C&EN’s World Chemical Outlook 2023

The American Chemistry Council (ACC), an industry group, also expects a shallow recession. After a strong 2022, in which US chemical production rose 3.9%, the ACC forecasts that output will decline by 1.2% in 2023.

One reason, the group says, is that construction of new homes, a big market for the chemical industry, will slip in 2023 because of the high cost of borrowing.

But another big chemical market—automotive manufacturing—could be a bright spot, now that a computer chip shortage that had been weighing on the industry is clearing up. The ACC forecasts that US sales of light vehicles will increase from 13.8 million units in 2022 to 14.9 million this year. “There’s some decent pent-up demand for vehicles in the system right now,” the council’s chief economist, Martha Gilchrist Moore, told reporters in December.

Forecast

US chemical output is expected to slip this year after a strong 2022.

Source: American Chemistry Council. Note: "Chemical production" excludes pharmaceuticals. a Predicted.

As always, the US chemical industry’s fortunes will depend to a large degree on the global competitiveness of its ethylene and other basic petrochemicals. Ashish Chitalia, head of petrochemicals, polymers, and sustainability management at the consulting firm Wood Mackenzie, says business was good in the first half of 2022. Demand was strong, and a tangled supply chain kept imports out of the market.But toward midyear, he says, demand slowed and the supply chain straightened out. Inventories spiked and petrochemical makers had to reduce operating rates.

The industry will work down this inventory during the year, according to Chitalia. “We are expecting in the second quarter of 2023 we’ll see a balanced situation in North America,” he says.

Relatively low energy prices should be a positive for the US chemical industry in 2023. Russia’s invasion of Ukraine shocked energy markets in 2022. Oil prices soared, rising by about 50% through June before falling.

The war’s impact on natural gas prices was even stronger. It was greatest in Europe, which depends on Russia for much of its supply, but the US wasn’t spared. US natural gas prices hit their highest levels in more than a decade as producers redirected liquefied natural gas exports to Europe.

But US prices never got so high that natural gas was more expensive than oil on an energy-content basis. This is good news for US chemical producers, which typically extract petrochemical raw materials from natural gas instead of petroleum, as most of the world does.

“Right now, it costs twice as much to produce ethylene in Asia as it does in the US,” Chitalia says.

Michael McMurray, chief financial officer of the petrochemical maker LyondellBasell Industries, told the Citi Basic Materials conference in November that he is watching whether the Chinese market will be robust enough to draw US exports. China imports 40% of the polyethylene it consumes, but the country’s zero-COVID policies have slowed its giant economy.

“We really need China to kind of reopen, I think, for the overall demand environment to improve and hopefully for margins to start improving as well,” McMurray said.

Also up in the air is the role scientists will play in advising negotiators and partners to the completed agreement.

Bethanie Carney Almroth, a professor of environmental science at the University of Gothenburg, is part of an informal network of about 150 scientists from around the world who are looking to help. They want to provide guidance so that negotiators can craft a science-based agreement and prevent regrettable substitutes for current plastic items, she says.

Some governments are skeptical about this idea. They prefer to rely on international agencies, including the UN Environment Programme, World Health Organization, and Food and Agriculture Organization to provide scientific advice for the talks.

Other countries are suggesting that the plastics agreement establish an official science advisory group to counsel governments on future actions—similar to a panel formed under the Stockholm Convention on Persistent Organic Pollutants. That body reviews scientific data and makes recommendations to treaty partners on which chemicals should be banned or severely restricted.

The chemical industry supports the idea of a scientific advisory group for the plastics pact, says Stewart Harris, speaking on behalf of the International Council of Chemical Associations, an umbrella group of industry organizations. He says the sector wants to ensure that industry scientists, who have deep expertise on plastics, are part of the advisory group.

Meanwhile, governments will gather in Geneva in early May to determine if they will add more chemicals to the Stockholm Convention. They are scheduled to decide whether to ban the once widely used chemicals perfluorooctane sulfonic acid (PFOS) and its salts and perfluorooctane sulfonyl fluoride, which was used to make PFOS. PFOS is highly persistent and is toxic even at very low concentrations.

They will also decide whether to adopt recommendations from the convention’s Persistent Organic Pollutants Review Committee to ban the insecticide methoxychlor. And governments are considering controls on the ultraviolet stabilizer UV-328, which is used in many types of plastic.

At the May meeting, governments will consider controlling classes of chemicals rather than individual substances under the Stockholm Convention, according to Bjorn Beeler, international coordinator at the nonprofit International Pollutants Elimination Network. Classes could include UV stabilizers, certain flame retardants, per- and polyfluoroalkyl substances (PFAS), and chlorinated paraffins. Each of these groups has members with similar toxicity and persistence.

