28 December 2012 21:50 [Source: ICIS news]
HOUSTON (ICIS)--The US chemical industry is expecting increased activity in 2013, mostly due to the shale gas advantage, although economic growth will not reach long-term trend levels until 2014, the American Chemistry Council (ACC) said in its year-end situation and outlook report.
“Favourable oil-to-gas price ratios driven by the production of natural gas from shale will drive a renewed US competitiveness that will boost exports and fuel greater domestic involvement, economic growth and job creation with the business of chemistry,” the ACC said.
But even though the US gross domestic product (GDP) has surpassed its pre-recession peak, growth has been “painfully slow”, as many sectors have yet to see a typical business cycle, the industrial group said.
“After three years of recovery from the Great Recession, the global economy stumbled in 2012 with the Euro area in recession again, a slowdown in China became particularly pronounced, and confidence-erosion and other negative factors spread,” the ACC said.
In the US, strong manufacturing recovery has lost its momentum as business confidence was hindered by rising uncertainty over the presidential election and the federal budget. The “fiscal cliff” refers to more than $600bn (€450bn) in tax increases and spending cuts that become effective on 1 January unless the president and Congress can come to an agreement on economic policy.
While the ACC is predicting a 2% growth for GDP, the fiscal cliff could cause the economy to shrink nearly 0.5% in 2013.
Still, the chemistry business is one of America’s most significant manufacturing industries - a $760bn enterprise that touches more than 96% of all manufactured goods, according to the ACC.
The industry will see potential growth as the US emerges as a global low-cost supplier of many petrochemical and plastic products, the ACC said.
The slowdown in global manufacturing has caused some downstream inventory build-up and subsequent destocking, the report said.
However, the ACC expects US chemical output to improve slightly during 2013 with a gain of 1.9%.
Production of specialty chemicals will be driven by demand from end-use markets, particularly light vehicles and housing, the ACC said. Plastic resins also will see growth as export markets revive.
“Despite weakening key export markets in Europe and China, US chemical shipments have become increasingly competitive due to low-cost ethane supplies from shale gas development,” the ACC said.
Shipments are expected to expand to $794.2bn in 2013, a 3.8% gain from the $765.1bn in 2012, according to ACC data.
Chemical trade will continue to expand, though at moderate rates because global manufacturing activity remains fragile.
In 2013, exports will increase by 4.7% to $199.7bn, and imports will gain 4.1% to $197.3bn, the ACC said. As a result, trade surplus in chemicals will expand to $2.4bn in 2013.
As chemical production continues to see modest gains, operating rates and profit margins could improve in 2013.
This opens doors for new plant and equipment investments, as the ACC sees the possibility of 50 chemical production projects that could result in large increases in capacity between 2014-2017.
Meanwhile, employment in the chemical industry increased by 1.3% in 2012, partially due to higher production of labour-intensive plastic resins, synthetic rubber and man-made fibres, the industrial group said.
Product gains are expected to outpace output growth in 2013, causing employment to slip by 0.2%, but the slight decline will be offset in 2014 by a 0.8% gain, the ACC said.
Still, employee wages are expected to increase in both years.
Further development of US shale gas and ethane could drive an even greater expansion in the US as the manufacturing industry is set to gain substantially, the ACC said.
“Following a decade of high and volatile natural gas prices that destroyed industrial demand and lead to the closure of many gas-intensive manufacturers, shale gas offers a new era of American competitiveness that will lead to greater investment, industrial growth and employment,” ACC chief economist Kevin Swift said.
($1 = €0.75)
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
Asian Chemical Connections