US to ride wave of growth – ACC

The US chemical industry is poised for accelerated growth, riding on a wave of global economic growth and a surge of investments based on cost competitive shale gas, the American Chemistry Council’s (ACC) chief economist said on 6 June.

“The global economy is on a synchronised upswing, and the Chemical Activity Barometer (CAB) in the US is projecting growth well into Q4 2017 and Q1 2018 where we could see an acceleration of activity,” said ACC chief economist Kevin Swift at a press event at the ACC Annual Meeting in Colorado Springs.

Business investment is set to take over from consumer spending as the driver of the US economy, he noted. US chemical industry volumes, excluding pharmaceuticals, are expected to rise by 2.1% in 2017 after a 1.1% gain in 2016, and then lift off to 4.2% in 2018 and 4.1% in 2019 as a wave of new capacity comes online, according to the ACC.

Much of the new US chemical capacity will be exported, lifting the US trade balance in chemicals (excluding pharma) from $28.2bn in 2016 to 32.5bn in 2017 and $41.1bn in 2018, the trade group projects. Capital spending is also projected to surge from $31.9bn in 2016 to $33.8bn in 2017 and $35.7bn in 2018.

There have been 310 US chemical projects totaling $183bn-184bn announced because of competitive shale gas, Swift noted, with 62% of the amount representing foreign direct investment (FDI). “We continue to see a flow of investment – this is the place to be,” said Swift.

On key end markets, the US automotive sector likely peaked in 2016 with record light vehicle sales of 17.5m units, but the economist sees a “fairly high plateau” with unit sales in the 17.2m-17.3m range in the next few years.

“Some bloated inventories need to be worked off and auto loans are a concern,” said Swift. And the US housing market is continuing a long, slow climb out of the financial crisis of 2008-2009 with housing starts gradually headed back to 1.5m – “growth in line with underlying demographics”, said Swift.

ACC optimistic on Trump

The ACC is encouraged by the Trump administration’s approach to US energy production and regulatory and tax reforms, the head of the trade group said on 6 June.

“While it is a difficult time to understand exactly what is happening, there are a lot of positive things happening that are key to enhancing our competitiveness,” said Cal Dooley, president and CEO of the ACC, at the group’s press event.

“The foundation of our industry is on energy, natural gas and natural gas liquids (NGLs). We have a political environment and regulatory construct that will allow us to have an abundant supply of natural gas,” he added.

The first actions of the administration demonstrated its commitment to maximise production, noted Dooley. This included approvals of the Keystone Pipeline and Dakota Access Pipeline to help ensure the US has the infrastructure to capitalise on its vast energy resources, he said.

The head of the trade group is also optimistic on the passage of US tax reform legislation as well as an infrastructure bill. “We see an administration and Congress that are very focused on maximising economic growth and creating jobs,” said Dooley.

“The path to tax reform looks uncertain, but we are confident that we will see a lower corporate rate to enhance the equity between the US tax regime and that of our competitors,” he added.

On the negative side, Dooley said it was “a mistake to withdraw from the TPP (Trans Pacific Partnership)” free trade agreement, which had benefits for the US chemical industry. The ACC is working with its partners in Canada and Mexico to ensure that any reforms to NAFTA (North American Free Trade Agreement) further enhance benefits for the US chemical industry, he said.

“The US chemical industry accounts for 14 cents out of every dollar of US exports, so we have a vested interest in trade,” said Dooley.

While the ACC has no official position on the Paris Accord, which the US administration has decided to withdraw from, “we are in complete alignment in our commitment to reduce greenhouse gas (GHG) emissions”, said Dooley.

The ACC’s Responsible Care programme tracks its members’ GHG emissions, which have fallen 25% since 1992. “We have a record that demonstrates our commitment, regardless of Paris,” said Dooley.

“And there is not another industry so critical to helping other countries achieve reductions of GHG emissions by providing plastics that lightweight, lubricants to enhance engine efficiency, materials for tyres that reduce rolling resistance and insulations and coatings that improve energy efficiency,” he added.

For every unit of GHG emissions that the US chemical industry emits, it saves two units for its customers, said Dooley.

Image: US fracking truck in California

Picture credit: Global Warming Images/Rex/Shutterstock

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