Chemical makers have concerns about a class-based approach to chemicals under this treaty, says American Chemistry Council spokesperson Andrew Fasoli. At times, he says, it is appropriate to list more than one chemical—such as PFOS and its salts. But to legally list broad classes of molecules in the treaty, governments will need to negotiate an amendment, Fasoli adds.

This year, governments will also attempt to revive an agreement to improve the management of chemicals globally. The Strategic Approach to International Chemicals Management (SAICM), established in 2006, is a set of policy guidelines that expired in 2020. Negotiations to extend SAICM through 2030 were interrupted by the COVID-19 pandemic.

Negotiators will restart work on SAICM at the Fifth International Conference for Chemicals Management in Bonn, Germany, Sept. 25–29. The chemical industry has backed SAICM since its inception as a way to ensure that all actors in the supply chain are trained and accountable for the safe handling of commercial chemicals.

More broadly, the Biden administration has committed to channeling 40% of the benefits of relevant federal investment to communities that bear a disproportionate environmental burden—a program called Justice40.

The problem now, Bullard says, is ensuring that the money—especially the federal funding that is distributed through state and local governments—gets to the right places. The prospect of inexperienced community organizations forming to compete for funding with groups that have been working on the front line for years concerns him.

“We are saying that we will not sit idle while we see money siphon off into places and into programs and going to projects that bypass our communities,” Bullard says. “That is the 2023 challenge.”

Peggy Shepard, executive director of We Act for Environmental Justice, says the onus of seeing that promises to communities are kept is on the communities themselves.

“The whole foundation of working to achieve environmental justice is local,” Shepard says. But essential resources are lacking at the local level. “We have some communities with maybe one staff person. You can’t really do a lot if you don’t have staff. If you don’t have a policy person, how are you engaging with the federal government? How do you engage on the state level on climate change?”

Shepard adds that local and state elected officials, and even some members of Congress, are unfamiliar with the Justice40 initiative. Last month, We Act kicked off an 11-city tour intended to bring community leaders and elected officials together to raise awareness of the 40% directive.

Awareness of the broader environmental justice movement has risen, however, beginning with the focus on racial inequality in the US that followed the murder of George Floyd in 2020 and then-candidate Biden’s avowed commitment to environmental justice. Shortly after his inauguration in 2021, the administration announced establishment of the White House Environmental Justice Advisory Council.

Shepard, cochair of the council, says environmental justice has been given a much more prominent seat at the federal table. “We might have known one or two people at a federal agency, generally the EPA,” she says, referring to the Environmental Protection Agency. “But the council has provided more access and input to other agencies—the Department of Transportation, Department of Energy, Department of the Interior.”

And these agencies require guidance on where resources are needed at the local level, Shepard says. “The issue with the federal government is they are trying to implement something transformational and formative, but they have not created the structure to do that.”

Community advocates also plan to be heard on the international climate policy stage in 2023. We Act, the Bullard Center, and the Deep South Center for Environmental Justice hosted a climate justice pavilion at last year’s UN Climate Change Conference, or COP27, in Sharm el-Sheik, Egypt. The pavilion, which in recent years has been located in the general area known as the Green Zone, was for the first time in the Blue Zone, where policy makers and delegations have pavilions.

The groups held several panels, one of which included EPA administrator Michael S. Regan. “We explained the challenge that all our states are not created equal,” Bullard says. “There are some that will do a great job in distributing money in a way that will follow need, and others in a way that will be problematic. And [Regan] said in public that if a state is not spending money in a way that is designed, EPA will withhold the money.”

A silver lining is that natural gas prices have fallen from their record highs in the summer of 2022—when they forced some chemical companies to idle or close plants—and are now below what they were right before the war. This is partly because a mild winter in Europe has reduced demand. Additionally, US liquefied natural gas is playing a critical role in meeting European energy demand, Kristy Kramer of the consulting firm Wood Mackenzie writes in an outlook report.

Analysts at the investment firm Jefferies forecast that any sustained improvement in financial performance among leading European chemical firms is “unlikely” in 2023 and that recovery will be volatile.

VCI, Germany’s main chemical industry association, described conditions as “persistently difficult” in a press release published at year-end. VCI president Markus Steilemann expects that “more dark months are ahead” for the industry.

Sounding a more optimistic note, the American Chemistry Council, a US trade group, predicts that chemical production in Western Europe will grow by 0.8% in 2023 after declining 3.2% in 2022. The European Chemical Industry Council, Europe’s main industry group, hasn’t yet published a forecast for 2023.

Even if modest growth is on the horizon, European chemical companies like BASF and Evonik Industries are responding to market conditions by substantially reducing operating costs and investment in the region. BASF aims to cut costs by nearly $500 million annually for the next 2 years, mostly in Europe. Evonik cites the planned sale of its performance materials business as a key positive for 2023, as it will reduce the firm’s exposure to Europe.

