US Chemical Market High on Low Oil Price

2015-01-06T10:32:52+00:00 January 6th, 2015|

US chemical Market output is to set accelerate sharply through the end of the decade, exceeding the growth of the overall US economy, according to ACC’s Year End 2014 Chemical Industry Situation and Outlook, published this week.


Despite facing global headwinds, the American chemical industry expanded at a 2.0 percent growth rate in 2014, and is expected to reach a 3.7 percent gain in 2015, before hitting 3.9 percent in 2016, according to the Year End 2014 Chemical Industry Situation and Outlook, published by the American Chemistry Council (ACC). The report’s consensus is that U.S. chemical output will continue to expand well into the second half of the decade.

“The appreciation of the dollar, coupled with increased domestic supply of unconventional oil and gas is helping to drive oil prices down,”

said Dr. Kevin Swift, chief economist at the American Chemistry Council.

“In turn, manufacturing costs are reduced, production is stimulated, inflation restrained, and consumer confidence, along with purchasing power and spending, is boosted,” he added.

Though the housing outlook remains cautious, inventories and interest rates remain low. Job growth, a major long-term driver for housing is improving, as seen in the 7.5 percent increase in housing starts between 2013 and 2014. Though activity will remain well below the previous peak of 2.07 million units in 2005, by the second half of the decade, activity will approach the long-term underlying demand of 1.5 million units per year.

Chemistry Growth Will Expand Well in Second Half of the Decade

Basic chemicals were hardest hit from recessions in Japan and Brazil. Strong growth is now expected in inorganic chemicals, organic chemistry, plastic resins, and synthetic rubber as most export markets revive.

“This year’s gains were led by consumer chemistries and specialties, but advances in manufacturing and exports in 2015 will drive increased demand for basic chemicals, especially in those segments in which the U.S. enjoys a renewed competitive advantage,”

he said.

“The wind is back in our sails. During the second half of the decade, U.S. chemistry growth is expected to expand at a pace of more than 4 percent per year on average, exceeding that of the overall U.S. economy,”

Swift said.

U.S. chemical production grew across all major producing regions in 2014. The highest growth was seen in the Ohio Valley and the Northeast regions. As the surge of shale-driven chemical capacity starts to come online in 2017 and beyond, growth will continue to accelerate, particularly along the Gulf Coast. By 2019, American chemical sales will exceed $1 trillion.

U.S. Exports Limited by External Markets

Though improvements in labor markets and growth in key end-use markets drove solid domestic demand for chemicals, weakness in external markets has limited U.S. chemical exports. Despite the competitive position, the US Chemical Market owes to a favorable oil-to-gas price ration, trouble in the economies of major trading partners will delay another trade surplus until 2017. As new investments in the chemical industry come online, basic chemicals export growth will accelerate, with an anticipated chemicals trade surplus of $77 billion by 2019.

Swift pointed to more than 215 new chemical production projects valued at over $135 billion that have been announced in the U.S., helping capital spending to surge nearly 12 percent in 2014 to more than $33 billion.

“We’re in the midst of an historic expansion, and the U.S. remains the most attractive place in the world to invest in chemical manufacturing, we must make sure America stays Open for Business

said ACC President and CEO Cal Dooley.

Article courtesy of Process Wordwide – http://www.process-worldwide.com/management/markets_industries/articles/470980/