Why U.S. Chemical Production Is Forecast To Rise In 2016

Despite a strong dollar and a faltering global economy, U.S. chemical production will continue to rise in 2016 thanks to the availability of low-cost energy and raw materials and strong gains in U.S. sales of cars and new homes.

“The fundamentals are strong,” says T. Kevin Swift, chief economist of the American Chemistry Council (ACC), the U.S. chemical industry’s major trade association, which just released its 2016 forecast. In 2015, “consumer spending accelerated, the job market began to firm, and households enjoyed extra savings from lower energy costs,” Swift says, setting the stage for strong chemical output in 2016.

Accordingly, U.S. chemical production, excluding pharmaceuticals, will rise 3.1% in 2016, ACC predicts, after a 3.8% increase this year.

The outlook, Swift notes, is much better than in Europe, where economic growth is slower and producers don’t have the advantage of the low-cost shale-derived energy and feedstocks available to U.S. producers. The European Chemical Industry Council, the European counterpart to ACC, anticipates a 1.0% production increase in 2016 after a 0.5% rise this year.

As the world economy slowly recovers, Swift says, low-cost shale gas will allow U.S. chemical and polymer makers to boost exports and remain among the lowest-cost producers globally. ACC forecasts that the U.S. chemical trade surplus, an expected $34.1 billion in 2015, will reach $59.1 billion in 2020.