Evonik forecasts that its energy and natural gas costs will increase by $310 million in 2023, to $1.7 billion, following a $620 million price hike in 2022. The firm expects to shave some energy costs by adding the ability to switch fuel for the power plant at its site in Marl, Germany, from natural gas to liquefied petroleum gas.

Huntsman, which has a substantial manufacturing presence in the UK and elsewhere in Europe, recently upped its planned cost cuts in Europe by 20%, to $280 million per year, by the end of 2023.

“It’s more than just saying we’ve got to suck in our gut and stop buying newspaper subscriptions for the next year,” Peter Huntsman said on a call with analysts. “We’ve got to fundamentally restructure in Europe, because Europe itself is being fundamentally restructured. And you are seeing a massive deindustrialization.”

Peter Huntsman expects high natural gas prices to become “permanently embedded” in the region. “Europeans are doing a horrible job when it comes to long-term energy security and competitiveness,” he added.

The loosening of quarantine requirements has created a very different environment for 2023. The Chinese government removed nearly all restrictive measures Dec. 7, and state media changed their tone to play down the risk of severe illness from COVID-19.

Notably, the expected explosion in COVID-19 infections is spurring the pharmaceutical sector, including demand for analgesics such as acetaminophen. Meanwhile, the agricultural chemical sector is looking forward to a prosperous year as pesticide and fertilizer prices climb.

Ye Yingmin, president of the Beijing-based consulting firm Chem1, is optimistic about the year ahead. “The year 2023 will be a starting year for a new industrial boom,” Ye says. Yet, with reports of COVID-19 infections and deaths flooding social media platforms in China, the challenge for economic and industrial recovery remains tremendous.

On Jan. 3, the China Federation of Logistics and Purchasing and the National Bureau of Statistics announced that the Purchasing Managers Index for the manufacturing sector declined from November to December, indicating shrinking economic activity despite the changed COVID-19 policy.

For individual products, the US Department of Agriculture’s BioPreferred ecolabel is already influential, and an effort underway to improve it could bear fruit in 2023. Right now, products earn the USDA Certified Biobased Product ecolabel by meeting a threshold for biobased content—generally 25% or higher. Products also state the percentage of biobased content, based on carbon isotope ratios.

The label is effective at boosting biobased materials and influencing consumer behavior but doesn’t directly measure sustainability, according to Rina Singh, executive vice president for policy at the nonprofit Alternative Fuels and Chemicals Coalition. Singh is working with the testing organization ASTM International to publish a full-life-cycle carbon footprint method and with the USDA to incorporate the result in an updated USDA ecolabel. The new BioPreferred label would include a color code indicating that a product is a net carbon sink, carbon neutral, or a net carbon emitter.

The method Singh is working on is now in early balloting at ASTM, and she predicts that it will pass midyear. She says her group’s early conversations with the USDA and key lawmakers are going well, and she expects the change to be part of the 2023 farm bill.

Stefan Unnasch, managing director of the life-​cycle-analysis firm Life Cycle Associates, says governments are in the best position to anoint standard methods and metrics. He cites the US Department of Energy’s GREET model as another robust platform for counting CO₂. But making standards align across international borders has not been a priority, causing headaches for global businesses.

To date, the EPA has proposed a rule to manage the risks for only 1 of the 10 chemicals—asbestos. That rule, proposed in April 2022, would ban US imports of chrysotile asbestos. The carcinogenic substance is used exclusively by the chlor-alkali industry. Chlorine makers claim the ban would have a negative impact on water disinfection and chemical supply chains. The agency is likely to finalize the rule in 2023 amid industry opposition, and chemical makers are likely to challenge it in court.

The EPA has nearly finished revising the assessments for the other 9 chemicals, except for the solvent 1,4-dioxane. The agency is completely redoing that one.

“We’re working as quickly as we can to put measures in place to protect people from exposures to dangerous chemicals like trichloroethylene, methylene chloride, and asbestos,” Freedhoff told the Senate Environment and Public Works Committee in June 2022. The deadlines for proposing rules for reducing risks of the 10 chemicals have passed, and the EPA didn’t meet any of them. “Without additional resources, we won’t get more than a handful of those rules on the books before 2025, or beyond,” Freedhoff testified.

In addition to the first 10 chemicals, the agency is evaluating the next set of about two dozen high-priority chemicals. Deadlines for those evaluations started in late 2022, and the EPA missed all of them. “It’s unclear whether we’ll even be able to complete half of them before 2025,” Freedhoff said at the June hearing.

The agency is also struggling to meet the 90-day deadline to review the risks of new chemicals before they hit the market. Freedhoff told lawmakers in June that fixing scientific integrity issues and hiring additional staff in the new chemicals program is the top priority for her office.

