Recently, the American council for chemical industry (ACC) and the European council for chemical industries (Cefic) released their respective forecasts for the future of the chemical industry in 2020.
01 ACC: chemical production increased by 2.0% in 2020
The American chemical council (ACC) recently predicted that global chemical production will grow by 2% in 2020, after rising 1.2% in 2019. Global trade tensions, slowing economic growth and weak industrial production have all curbed chemical production. Although global chemical production rose 1.2% in 2019, several major economies are in or near recession. ACC data showed that European chemical production fell 0.4 per cent in 2019, led by Germany, Belgium and the Netherlands. South Korea and Taiwan in Asia also saw declines in chemical production last year.
Producers hope the easing of trade tensions between China and the United States will boost confidence. Kevin Swift, chief economist at ACC, said a successful resolution of trade tensions would help ease uncertainty, with global chemical production set to grow by 2.0 per cent in 2020 and 2.7 per cent in 2021 and an average of 2.4 per cent over the next three years.
02 Cefic: the outlook for 2020 remains uncertain
According to the European council for chemical industries (Cefic), eu chemical production will remain at the same level in 2020. The weak production reflects the economic and geopolitical challenges facing the industry. Cefic said the chemical business environment had been significantly affected in 2019 by slowing global economic growth, political uncertainty over brexit and trade conflicts. The outlook for 2020 remains uncertain. "While rising real incomes should keep demand for manufactured goods stable, continued political uncertainty and a hostile trading environment are unlikely to promote a significant increase in chemical demand," Cefic said.
03 New demand "growth points" will emerge
With consumer power still strong, recession risks remain low. "IHS Markit expects global growth to stabilize at 2.5 per cent in 2020 and to rise slightly to 2.7 per cent in 2021 and 2022," said Nariman Behravesh, chief economist at IHS Markit. It is expected that new 'growth points' of demand will emerge in 2020. "Consumer spending continues to be a bright spot in the global economy, helped by decent income growth, as well as low oil prices, low inflation and low interest rates."
04 The us chemical market accelerated in the second half of the year
ACC expects the U.S. chemical market to rise slightly in 2020 and is likely to accelerate in the second half of the year. ACC's chemical activity barometer (CAB), a leading economic indicator, showed no change in the 3-month moving average (3MMA) for December after rising 0.1% in November 2019. The three-month moving average for cabs rose 0.4% from the same period in 2018, after two months of negative year-over-year data. "The CAB index shows that business conditions in the U.S. grew slowly in the third quarter," swift said. Mr. Swift said weak industrial production and trade tensions have stifled growth, but the U.S. chemical industry has maintained a significant competitive advantage thanks to she-related low-cost feedstocks and a surge in U.S. energy production. Swift added that access to export markets is critical because export growth will be key to driving the development of the chemicals industry over the next decade.
Total us trade in chemicals is expected to fall by 3 per cent to $242bn in 2019 and rise by 1 per cent in 2020. The us chemical trade grew by 10% in 2018. Both imports and exports are expected to decline this year, although the sector continues to maintain a positive trade balance. Since mid-2019, ACC has lowered its forecast for the chemicals trade. "The us chemical trade growth forecast has been revised downward as trade barriers rise in the second half of 2019 and demand side conditions slow," ACC said.
U.S. chemical production is expected to grow 0.4% in 2020 and another 2.3% in 2021, swift said. Capacity utilisation of chemicals is expected to decline gradually in the coming years, from 82.9 per cent in 2019 to 81.9 per cent in 2021, as new capacity comes on stream, ACC said.
Martha Moore, senior director of policy analysis and economics at ACC, said: "the us chemical industry is expanding as shale-related superior resource investments come on stream and more new capacity projects are planned." Us production of basic chemicals is expected to grow by 0.7 per cent in 2020, compared with 0.6 per cent in 2019 and 3.5 per cent in 2018. Capacity expansion, driven by basic chemicals, continues. Total us chemical capital expenditure is expected to reach $36.5bn in 2020, up nearly 5 per cent year on year. Chemical investment growth will slow in 2021 as many projects are completed.
ACC expects U.S. specialty chemical production to grow 2.6% in 2019 and decline 0.4% in 2020. In 2018, U.S. specialty production increased by 4.0%. Low demand in the end-use market is a key reason for the expected decline in the future.
In end-use markets, the outlook for 2020 is mixed, with demand for specialty chemicals rising the most in construction materials, oil and gas extraction, oil refining, semiconductors and aerospace. But auto-related demand is set to decline, with us light vehicle sales expected to fall from 16.9m in 2019 to 16.5m in 2020. Still, there is some room for growth. ACC expects housing starts in the U.S. to total 1.26 million units in 2019 and 2020, but unlike in some other markets, uncertainty tends to go up. The growing number of households and improving employment and income growth will continue to provide support.
