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IHS: Shale oil and gas to boost US chemical production 5% annually

12:40 PM MDT | September 4, 2013 | Clay Boswell

Between 2013 and 2020, the production of basic chemicals and plastics in the United States will increase at an average rate of 5%/year to meet growing demand for cost-advantaged exports, according to 'A Manufacturing Renaissance,' the third volume of the IHS report, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy.

Exports of US manufactured chemicals and plastics have increased by 11% since 2010, says IHS.

Lower raw material and energy costs, the result of shale gas and oil development, have spurred a "manufacturing renaissance" in the United States that will increase production by 3.5% by 2020 and 3.9% by 2025, says IHS. "Output by the manufacturing sector will increase by $258 billion in 2020 and $328 billion in 2025," the report states. "The US competitive advantage is particularly pronounced in energy-intensive industries such as energy-related chemicals, which in the coming years will be a primary beneficiary of lower prices for energy and feedstock. Industries such as organic chemicals, resins, agricultural chemicals, petroleum refining, metals such as iron and steel, and machinery are among the top-ranked sectors benefiting from this revolution."

IHS forecasts that between 2012 and 2016, more than $31 billion will be spent to install over 16 million m.t./year of chemical production capacity in the United States. By 2025, 89 million m.t./year of new capacity will have been added for a cumulative investment of almost $129 billion. The new capacity will be focused mainly in acrylics, aromatics, nitrogen fertilizers, chlor-alkali, olefins, polyolefins, vinyls, glycols, and methanol. These nine value chains together accounted for about 45% of US production capacity in 2012, says IHS.

"Over the longer term, given expectations that North America will remain a low-cost energy and feedstock source for the chemical industry, the region could return to more downstream manufacturing of durable and non-durable goods based on these low-cost chemicals and plastics," says the study, which was released on 3 September. "The result will be stronger growth in domestic consumption of basic chemicals and plastics as a result of the ‘on-shoring’ of the manufacturing of certain products produced from polyethylene."

Unconventional oil and gas will provide an increasing benefit to the United States trade balance that will plateau in 2022 at $180 billion/year in additional real net trade above what would have occurred otherwise, says IHS.

"The benefits of this unconventional oil and natural gas revolution are also reaching more than 120 million American households across the country whose incomes and consumption are rising," the report adds. "In 2012, average real disposable income per household increased by more than $1,200 as a result of the unconventional revolution—an aggregate financial boost to all US households of $163 billion." The benefit to the average household will grow to just over $2,700 in 2020 and to more than $3,500 by 2025, says IHS.

A Manufacturing Renaissance is available for download at the IHS Web site.





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