Corrected: US chem industry was strong in ’22, but faces headwinds from weak demand in ’23 – ACC

Adam Yanelli

07-Dec-2022

Correction: In the ICIS story headlined “US chem industry was strong in ’22, but faces headwinds from weak demand in ’23 – ACC” dated 7 December 2022, the wrong year was used.

Please read in paragraph 19 “…The ACC expects lower growth across most categories in 2023.…” instead of “…The ACC expects growth across all categories in 2022…”.

A corrected story follows.

HOUSTON (ICIS)–The US chemical industry saw one of its best years in the past decade in 2022, but the pace of growth has slowed recently, and economists anticipate a shallow recession at the start of 2023 that is likely to weigh on domestic and export demand in the new year, the American Chemistry Council (ACC) said.

In its Year-End 2022 Chemical Industry Situation and Outlook, the ACC said it still expects US chem producers to continue to benefit from a competitive advantage on the strength of domestic energy production.

LOOKING BACK AT 2022
ACC chief economist Martha Moore said in the report that the global economy is struggling with slow growth as inflation is eroding consumers’ purchasing power.

Central banks across the globe, especially the US Federal Reserve, are aggressively tightening monetary policy to combat inflation, which worsened amid Russia’s invasion of Ukraine.

The tightening of monetary policy includes a shift from quantitative easing, which in the US meant the Fed was buying mortgage-backed securities and US Treasury notes from investors, to quantitative tightening, where the Fed is now selling those assets.

Weakness in China from COVID-19 lockdowns and a real estate downturn is also weighing on global demand, Moore said.

The ACC report noted a softening housing market weighed by rising mortgage rates, higher costs for materials and low inventories.

Globally, the purchasing managers indices (PMIs) of the major economies have declined with the exception of Russia, India and Mexico. The ACC highlighted the strength in India.

Supply chains are improving, but they are still more fragile than before the pandemic, the ACC said.

LOOKING FORWARD TO 2023
While the US is not currently in a recession, the ACC report predicts a shallow recession for early 2023 while anticipating flat GDP growth for the whole year.

The index of leading economic indicators from the Conference Board indicates a downturn, the ACC said, with a soft landing still possible.

Inflation is projected to ease to 4.2%.

The ACC projects the automotive industry to surge in 2023 after three years of suppressed sales largely due to global supply chain issues and a shortage of semiconductors.

The semiconductor sector is likely to grow in 2023 as new capacity is expected to start up and existing bottlenecks are easing.

Energy is another growing sector in 2023, the ACC said.

Natural gas production has exceeded its pre-COVID peak, but US oil production has not because of tight labour and scarce building materials.

The ACC projects that US oil production will not break its pre-COVID peak until 2024.

Capital spending in the chemical industry will slow down in 2023, the ACC said, as it shifts towards lowering greenhouse gas emissions and chemical recycling.

The ACC expects lower growth across most categories in 2023.

Additional reporting by Al Greenwood

Thumbnail image shows Work on BASF’s MDI facilities at Geismar, Louisiana (Source: BASF)

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