By John Richardson
The huge and long-lasting impact of the economic crisis on the US chemicals industry is detailed in the excellent Year-End Situation and Outlook report from the American Chemistry Council (ACC), which was released late last week.
Light vehicle sales and housing starts will still be below 2006 levels in 2015 - the final year in the industry advocate group's forecast period.
The number of light vehicles sold in 2006 totalled 16.5m which fell to 10.4m in 2009, the lowest point of the crisis for light vehicles.
A recovery in sales to 15.9m in 2015 is forecast by the ACC.
Source of picture: Theodore's World
Housing starts were 1.81m in 2006, falling to a low point of 560,000 in 2009 and are forecast to gradually increase to 1.51m in 2015.
The housing market - which is crucial for the US chemicals industry as each new home contains around $15,000 worth of chemistry - bottomed-out this year, according to the ACC.
But with the US and global economic recoveries in such a fragile state, with house prices back to 2003 levels, and with an estimated "shadow inventory" of 5m homes waiting to be sold, further downward corrections cannot be ruled out. This shadow inventory represents homeowners on the sidelines waiting to see if and when the market improves.
A further worry is that mortgage defaults are mainly among sub-prime borrowers in 2008, but are now primarily among borrowers with safer loans, who, the ACC says, "have become delinquent due to a job loss or other economic setback".
The unemployment rate rose in the US last week, providing further evidence that this is a jobless recovery.
Employment losses in the US chemicals industry have totalled 180,000 over the last decide with 80,000 of these losses - 40% - occurring since the crisis began in 2007, adds the ACC.
But it is not all doom and gloom: US chemicals exports were up by 16.8% this year over 2009, resulting in a $50.1bn trade deficit switching to a $3.7bn surplus. Plastic resin exports were up by 15% (we will attempt to provide you with more details later on).
The rebound in global trade and the shale-gas story are the factors behind this reversal.
Further shale-gas technology improvements and movements up the learning curve might make US ethane-based ethylene production even more advantageous.
The Marcellus and other shale-gas fields, however, lack infrastructure to deliver natural-gas liquids (NGLs) to petrochemical producers.
Public concerns over groundwater pollution from fracking could result in "ill-conceived" legislation with excessive demand growth a further risk, says the ACC.
Before companies start detailed evaluation of petrochemical investments based on increased US natural-gas reserves, the ACC predicts that further capacity closures are on the cards. This will obviously be of older, higher-cost facilities.
Overall US industry operating rates were only 74.1% in 2010, it says.
(This suggests that the return to profitability enjoyed by producers is as much about carefully matching production to demand as well as feedstock costs)
Capacity utilisation is only expected to edge-up to 79.8% in 2015, pointing to the likelihood that the industry might still be a long way from expansions.
Could it be that by the time investments are being seriously studied, the gas advantage will have significantly eroded? Or might it have even disappeared altogether?
Before you say "nonsense" how many of you predicted the shale-gas revolution and its impact on US natural-gas prices?