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Volume 87 Issue 27 | pp. 51-59
Issue Date: July 6, 2009

Cover Stories: Facts & Figures Of The Chemical Industry

Chemical Output Slipped In Most Regions

Drops of 10% or more in production were common as buyers whittled down inventories
Department: Business | Collection: Economy
Keywords: facts & figures, capacity utilization, economy, manufacturing, production
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U.S. Production
Output plummeted in all chemical sectors
Credit: NOTE: Seasonally adjusted. SOURCE: Federal Reserve Board
8727prod_gr1_lg
 
U.S. Production
Output plummeted in all chemical sectors
Credit: NOTE: Seasonally adjusted. SOURCE: Federal Reserve Board

Chemical production saw large decreases in 2008 as companies responded to lower demand from battered customers throughout the economy. Output declined in North America, Europe, and many parts of Asia. Compared with recent steady increases in output—especially the strong growth of 2006 and the slightly smaller gain in 2007—the 2008 numbers show a significant change.

In the U.S., chemical production began a slow slide in January that continued through the summer. Plant shutdowns precipitated by two giant hurricanes caused a particularly large dip in output in September. In 2005, Hurricanes Katrina and Rita caused a similar zigzag in the chart. This time, though, when the facilities came back on-line, the economic collapse was in full swing. Production blipped up and then continued its decline until December.

For the year, although production of all manufacturing goods dropped 3.1%, production of chemicals fell by 4.6%. Customers did not reorder chemicals but instead chose to conserve cash by depleting inventories.

Chemical plant use as a percentage of capacity—also known as capacity utilization—dipped well below the low point of the last recession in 2001, mirroring the trend in manufacturing overall. Total manufacturing capacity utilization slipped to 68.9% at the end of 2008 compared with 78.7% at the end of 2007. Meanwhile, chemical capacity utilization fell to 67.4% at the end of 2008 versus 78.7% at the end of 2007.

Almost all categories of U.S. chemical production saw large decreases, reversing a multiyear trend of modest gains. Production volumes of many chemicals were off by 10% or more. Organic chemicals for which output was down more than 10% were acrylonitrile, benzene, 1,3-butadiene, ethylbenzene, ethylene, ethylene oxide, and styrene. In inorganics, those with big declines included ammonia, ammonium sulfate, chlorine, phosphoric acid, and sulfuric acid.

In addition, all U.S. plastics categories were down more than 10% because the economic downturn hit the automotive and housing sectors particularly hard. This year, the U.S. plastics table (see page 57) no longer includes epoxy, urea, melamine, and phenolic thermoset resins. Also missing are two thermoplastic categories: acrylonitrile-butadiene-styrene and other styrene polymers, and polyamine. The American Plastics Council says a number of producers declined to provide data for the now-missing categories.

For the U.S. fiber industry, a multiyear production decline accelerated. Nylon output was down 22.3%, and output for both olefin and polyester fibers fell more than 14%.

To take advantage of the agriculture boom, U.S. fertilizer makers increased production of ammonium sulfate by 8.2%. But 2008 output volumes of ammonium nitrate, urea, diammonium phosphate, and phosphoric acid were lower than in 2007.

Canada also made strong gains in some fertilizer production for the year. For example, ammonium nitrate production gained 7.5%, moving up to 1.3 million metric tons. But the country's basic chemicals output shrank 3.8%, bringing production levels to what they were 10 years ago. In organics, Canada produced significantly less benzene, formaldehyde, and propylene in 2008 than in 2007.

Other data about Canada's production have become harder to come by. Statistics Canada discloses production figures only when a minimum number of companies report data. With the closure of an ethylene plant in Quebec, authorities can no longer report ethylene data, even though it is one of the country's most important chemical commodities. The vast majority of ethylene produced in Canada goes to make polyethylene, and output of polyethylene declined 12.2% in 2008.

[+]Enlarge
U.S. Plant Use
Chemical manufacturing capacity use dropped in 2008
Credit: NOTE: As of December. SOURCE: Federal Reserve Board
8727prod_gr2_lg
 
U.S. Plant Use
Chemical manufacturing capacity use dropped in 2008
Credit: NOTE: As of December. SOURCE: Federal Reserve Board

In Europe, barriers to obtaining production data are even higher. In past years, C&EN has calculated an estimated output for all of Europe based on those of several large producing countries. But as the countries that report data in a timely fashion have dwindled down to one, Germany, C&EN has decided to provide the most up-to-date figures possible, which are for 2007. These numbers, of course, do not reflect the economic downturn.

Even so, C&EN found reliable 2008 data for a few European chemicals. According to the trade association EuroChlor, European chlorine production fell by 4.7% in 2008 to 10.1 million metric tons. And according to the Association of Petrochemical Producers in Europe, ethylene production decreased 8.4% to 20.0 million metric tons.

In Asia, as in previous years, C&EN was unable to obtain output numbers for India and got only a handful of statistics from China. But data from Japan, Taiwan, and South Korea show that the region's chemical industry declined last year.

In Japan, total production of chemicals sank nearly 7% in 2008. Large-volume chemicals were particularly affected, with production of petrochemicals shrinking by a sizable 9.9%. Output of many major chemicals in Japan was lower in 2008 than it was 10 years ago.

South Korea, which exports much of its output to China, saw overall production increase, but by a lot less than in previous years. Production of ethylene, propylene, and their corresponding polymers was up. Output of the engineering plastic acrylonitrile-butadiene-styrene, however, fell significantly.

In Taiwan, plastics production plunged; output of most major plastics was down by more than 10%. Taiwan's petrochemical industry declined more than 5% overall.

Even in China, output of some major chemicals reversed the regional trend by going down. Production of ethylene, which had grown by more than 10% per year over the previous decade, dipped 2.1% in 2008. Benzene's story was similar: Production was down slightly in 2008, a big change from 10 years of growth at an annual rate of more than 11%.

 
 
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