US chemical output is 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 today. ACC forecasts a 3.7% US chemical output gain in 2015, up from 2% in 2014, and an even stronger gain of 3.9% for 2016. The forecast puts the US chemical industry on track to break the $1 trillion sales barrier by 2019, up from $805 billion in 2014.
Excluding pharmaceuticals, US chemical output is expected to advance 2.4% in 2014, followed by 4% in both 2015 and 2016. The strongest gains are expected in basic chemicals, particularly bulk petrochemicals and plastics, with growth expected to hit 3.8% in 2015, 4.5% in 2016, and exceed 6% in 2017 and 2018 as new US capacity hits the market.
“The appreciation of the dollar, coupled with increased domestic supply of unconventional oil and gas is helping to drive oil prices down,” says Kevin Swift, ACC chief economist. “In turn, manufacturing costs are reduced, production is stimulated, inflation restrained, and consumer confidence, along with purchasing power and spending, is boosted.”
Though improvements in labor markets and growth in key end-use markets drove solid domestic demand, weakness overseas has limited US chemical exports. “Despite the competitive position American chemistry owes to a favorable oil-to-gas price ratio, trouble in the economies of major trading partners will delay another trade surplus until 2017,” ACC says. “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.” Export gains will be fueled by more than 215 new chemical production projects with total investment valued at more than $135 billion that have been announced in the United States, according to ACC. Chemical capital spending surged nearly 12% in 2014, to more than $33 billion.
Basic chemical output in 2014 was hurt by recessions in Japan and Brazil, ACC says. Stronger growth, however, is expected over the next few years 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 US enjoys a renewed competitive advantage,” Swift says. “The wind is back in our sails. During the second half of the decade, US chemistry growth is expected to expand at a pace of more than 4%/year on average, exceeding that of the overall US economy.” Swift said.
US chemical production grew across all major producing regions in 2014 with the highest growth seen in the Ohio Valley and the Northeast regions, ACC says. “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,” Swift says.
By Robert Westervelt