U.S.’s chemical outlook is sunnier than Europe’s

The forecast for the U.S. chemical industry next year is brighter than it is for the business in Europe and Germany, reflecting in part the advantaged raw material position of the U.S.

The American Chemistry Council (ACC), the U.S. chemical industry’s major trade association, is calling for a U.S. production increase of 3.6% in 2017 following a 1.6% increase this year. Growth in chemical production will outpace projected U.S. economic growth of 2.2%, ACC says.

In Europe, however, the European Chemical Industry Council says chemical production will increase a mere 0.5% in 2017 following a year in which output didn’t grow at all.

In Germany, Europe’s largest chemical maker, the outlook is even more muted. The Germany Chemical Industry Association says 2017 will be the second year in a row with no production growth.

To be sure, U.S. chemical producers face many of the same headwinds that their European counterparts face, including high regulatory costs, weakness in the manufacturing sector, and soft export markets, according to ACC chief economist T. Kevin Swift. But unlike Europe, the U.S. has “access to affordable and abundant supplies of natural gas,” Swift says.

The result is that European producers have to contend with higher energy and feedstock costs than their U.S. counterparts. Costs for ethylene, the chemical industry’s main feedstock, are twice as high in Europe as in the U.S., the European council says.

But for the U.S. chemistry business, long-term prospects are strong and getting stronger, Swift says, noting industry investment commitments of $170 billion since 2010, driven by the availability of cheap natural gas. Chemical demand in the year ahead will be led by healthy consumer spending on housing and automobiles, he says.

Swift won’t comment directly on Britain’s pending exit from the European Union or President-elect Donald Trump’s plans to eliminate regulations and renegotiate trade agreements. He does suggest that U.S. economic growth at present is below its potential because of high taxes, regulatory burdens, and economic uncertainty.