U.S. Chemical Output Expected To Slow

In its end-of-the-year assessment and outlook for the global chemical enterprise, the American Chemistry Council, a chemical industry trade association, concludes that “the recovery from the worst recession since the Great Depression has stalled.” The impact for the U.S. chemical industry will be a glacial pace of growth in 2012.

The group’s pessimistic appraisal takes into account evidence of an emerging recession in Europe, a slowdown in the U.S. economy, and signs of less-robust growth in Asia. “Is it 1937, when another recession followed a few years after the Great Depression,” asks T. Kevin Swift, ACC’s chief economist “or 1995, which was just a mid-cycle slowdown?”

The answer is likely not a simple one. Economic prospects going forward “represent a two-speed world” in which Asia outpaces the rest of the world, say Swift and colleagues at ACC who prepared the report.

Developed nations will be constrained by debt, adverse demographic factors, and tighter fiscal policies that could lead to slower growth and recession. Emerging markets will continue to grow, but not as strongly as in 2010, the economists say. Developing countries such as China and India will benefit as they continue to industrialize and develop consumer-driven economies.

Following a strong rebound in 2010 from the Great Recession of 2008, the chemical enterprise encountered significant headwinds this year from higher energy prices, a devastating earthquake in Japan, Europe’s monetary crisis, and a slowdown in China, ACC economists say. After falling 4.4% in 2009, global chemical production rose 10.0% in 2010, but it will have increased only 3.5% this year, they note.

For 2012, the ACC economists predict global chemical production will grow by 3.6%. Output will rise by 6.2% in developing countries but by just 1.6% in developed countries. For the U.S. predictions are for an anemic increase in 2012 chemical production of 1.2%, following a 1.9% rise in 2011.

The U.S. manufacturing sector, the largest consumer of chemicals, slowed in the third quarter of this year, ACC says. Bright spots include the aerospace industry, where Boeing is rushing to fill orders for its new Dreamliner airplane. Also, the increased availability of shale gas has improved U.S. competitiveness by lowering energy costs and boosting availability of petrochemical raw materials.

But the U.S. housing market remains weak. It was part of the reason why last week DuPont lowered its 2011 earnings expectations. Other factors, cited by DuPont chief executive officer Ellen Kullman, included weak demand for the company’s polymers and softening demand for consumer electronics.