“American chemistry is riding a synchronized global upswing,” said Kevin Swift, chief economist of ACC and co-author of the report. “Manufacturing has turned a corner, business investment is on the rise, and domestic oil and gas production is on the rebound. It all sets the stage for tremendous momentum, expansion, and capital investment.”
US chemical manufacturers remain advantaged with access to cheaper and more abundant feedstocks and energy, helping push the number of announced chemical production projects to nearly 320 with a cumulative value of over $185 billion. Nearly 65% of the chemical industry investment announced since 2010 has been completed or is under construction. As these investments have come online, chemical production volumes have continued to increase. Excluding pharmaceuticals, production volume for 2017 is expected to be up 0.8%, increasing to 3.7% in 2018, and 3.9% in 2019 before easing to 3.0% in 2020.
Stronger export markets and gains in investment spending continue to boost demand in key end-use markets including light vehicles and housing. Though production has eased from last year’s robust pace and light vehicle sales are expected to retreat slightly, the outlook is for sales to progress at a solid, though slower, pace over the next several years. Housing activity improved to 1.20 million starts in 2017 and will rise to 1.29 million in 2018 as the level of activity gradually returns to its long-term underlying demand pace of 1.5 million units per year by 2022.
The report also noted that in addition to end-use markets, improved export markets will also drive strong gains in US chemistry. Basic chemicals production is expected to be flat in 2017, before growing by 4.7% in 2018, and 5.2% in 2019 as new capacity comes online. Major export markets such as Latin American and Asia will play a large role in expanding production.
In the specialties chemicals segment, production will increase by 3.0% in 2017 and grow further by 2.3% in 2018. Gains in specialty chemicals were led by improvements in oilfield and mining chemicals, adhesives, and electronic chemicals.
Increased exports will result in a $32 billion trade surplus in chemicals (excluding pharmaceuticals) this year. Total chemical exports (on a dollar basis) rose 4.9% to $127 billion, while imports rose 2.8% to $96 billion. Two-way trade between the US and its foreign partners will reach $223 billion this year, a 4.0% expansion over 2016.
“Our fundamentals remain incredibly strong and the US remains the destination for chemical investment,” said Swift, noting that 62% of the $185 billion in announced projects is foreign direct investment. In addition to the new projects, chemical industry capital spending continues to surge, reaching $38 billion in 2017 and accounting for one-half of total construction spending by the manufacturing sector. Capital spending increased 6.0% this year, but will grow by 6.3% in 2018 and 6.8% in 2019, reaching $48 billion by 2022.
The business of chemistry is a $768 billion enterprise and one of America’s most significant manufacturing industries, accounting for more than 14% of all US exports and 15% of the world’s chemicals. More than ninety-six% of all manufactured goods are touched by products of chemistry.
Prepared annually by ACC’s Economics and Statistics Department, the “Year-End 2017 Chemical Industry Situation and Outlook” is the association’s annual review of the US and global business of chemistry. It offers global and domestic chemical industry data related to production, trade, shipments, capacity utilization, R&D spending, capital spending, employment and wages.
The “Year-End 2017 Chemical Industry Situation and Outlook” is available as part of a larger subscription. To order the subscription, visit https://store.americanchemistry.com/.