USA: Chemical Industry Outlook ACC Predicts Uncertainty and Downside Risks due to Covid-19

Editor: Ahlam Rais

The American Chemistry Council (ACC) provides an interim update on the chemical industry amidst the global pandemic of Covid-19. ACC forecasts that U.S. chemical volumes are expected to fall 3.3 % in 2020 before rising 5.2 % in 2021. Also, global GDP is expected to contract by 2.5 % in 2020 before rebounding 6.0 % in 2021.

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In the US, specialty chemical volumes will decline 4.4 % in 2020 before rebounding 3.3 % in 2021, predicts ACC.
In the US, specialty chemical volumes will decline 4.4 % in 2020 before rebounding 3.3 % in 2021, predicts ACC.
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Washington/USA – The American Chemistry Council (ACC) recently released an abbreviated, interim update to its Chemical Industry Situation and Outlook. The update offers two scenarios intended to capture a range of potential trajectories for the global and U.S. economies and the chemical industry.

“ACC typically updates our economic forecast twice a year, but we wanted to provide an interim update that would reflect some of the potential impacts of Covid-19,” said Kevin Swift, ACC chief economist. “While there is significant uncertainty in the projections, short-term risks are to the downside before a possible rebound in 2021.”

According to the update, U.S. chemical volumes are expected to fall 3.3 per cent in 2020 before rising 5.2 per cent in 2021. Basic chemical volumes will drop 2.9 per cent in 2020 before rising 6.7 per cent next year. Chemical shipments are expected to fall 10.0 per cent in 2020 before rebounding by 7.8 per cent in 2021. Anticipated declines reflect struggling end-use markets and export customers for U.S. chemistry products.

Partially offsetting weakness in U.S. chemical production is strengthening demand for chemistry used in the response to Covid-19. Among the many chemistry solutions used in the fight against the virus are synthetic materials for personal protective equipment (PPE), ingredients for cleaners and disinfectants, and plastics used in medical equipment such as ventilator machines and IV bags.

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Automotive and building and construction are key end-use markets for chemistry. According to ACC projections, vehicle sales will fall sharply to 13.1 million in 2020 before improving to 15.5 million in 2021 – down from 16.9 million in 2019. Housing starts will tumble to 1.08 million before edging to a higher 1.19 million pace in 2021. Specialty chemical volumes will decline 4.4 per cent in 2020 before rebounding 3.3 per cent in 2021.

“Industrial activity started the year on a weak note even before news of Covid-19 emerged in late January,” said Martha Moore, senior director of policy analysis and economics at ACC. “Then supply disruptions from China began to percolate through the U.S. industrial sector. With further shocks to aggregate demand, U.S. industrial production is set to fall 8.4 per cent this year before growing by 2.6 per cent in 2021.”

Global GDP is expected to contract by 2.5 per cent in 2020 before rebounding 6.0 per cent in 2021, according to ACC’s update. As the industrial sector has been dealt a series of blows from closures related to Covid-19, demand destruction and logistical challenges, global industrial production will fall 3.9 per cent in 2020 before improving 5.6 per cent in 2021. Trade and commercial activity have experienced an unprecedented collapse, and world trade is seen shrinking 10.5 per cent in 2020 before improving by 9.9 per cent in 2021.

U.S. GDP is projected to fall by 4.0 per cent in 2020 before rising 4.0 per cent in 2021. Consumer spending will decline by 4.6 per cent in 2020 before rebounding 4.4 per cent next year. Economy-wide business investment was already lower prior to Covid-19 and is expected to decline 9.7 per cent in 2020 before showing 3.0 per cent growth in 2021.

With more than 20 million people filing unemployment claims in the past four weeks, the unemployment rate is expected to reach over 13 per cent by the end of Q2 2020 before steadily easing through 2021. After three years of gains, chemical industry employment is expected to decline by 28,000 (5.1 per cent) in 2020. Chemical industry capital spending declines 2.0 per cent in 2020, but grows 1.8 per cent in 2021.

ACC’s analysis presents an assessment of current conditions and expectations using economic data and publicly available information through April 14, 2020. For the U.S. chemical industry, we use our own model (supplemented by other forecasters), projecting likely paths for the industry in 2020-2022. In addition, we take into account forecasts made by manufacturing economists, economic forecasting consultants and other institutions.

The projections in this release rely on a baseline scenario under which U.S. Covid-19-related restrictions are lifted before the end of Q2 2020. ACC also developed a “pessimistic” scenario under which U.S. restrictions are extended through Q4 2020.

ACC’s Mid-Year 2020 Chemical Industry Situation and Outlook will be published in June. It will provide a review of the U.S. and global business of chemistry and the macro economy, offering global and domestic chemical industry data related to production, trade, shipments, capacity utilisation, end-use markets, R&D spending, capital spending, employment and wages.