US chemical volumes to rebound slightly in 2024 with destocking mostly over – ACC economist

NEW YORK (ICIS)–US chemical volumes are poised to rebound modestly in 2024 as inventories are low and destocking is largely done across most value chains, said the chief economist of the American Chemistry Council (ACC).

“We think [destocking] has pretty much played out but demand remains relatively weak. We are starting to see some green shoots of firming demand in certain areas but it’s early days,” said Martha Moore, chief economist of the ACC, at a press briefing.

US chemical volumes are expected to rebound 1.5% in 2024 after falling an estimated 1.0% in 2023 with gains in all major categories – basic chemicals (+1.7%), specialties (+0.7%), agricultural chemicals (+1.0%) and consumer products (+1.7%), according to the trade group.

This compares to expected global chemical volumes growth of 2.9% in 2024 after just 0.3% growth in 2023.

“We expect modest growth across all segments in 2024 and further expansion in 2025. Capacity expansions in manufacturing will boost chemistry demand in the years ahead, and we also continue to have favorable energy dynamics here in the US,” said Moore.

This manufacturing expansion will be driven by the big three US stimulus programs – the Inflation Reduction Act (IRA), the CHIPS and Science Act and the Infrastructure Investment and Jobs Act, she pointed out.

By 2025, the economist sees US chemical volumes accelerating to 2.1%.

SURGE IN MANUFACTURING CONSTRUCTION SPENDING
A bright spot is the surge in manufacturing construction spending which started in Q3 2021 and has accelerated since. This spending has rocketed 61.9% year on year to a seasonally adjusted annual rate of $199bn as of the latest September 2023 figures.

“Back in 2018, 2019 we were talking about the chemical industry accounting for around half of all new manufacturing construction spending. That has since rotated to computer, electronics and electrical that’s semiconductors, batteries and electrical equipment for data warehouses, and there’s chemistry involved in all of that,” said Moore.

“As this new capacity is being built, when that’s online, that will require chemistry to produce the products in those areas,” she added.

US chemical exports are expected to rebound 3.1% to $170.7bn in 2024 after falling an estimated 7.5% in 2023. Likewise, US imports of chemicals are projected to jump 8.2% to $149.6bn after a 10.5% decline in 2023.

CAPEX TO SLOW
US chemical industry capital spending (capex), after surging an estimated 4.3% in 2023, is projected to slow to 1.1% to around $27.5bn in 2024 before bouncing to 2.9% in 2025, according to the ACC.

“We’ve got new investments in lower carbon technologies and that’s really going to propel more investment going forward,” said Moore.

US AND GLOBAL ECONOMIC OUTLOOK
Meanwhile, the economist expects a slowdown and potential soft landing for the US economy, with 2024 GDP growth slowing to 1.1% after expected growth of 2.3% in 2023.

“We’re having a downturn [in the US] and whether that downturn turns into a recession as defined by the NBER (National Bureau of Economic Research) [is unclear]. We could achieve a soft landing – that’s a viable scenario – but a more likely scenario is that we have a small contraction in the first part of next year,” said Moore.

For key chemical end-markets, US light vehicle sales are expected to be flat at 15.5m units in 2024 while housing starts are projected to decline about 3% to 1.35m.

The global economy is likewise expected to slow but more modestly, with expected GDP growth of 2.3% in 2024 versus an estimated 2.7% in 2023, according to the ACC.

Focus article by Joseph Chang