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US chemicals production set to accelerate on shale benefit
1:49 PM MST | December 13, 2013 | —Robert Westervelt
US chemical makers are firmly “back in the game” thanks to the cost advantage enabled by low-cost shale feedstocks, according to ACC’s year-end review and outlook. US chemical production was up 1.6% in 2013 and is expected to rise 2.5% in 2014 and 3.5% in 2015, says Kevin Swift, ACC chief economist and managing director. “Following a decade of lost competitiveness, American chemistry is reemerging as a growth industry,” Swift says.
Overall growth in the US economy “should persist, albeit slowly and tenatively, in 2014,” ACC says. “Below-trend” US GDP growth of 2.5% is forecast for 2014, ACC says. GDP is expected to accelerate to 3% in 2015.
US chemicals production will grow strongly through the second half of the decade, as the nearly $100 billion in new chemical investment announced since 2010 comes online. “During the second half of the decade, US chemistry growth is expected to expand at a pace over 4%/year on average, a rate that exceeds that of the overall US economy,” Swift says. The total value of shipments will advance at a slightly stronger pace than production, with shipments values set to exceed $1 trillion in 2018, up from $789 billion in 2013, ACC says.
The forecast growth rates are the highest for industry in more than 20 years. “Excluding pharmaceuticals, US [chemical] growth has averaged less 1%/year since the early 1990s,” says Martha Gilchrist Moore, ACC’s senior director/policy analysis and economics. “This is going to be a real step-up from that level.” US chemicals production excluding pharmaceuticals was up 3.2% in 2013, and growth is expected to slow to 2.6% in 2014. Specialties and agricultural chemicals will drag down the rate in 2014 after advancing strongly the two years prior. Basic chemicals are expected to grow 2.4% in 2014, up from 1.2% in 2013. Chemicals production growth excluding pharmaceuticals will be 3.5% in 2015, 3.8% in 2016, and 4.0% in 2019, according to ACC estimates.
US exports will ramp up sharply as production comes online. Exports of chemicals will grow 6.6% in 2014, to $205 billion, and a further 7.6% in 2015. Excluding pharmaceuticals, the surplus in chemicals trade will grow to $67.5 billion by 2018, up from $42.7 billion in 2013, or by an average of 9.6%/year.
The expansion is also reversing the industry’s falling employment trend. Employment in the chemical industry is expected to have grown by 1.3% in 2013 and to continue to expand through 2018, ACC says. This growth contrasts with the continuous decline in industry employment between 1999 and 2011.
ACC says the global outlook is also favorable after a weak performance in 2013. Global chemical production likely advanced 2.4% in 2013, down from 2.7% in 2012. “With improving economic prospects, global chemical growth will improve to 3.8% in 2014 and 4.1% in 2015,” Swift says. High-growth economies of Asia, particularly China, and the Middle East will drive growth, while Western Europe will lag. Production growth in Western Europe, however, should turn positive, up 1.4% in 2014 after declines of 1.4% and 0.1% in 2012 and 2013, respectively. “Growth in Europe and many emerging markets will be stronger in 2014, and fragile recovery will gain traction,” Swift says.