U.S. chemical output may fall this year, but outlook remains positive
2023/8/11
Martha Moore, chief economist at the American Chemistry Council and author of the report, said: "The consumption rebound driven by the epidemic has faded, and we expect the growth rate of consumer spending to continue to slow. Risks remain high. Chemical producers will be very cautious in managing their inventories amid a weak economy and closely monitor the impact of U.S. government regulatory policies.”
Weakness in the U.S. industrial sector will adversely affect the chemical industry, as more than 85% of basic and specialty chemicals are used in industrial sectors. The chemical demand situation in the U.S. industrial sector is expected to be unlikely to improve before 2025, and the overall U.S. industrial output is expected to decline by 0.6% year-on-year this year.
Insufficient demand in the terminal market
The U.S. auto and real estate industries are expected to recover moderately this year. U.S. light vehicle sales over the past three years have been well below their 10-year average due to the COVID-19 pandemic and a global semiconductor shortage, but vehicle production and dealer inventories have increased. However, rising consumer borrowing costs will curb car demand, and car sales are unlikely to see a sharp increase in the short term, and may see moderate growth. U.S. auto sales are expected to rise to 15 million this year and 15.4 million in 2024.
Although the increase in demand for telecommuting during the epidemic led to higher housing prices and rents in the United States, the weak economy and sharply rising interest rates have had an impact on the real estate industry in the United States. Since March 2022, the Federal Reserve has raised interest rates 11 times in a row in order to curb inflation, increasing the federal funds rate from the initial zero interest rate to the current 5.25%~5.5%. That makes it more expensive for consumers to borrow money to buy big-ticket items like cars or houses, holding back growth in consumer demand. In 2022, U.S. housing starts will decline for the first time since the 2008 financial crisis. U.S. new housing starts are expected to fall to 1.32 million units in 2023 and 1.31 million units in 2024.
Enterprises carefully manage inventory
In the third quarter of 2022, U.S. chemical production began to weaken, offsetting the increase in U.S. chemical production in early 2022. Production interruptions due to weather have led to reduced chemical inventories, unplanned shutdowns and maintenance of chemical plants and refineries, etc., dragging down US chemical production in the first quarter of 2023.
The destocking of chemical companies in the United States has basically ended, but the companies have not started to replenish their stocks. Considering the unstable economic environment, US chemical companies are carefully managing their inventories.
It is expected that in 2023, the output of chemicals in the United States will decrease by 1.6% year-on-year, of which the output of basic chemicals will decrease by 3.1% year-on-year. In 2024, the U.S. chemical industry is expected to recover moderately, with U.S. chemical production growing by 1.2% year-on-year.
Positive long-term growth prospects
Although the production of chemicals in the United States will decline in 2023, the long-term prospects of the chemical industry are still optimistic. The advantages of the United States in natural gas production will provide the chemical industry with sufficient raw materials, which is conducive to chemical production.
In addition, the "Inflation Reduction Act", "Infrastructure Investment and Employment Act", and "2022 Chip and Science Act" introduced by the United States are expected to promote the return of manufacturing to North America, thereby stimulating consumer demand for chemicals and supporting the development of the US chemical industry.
It is expected that the export volume of US chemical products will decrease by 4.5% this year, and will decrease by 0.6% in 2024; imports will decrease by 5.5% in 2023, and will increase by 2% in 2024. In the next two years, the United States will maintain a trade surplus in chemicals.
It is expected that the capital expenditure growth rate of the US chemical industry will slow down to 2.4% this year, and the average annual growth rate of capital expenditure in the US chemical industry is expected to be 3% to 4% before 2026. Sustainable investing will account for an increasing share of the capex mix.
It is expected that global chemical production will increase by 0.6% year-on-year in 2023. Among them, the increase in chemical production in Asia-Pacific, Africa and the Commonwealth of Independent States will offset the decline in chemical production in Europe, North America and Latin America. Global chemicals production is projected to register a strong growth of 3.5% in 2024 as global industrial production recovers.
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