Output Declines In U.S., Europe

The economic downturn continued to put a damper on chemical production in the U.S., Canada, Europe, and Japan last year, but output rose in China and Taiwan while holding steady in South Korea.

In the U.S., chemical companies began cutting back output in the latter part of 2008 as their customers, anticipating a drop in orders, stopped buying and worked down their inventories instead. By the start of 2009, chemical production was significantly below year-earlier levels. But as the lackluster year wore on, firms gently pressed the accelerator, raising output slowly through December.

U.S. output of just about every monitored chemical product was weaker in 2009 than in 2008. Production of basic chemicals dropped 6.7%, basic inorganic chemicals were off 7.2%, and organic chemicals slid 5.4%. In the general chemical products category, which slipped 10.7%, the index for pharmaceuticals and medicines, usually a strong sector, rose by a paltry 0.3%.

Chemical plant utilization in the U.S. actually rose for the year compared with 2008, from a decade-low 67.2% to a somewhat more respectable 74.0%. During the 2001 recession, plant utilization slipped only to 71.6%, an indication of how bad the recent slowdown was. Total U.S. manufacturing capacity utilization was scraping bottom in 2009 at 68.4%, still lower than the 69.0% seen in 2008. These figures are down even compared with the 2001 recession, when plants operated overall at 71.5%.

Almost all types of basic organic chemical production have fallen steadily in the U.S. over the past decade, but the drop in 2009 was particularly severe. Propylene output dropped by more than 10%, and production of aniline, butadiene, cumene, and ethylene oxide fell even more. Ethylbenzene, ethylene, and vinyl acetate held steady. And the production of some plastics, including polyvinyl chloride and both linear low-density and high-density polyethylene, grew slightly.

All categories of inorganic chemicals saw weak demand in the U.S., with production especially weak in chlorine, nitric acid, and sodium chlorate. Similarly, after a fairly strong 2008, all types of fertilizers saw steep output declines, with most dropping by more than 10%.

And the U.S. synthetic fiber industry continued its long downward spiral. Nylon output was off 14.0%, and olefin and polyester fiber production fell 13.8% and 11.8%, respectively.

On the whole, however, the U.S. chemical industry had a better production year than did manufacturing as a whole. Reduced spending by both consumers and businesses pushed total production of manufactured goods down 11.4%. Durable goods such as automobiles, furniture, and appliances were especially hard-hit. Luckily for the chemical industry, many of its wares go into nondurable items and day-to-day necessities such as soaps and medicines. Although production of nondurable goods was down 5.6% compared with 2008, chemical output as a whole was down only 4.8%.

Similarly, in Canada chemical makers fared a bit better than manufacturers overall. The Canadian chemical sector saw production slip by 10.7% in 2009, compared with 13.3% for all manufacturing. Demand dropped for most of Canada’s major organic chemicals. Production of ethylene, Canada’s highest-volume organic chemical, dropped nearly 12%, to 4.3 million metric tons. Canadian production of inorganics also fell, except for sodium hydroxide, and even fertilizers such as ammonium nitrate—usually a boon to Canada’s chemical sector—suffered from weaker demand.

The most recent year that C&EN could obtain data for Europe is 2008. Although the numbers were on the books before Europe bore the full brunt of the downturn, the region produced fewer of many important key chemicals that year. A few key organics posted especially sharp production declines, including ethylene, which was down 8.5%, and benzene, which shrank by 16.4%.

Production of many inorganics in Europe also declined, although output of chlorine actually increased by 3.9% in 2008. The boost in chlorine fed a 7.1% increase in polyvinyl chloride output in Europe, but the rest of the major plastics saw a decline in production. Meanwhile, European fertilizer makers produced significantly less urea during 2008 but, curiously, much more ammonium sulfate.

In Asia, Japanese chemical output mirrored the slowdown in the U.S. and Europe, but in Taiwan and China, factories increased production. South Korean chemical output remained steady or turned positive.

In Japan, output increased in a few categories of chemicals in 2009, including organics such as benzene, ethylene, and styrene. But output of inorganics dropped sharply—all by more than 10%. Japan’s plastics production was also down across the board. Polypropylene output, for example, dropped 16.0%.

Taiwan was a different, more positive, story. The small island nation increased its output in all categories of organic chemicals, especially in purified terephthalic acid, ethylene, and styrene. It also boosted output slightly in fertilizers, plastics, and man-made fibers.

South Korea was able to maintain its chemical production with a 5.3% increase overall. But it saw a relatively significant uptick in ethylene and propylene production of 5.2% and 9.1%, respectively.

From the limited information available about China’s chemical output, it appears that the developing nation is working to supply its own basic chemicals from domestic sources. Production of benzene jumped 15.0%, and ethylene increased by more than 4%. Inorganics output rose only slightly, with the exception of sulfuric acid, which jumped by 16.6% in 2009.