Specialties: Growth To Be Fueled By Autos, Electronics

Demand for specialty chemicals will experience above-average growth in 2013 as the automotive and electronics sectors recover, say American Chemistry Council economists in their year-end review of the chemical industry.

Global specialty chemical demand is likely to increase 3.1% this year, double its 2012 growth, and then rise another 4.2% in 2014, according to the trade association. Accounting for the rise is a strengthening of the consumer economy, explains T. Kevin Swift, the council’s chief economist.

Rising consumer demand in rapidly industrializing Asian and South American economies will boost specialty chemical use for consumer products, including automobiles. Not all segments of the consumer economy will do so well, though. For instance, Swift expects slow growth in the printing and textile industries to crimp demand for chemicals used by those sectors.

Relatively low energy prices give an advantage to specialty chemical companies, says economist Frederick M. Peterson of Probe Economics. Because specialty chemical prices are relatively stable, the energy savings flow to the bottom line. One particularly beneficial phenomenon, Peterson notes, is the global demand for electronic devices, which should buoy electronic chemical sales.

In the U.S., Swift expects light-vehicle sales will rise in 2013 and 2014 because of “pent-up demand, improved employment, and greater availability of credit.” Each new vehicle uses on average about $3,650 in chemicals and plastics.

Overall global demand for fluid cracking catalysts used to refine oil into fuel should increase 2–3% annually for the next few years, says Shawn Abrams, president of W.R. Grace’s catalyst technologies business. Catalyst demand in the Middle East will grow a more robust 5–6% owing to local and export demand. Catalyst demand will grow at a similarly strong rate in Asia but largely to satisfy the burgeoning economies of the region.

Customers can expect stable prices for refinery catalysts in 2013 because of improved availability of the rare earths used to make them, Abrams says. Prices came down toward the end of 2012 after peaking earlier in the year. China, which still controls a large segment of the rare-earth market, changed its policies on exports. Also, new rare-earth mines have opened or will soon open in Asia and the U.S., he notes.

Catalyst makers are developing catalysts to meet the needs of refiners and chemical makers that want to use alternative feedstocks. Catalysts that help convert biomass into transportation fuels or coal into olefins are a niche market now, Abrams says, but could develop into a significant business in the future.