good investment options at the moment. You can see the complete list of current stocks of Zacks # 1.

Ferro Corporation (FOE – Free report)

The Ohio-based Ferro Company ranks first in the Zacks and anticipates earnings growth of 21.6% by 2019. Profit estimates for the current year have been revised upward by 4%, 4% in the last 60 days. In addition, the company posted a positive earnings surprise in three of the last four quarters, with a positive average surprise of 0.3%. The company also expects a long-term growth rate of earnings per share of 15.6%.

Ingevity company (NGVT – Free report)

Our next choice in space is Ingevity, based in South Carolina, with a # 1 Zacks ranking. It expects earnings growth of 21.5% for 2019. The company also expects a growth rate of long-term earnings per share of 12%. In addition, Ingevity generated a positive earnings surprise for each of the last four quarters, with an average positive surprise of 19.8%.

Westlake Chemical Partners LP (WLKP – Free report)

Based in Texas, Westlake Chemical Partners is ranked number 2 by Zacks. The company expects earnings growth of 14.2% for 2019. Current year earnings guidance has been revised upwards by 5.1% over the past 60 days. The share also shows an expected long-term growth rate of earnings per share of 2.8%.

Quaker Chemical Corporation (KWR – Free report)

Quaker Chemical, based in Pennsylvania, is another interesting choice, armed with Zacks Rank 2. It forecasts earnings growth of 21.1% for 2019. Estimates of current year results have been revised upwards by 2.7% over the past 60 days. The company has posted a surprising positive profit over the past four quarters, with an average positive surprise of about 5%. The stock also has a projected long-term growth rate of earnings per share of 11%

Livent Corporation (LTHM – Free report)

Livent, based in Pennsylvania, was second in the Zacks. The company expects earnings growth of 20.5% for 2019. Estimates of current year results have been revised upward by 2.8% over the past 60 days. In addition, the company recorded a positive earnings surprise of 19.1% in the last quarter published.

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