US Chemicals Still on Expansion Course

07.06.2019 -

Despite a “challenging” global economy, output of the US chemical industry will continue to grow this year, the industry association American Chemistry Council (ACC) forecasts in its Mid-Year 2019 Chemical Industry Situation and Outlook report.

ACC says growth in key domestic end-use markets and a “sustained competitive advantage tied to surging supplies of natural gas and NGLs from US shale activity” are spurring investment in new production facilities.

“Solid production gains” are anticipated as new shale-fed capacity comes online, the association predicts, without addressing the question of potential oversupply with growth slowing “across much of the globe” amid rising trade tensions.

In this vein, exports “are not performing as well as expected a year ago,” the association acknowledges, adding that US manufacturing also appears to be slowing. Most recently, the chemical producers have spotted dark clouds on the horizon in the form of a looming trade war with Mexico.

Around $543 million in chemical products cross the US-Mexico border every week, ACC calculates, adding that Mexico purchases more US-made chemicals than any other trading partner – nearly $23 billion in 2018.

For the present, ACC sees chemical inventories in a comparatively more balanced position. US housing is expected to ease slightly before continuing its slow recovery, but demand from the automotive sector is expected to stay at relatively elevated levels. This would put the US out of sync with sector OEM suppliers elsewhere, who are seeing a rather pronounced ordering slump.

For individual chemical segments, ACC says the outlook for the US market is mixed. This year, output gains are expected be strongest in organic chemicals, inorganic chemicals and other specialty chemicals. Production of agricultural chemicals and consumer products is seen as falling slightly before recovering in 2020.

Tooting its own horn, the trade association sees the US chemical industry as a source of strength for the national economy with growth of 2.5% in 2019 and 3% forecast for 2020.  On the whole, growth in chemicals will outpace that of the US economy through 2024, ACC believes.

 Overall, the US chemical industry’s trump card is, by its own account, shale. Since 2010, ACC says, the shale-fuelled “significant expansion” of petchems capacity has been“reversing a decades-long decline.”

According to the grouping’s latest count, 334 chemical and plastics projects cumulatively valued at $204 billion have been announced to date, with 53% of the investment completed or underway and 40% percent in the planning phase. The industry’s capital spending is forecast to rise by 5.4% in 2019 and almost 5% in 2020 to a value of $43 billion by 2024.

Finally, the US chemical industry expects to post a $37 billion trade surplus this year, with exports rising nearly 6% to $149 billion and imports rising by only 2.4% to $112 billion. It is not clear what this calculation is based on, however, as the association says trade growth “has slowed considerably.”