U.S.: Domestic Manufacturing Slowdown Will Be Offset By Shale Gas Upside

The U.S. chemical industry should see a slight uptick in demand this year as end markets such as vehicles and housing gain modest ground. In addition, as production enabled by cheap natural gas comes on-line, domestic manufacturers will be equipped to produce more chemicals for export to growing economies.

This year, U.S. chemical production, excluding pharmaceuticals, is expected to grow by a moderate 1.9%, compared with a 1.5% increase in 2012, according to the American Chemistry Council, a trade group. Last year’s slow, tentative growth will continue into the early part of 2013, due to slowing momentum in U.S. manufacturing, the recession in Europe, and weakness in exports to Asia, ACC’s chief economist, T. Kevin Swift, reports.

Caution by downstream customers will crimp orders for basic chemicals including inorganics, petro­chemicals, plastics, and synthetic rubber. In contrast, production of specialty chemicals will be driven by consumer demand for new passenger vehicles and houses, Swift outlines.

To expand business, chemical firms will find growth markets beyond China and Brazil, says Garrett Gee, U.S. chemical advisory services director at the consulting firm PricewaterhouseCoopers. Companies will target countries such as Vietnam, Indonesia, Turkey, and Argentina in order to access “incremental increases in demand as the emerging middle class evolves,” Gee says.

Certain megatrends will also continue, according to Gee. The chemical industry will look to benefit from spending on energy and natural resources, urban infrastructure, consumer goods, health and nutrition, animal and life sciences, clean water, transportation, and communication.

DuPont CEO Ellen J. Kullman mentioned some of the same trends in a December speech. “Our current outlook,” she said, “calls for our 2013 earnings to grow low- to mid-single digits over 2012 as the investments we are making in agriculture and nutrition, industrial biosciences, and advanced materials continue to deliver results, offset by the weakness in titanium dioxide markets.”

Meanwhile, 50 facilities have been announced to capitalize on the country’s new shale gas advantage, according to ACC. They will turn out basic chemicals including ethylene, polyethylene, methanol, and ammonia and are likely to push chemical production higher than consensus estimates this year.