Mid-Year Chemical Industry Outlook U.S. Chemical Industry Boosted by Solid Global Economic Growth

Editor: Anke Geipel-Kern

Global economic expansion continues to lift export markets for chemical producers, and surging supplies of natural gas and natural gas liquids (NGLs) from shale deposits in the U.S. are creating favorable conditions for American chemical manufacturing businesses. The positive assessment comes from the Mid-Year Chemical Industry Situation and Outlook, a biannual economics report from the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com) that was released last week.

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Martha Gilchrist Moore, senior director of policy and economics at ACC
Martha Gilchrist Moore, senior director of policy and economics at ACC
(Source: © PhotographyByAlexander.com)

The report was prepared by the ACC Economics and Statistics Department, led by Kevin Swift, chief economist at ACC, and Martha Gilchrist Moore, senior director of policy and economics at ACC. “World trade continues to revive after lagging in recent years,” the ACC team writes in the report, adding that “global manufacturing is anticipated to feature solid growth for 2018 as a whole.”

In evaluating current economic conditions and expectation for the global business of chemistry, the report predicts increased output from the U.S. chemical and allied industries in 2018 and beyond. The competitive advantage conferred by inexpensive natural gas from shale deposits has given rise to a massive wave of investment in chemical production projects in the U.S. Looking ahead towards the near future, the report anticipates large production gains as new chemical production capacity comes online over the next few years.

In the U.S., 2018 is seeing better performance from the chemical industry, surpassing 2017, which saw mixed results due to a combination of factors including destruction and flooding from Hurricane Harvey, which affected U.S. chemical producers in the Houston area. In addition to global economic growth, the higher performance of the chemical industry this year is being driven by a robust manufacturing sector, a balanced position for chemical inventories, and the continuing steady recovery of the housing market, the ACC report states, which is an important end-use customer for chemical products. Further, “despite a pull-back from record-high vehicle sales, the automotive sector is expected to remain at relatively elevated levels,” the ACC economics team states.

“Despite a slow start to the year, U.S. chemical production is expected to expand 3.4 % this year, and 3.6 % in 2019,” the report states, adding the prediction that the U.S. chemical industry will grow faster than the overall U.S. economy through 2021, reaching sales of $ 700 billion for the U.S. chemical industry by 2023.

In an attempt to parse out the prospects for individual chemical sectors, the report says that during 2018, “output gains are expected to be strongest in agricultural chemicals, including fertilizers and crop-protection chemicals, as well as consumer products, coatings and bulk petrochemicals & organics.” In addition, the production of plastic resins “is set to grow at the fastest pace since 2012 as new capacity comes online and demand firms for domestic customers and those abroad,” the ACC authors say.

In addition to agricultural chemicals, production of basic chemicals (inorganics, resins, manufactured fibers, synthetic rubber and petrochemicals) is “on an upswing,” the report says. Specialty chemicals have a similar outlook, led by oilfield chemicals, and demand is also expected to be strong for adhesives and sealants, paint additives, electronic chemicals, plastic additives and others, according to the ACC team.