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World Chemical Outlook

by Business Department
January 10, 2011 | A version of this story appeared in Volume 89, Issue 2

Executives throughout the chemical industry entered 2010 with a surprising amount of optimism for people who had just been through what is now being called the Great Recession. They figured that business had hit rock bottom and could only go up from there.

And they were right. Last year turned out to be a pretty good year for the chemical enterprise. After having drawn down inventories to the bottom during the recession, consumers of everything from melamine to mass spectrometers had to buy again. Demand for chemicals rose 5.2% in the U.S. and a whopping 10.0% in Europe.

But that restocking effect has run its course. Trade association economists are projecting that chemical industry growth in the developed world this year will be quite modest: 2.7% in the U.S. and 2.5% in Europe. The cold truth for mature countries is that their chemical industries are generally smaller than they were before the recession.

The outlook is sunnier in developing regions. Chemical makers in Asia, Latin America, and the Middle East are planning ambitious facilities making everything from basic chemicals to sophisticated specialties. Some of these projects are homegrown, but many involve partners from the U.S. and Europe.

Regardless of the region, some chemical markets will be more robust than others. After expanding at double-digit rates during 2010, electronic materials sales will settle in at a comfortable 5–6% growth rate this year. On the other hand, sales of paints and coatings will be sluggish, particularly in the U.S., where the construction industry has yet to recover from the recession.

As usual, the pharmaceutical industry marches to a different drummer. There, the first in a long-anticipated series of patent expirations will hit big pharma’s bottom line. Companies are likely to continue expanding into emerging markets this year to offset their dependence on patented pills for rich nations. The pharmaceutical chemical manufacturers that serve these firms are hoping to benefit from this geographic diversification.

Overall, the year ahead is not expected to bring any great leaps forward for the world’s chemical enterprise. But it should be a year of growth, and experienced managers are grateful for that.

World Chemical Outlook was compiled by Assistant Managing Editor Michael McCoy, Senior Correspondent Marc S. Reisch, and Senior Editors Melody M. Bomgardner, Lisa M. Jarvis, Rick Mullin, and Alexander H. Tullo in New Jersey; Senior Correspondent Jean-François Tremblay in Hong Kong; Senior Correspondent Ann M. Thayer in Houston; and Contributing Editor Paige Marie Morse in Munich.



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