Manufacturers of lubricants and gasoline additives have seen their margins crushed by the rising prices of oil and natural gas. Producers of coatings, paints, and adhesives have been sunk by reports that auto sales and housing starts are slowing. Prices are so low that analysts might be excused if they simply slapped a buy rating on the group and waited for things to turn around. They haven't, because a number of industry fundamentals are staring at the group with all the menace of snake eyes. Energy prices are bound to make production more pricey as well.
Economic forecasts are another industry bugaboo.
That's because the industry's mainstays follow the ups and downs of the economy. While most soothsayers don't predict a recession, the soft landing economists expect at some point in all likelihood would clamp down on the specialty chemical group's biggest customers, in automobile manufacturing and construction. And don't forget weak exports. For one thing, industrial gases don't depend on oil and natural gas as raw materials. What's more, industrial gas concerns have a broad clientele in industries such as food production, electronics, and health care that shouldn't be rattled by anything short of a severe drop-off in economic growth.