US chem industry still weak, despite shale gas – German trade group

28 November 2011 16:16  [Source: ICIS news]

HOUSTON (ICIS)--The US chemical industry has not yet recovered from the 2008 economic crisis, despite “moderate” increases in production over the past 30 months and low feedstock costs on the back of the shale gas boom, Germany’s chemical trade group VCI said on Monday.

In a report to member firms, Frankfurt-based VCI said the US chemicals industry was still performing at below its pre-crisis level, even though US-based chemical producers are competitive and innovative, and have the benefit of relatively low feedstock costs and a weak US dollar.

However, the real underlying problem facing US-based chemical producers is “creeping deindustrialisation”, which has dampened US domestic demand for chemicals and plastics for many years, the group said.

In addition, many of the industry’s key customer markets, especially building and construction, are yet to recover from the 2008 setback.

With a relatively low export quota of about 24%, the US cannot rely on exports to compensate for weak domestic demand for chemicals, VCI said.

On the plus side, US chemical producers are likely to improve their competitiveness further on the back of the shale gas boom, even though the technology has been challenged on environmental grounds.

But even with shale gas and its promise of low feedstock costs for chemicals, over the medium term it remains doubtful if the US chemical industry can regain its former strength, given its underlying structural weakness resulting from relatively low domestic demand, VCI said.

Read Paul Hodges’ Chemicals and the Economy Blog

By: Stefan Baumgarten
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