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US chemicals booming, but trade wars cloud the horizon – AFPM CEO

March 26, 2018
Chemical Value Chain

Free trade has been key for the US chemical industry to boom, but the threat of trade wars with other countries has become the major worry among companies in the country, the CEO of the American Fuels & Petrochemicals Manufactures (AFPM) said on Monday.

Chet Thompson said that the US petrochemicals industry’s relationship with the US Administration led by Donald Trump has “dramatically improved” compared to the previous administration, but then added that tariffs imposed in manufactured goods coming from abroad were likely to darken the optimistic mood in the industry.

President Donald Trump announced earlier in March tariffs in foreign steel and aluminium, which were complemented last week by more tariffs on goods manufactured in China specifically, which caused chemical stocks in the US to plummet.

Both the US chemical trade group the American Chemistry Council (ACC) and its European peer Cefic have said that the spectre of trade wars would only harm the industry.

“Free and fair trade has been good for our country, for US consumers and for us [the chemical industry]. Global demand for our projects continues to rise [and] this is why we support NAFTA [the North American Free Trade Agreement between the US, Mexico and Canada],” said Thompson.

“Trade in chemicals has more than tripled during the two decades of NAFTA, and our NAFTA partners account for a third of our exports. NAFTA needs to be maintained as a strong investment mechanism… [Tariffs would not be] good for the economy or consumers, and they could start a trade war.”

Thompson was speaking at the opening of the 2018 International Petrochemical Conference (IPC) hosted by AFPM in San Antonio, Texas, on 25-27 March.

On 25 March, the CEO for North America at Swiss producer Clariant also said on the sidelines of IPC that the fact Canada and Mexico had been excluded from the steel and aluminium tariffs was a positive thing.

Deepak Parikh said that gave him a glimpse of hope that NAFTA will be maintained intact, despite a campaign promise by Donald Trump to reverse that trade deal, which in his view has damaged the US manufacturing industries.

Apart from that, however, Thompson described a thriving environment for US chemicals, although he admitted that the industry needs to think about the life cycle of the products it produces – a hot topic at a time when other major producing regions such as Europe are talking about circular economy where all products are reused, a prospect which would damage chemicals that are hardly recyclable.

“These are exciting times, things are going quite well. Demand is vibrant and growing, and the IEA [International Energy Agency] projects demand will rise by 5m bbl/day by 2040. Global rising middle classes are driving this growth,” he said.

According to figures by AFPM, by 2028 there will be 5.2bn people considered middle class in the world, up from the current 3.2bn – a scenario where “the majority of people [globally] will live a middle class” life style, a fact which will only benefit US chemicals production, said Thompson. He added that in the coming years, exports of chemicals out of the country are expected to grow by 60%.

The AFPM CEO added that “despite the negative headlines, the tweets, and all the craziness which surrounds” President Trump’s administration, his tenure had been “undoubtedly good” for US chemicals and manufacturing in general.

He described the tax reform as “big and historical”, which for the first time in 30 years – the last major tax reform was passed by President Ronald Reagan in the 1980s – had freed up resources to invest in facilities and workers, which will allow the industry to thrive further.

“On regulatory reform, the EIA [Energy Information Administration] is currently in the process of reversing 60 regulations which added an unnecessary burden [to the industry] but had no environmental benefit. [There will also be] an infrastructure reform this year, which is critical for projects [the chemical industry needs],” said Thompson.

As part of challenges that should prompt the chemical industry to communicate better, said the CEO, he mentioned public opposition to infrastructure projects which are vital for future development, as well as opposition in some quarters to plastics bags or other packaging products.

“[These are] real threats [and] we need to address them, just like with any challenge. This means we have to find ways to address the life cycle of our products, we need to lead, we need to do a better job in telling the story of our industry,” concluded Thompson.

Pictured: A steam cracker being delivered to an ExxonMobil’s facility in the US Gulf Coast
Source: ExxonMobil

By Jonathan Lopez

Source: ICIS News

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