US Chemical Industry Slump Extends Into Q2

09 July 2001 00:00  [Source: ICB Americas]

The chemical industry's slump extended on into the second quarter. Petrochemicals and their derivatives remain hard hit but other sectors of the chemical industry appear healthy, particularly the life sciences.

Chemical shipments rose in May but they were off 3.5 percent on a year-over-year basis. "The environment for industrial chemicals is challenging to say the least," notes Thomas Kevin Swift, American Chemistry Council (ACC) senior director for policy economics and risk analysis.

He adds that the weakness "has been centered in petrochemicals and organic intermediates with shipments down 10.4 percent."

Downstream derivatives and other industrial chemicals also remain soft. Shipments of those products are down 1.8 percent from a year ago, and their volume is off more than 5 percent. Shipments of inorganic chemicals are up 4.9 percent because of higher ECU values. The price index for inorganic chemicals is up 9.5 percent, indicating that volumes have fallen by more than 4 percent.

"Based on some indicators, it appears that a trough is being reached," Mr. Swift says. "Export demand, up nearly 5 percent on a year-over-year basis, has been a positive factor but the strong gains in exports over the past year have ended as the effects of the still-strong dollar and weakening markets in Europe are being felt."

Shipments of specialty chemicals rose in May and are 2.8 percent higher than they were a year ago. Shipments of coatings are up 4 percent, and shipments of industrial gases have climbed 4.5 percent, but shipments of adhesives and sealants fell in recent months and are down 0.5 percent year-over-year. Electronic chemical shipments have also softened and are only 2.4 percent higher than they were a year ago.

"Fine chemicals are also facing overcapacity and slower growth," Mr. Swift says. "Since many specialties are based on ethylene chemistry, the higher natural gas costs caused raw material costs to surge for most specialties. These are now easing, while at the same time, some modest price gains have been achieved for most specialties."

Life sciences shipments are up 4.1 percent, but pharmaceuticals are moderating and up only 3.8 percent from a year ago. Crop protection shipments are up 7.2 percent, but this gain reflects weakness in 2000 rather than strong growth this year.

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