To get TSCA implementation back on track, the EPA asked Congress for an increase of nearly $64 million and of 201 full-time employees for fiscal 2023, which began Oct. 1. “There’ll be real consequences if we don’t get these resources,” Freedhoff told lawmakers in June. “Communities, workers, children—all of us, really—would go even longer without the health protections we need and deserve.”

Lawmakers passed the 2023 budget just before the new year, giving the EPA $9 million for TSCA implementation. The EPA must collect that amount from industry paid user fees to offset the costs.

The EPA proposed raising TSCA-related fees in November and will have to do so this year to comply with the 2023 appropriations bill. Those fees, paid by chemical manufacturers, help support the agency’s review of the safety of new chemicals and those already on the market that may pose a health risk. The EPA can collect up to 25% of the cost of reviewing chemicals from industry-paid user fees, but so far those fees have covered only about 12% of the costs.

This year, the EPA intends to finalize its designation of two PFAS as hazardous substances under the federal Superfund program for cleaning up sites contaminated with toxic waste, according to an agency report issued in November. The action would affect companies and others that released perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), including their salts and structural isomers.

PFOA and PFOS are contaminants widely found in water, soil, and sediments. Published evidence indicates that they are toxic to humans at very low levels. The two chemicals were formerly ingredients in foams used to extinguish liquid-fuel fires. They also had applications in a number of industrial processes, including the production of fluoropolymers.

The EPA’s planned designation would make companies liable for PFOA and PFOS releases. The agency could either require polluters to clean up these substances­ or could conduct cleanups and recover costs from those responsible for the contamination.

The American Chemistry Council, a chemical industry trade group, opposes the EPA’s liability plan, calling it expensive and unworkable.

In addition, the EPA plans to complete a rule this year that would require companies to report on the quantities of PFAS that are produced in or imported into the US or are by-products of manufacture, the agency report says. This regulation would also require companies to provide information about worker exposure to and disposal methods for these chemicals.

While it will take years to build those factories, Iyer expects most of the plans to be set in the next 12 months. The tax credits expire after 10 years, so companies have to move quickly. “In 2023, the wheels start turning,” he says.

In February 2022, Graphex Technologies, which makes anode materials in China, announced plans for a graphite processing facility in Michigan that is expected to open in 2023. CEO John DeMaio says the passage of the IRA in August 2022 encouraged the company to expand further. The company is now planning a second US plant that would carry out a separate graphite processing step. “We were already on the path to domesticating the supply chain because it makes good business sense,” DeMaio says.

Venture capital funding for batteries is also accelerating, according to Eric Rosenblum, managing partner with the investment firm Foothill Ventures. He says promising start-ups can now raise enough money to jump from the research lab to the factory in just a few years, partly because more venture firms now understand the technology. “The ecosystem that’s developing around these kinds of scientific founders is new,” he says. “You have a group of deep-tech investors . . . who can do the due diligence and support the company.”

Eric Schulze, who oversees regulatory affairs at Upside, expects the firm’s accomplishment to help others move more quickly. “We intentionally built our submission to be copied, built upon, and used by others,” he says.

Clearing regulatory hurdles isn’t the only challenge for cell-grown-meat companies. To compete with traditional producers, they will need to lower costs. That means finding cheaper chemicals for the media used to grow animal cells. Those chemicals represent the bulk of costs for producing cell-grown meat.

Upside’s cell culture medium includes amino acids, fatty acids, sugars, trace elements, vitamins, and recombinant proteins. The most expensive components are the proteins, including growth factors and albumin. Cells need only small amounts of growth factors but require substantial amounts of albumin—making a low-cost source a must, Bomkamp says. Researchers are trying to find cheap plant proteins to replace animal- derived or recombinant albumin. “My hope is that it would be something fairly simple,” she says.

Schulze says Upside is working on ways to reduce costs but that it will take years for the price of cell-grown meat to match that of conventional meat. In the coming months, he adds, the focus will be on getting consumer feedback for the first time and making the chicken taste more “ideally chicken-y.”

The firm licensed its bio-BDO process to the bioplastics firm Novamont, which started up a 30,000-metric-ton-per-year plant in Italy in 2016. More recently, it licensed the technology to Qore, a joint venture between the chemical distributor Helm and the agriculture giant Cargill. Lisa Kennedy, Genomatica’s vice president for strategic partnerships, says she expects Qore to open a plant in Iowa in 2024 that is twice as big as the Italian facility. Qore already has the spandex maker Lycra signed up as a customer.

Credit: Shutterstock

Industrial biotechnology is bringing biobased versions of existing synthetic polymers, like spandex, to market.

Steve Weiss, a consultant who works with Genomatica and other biobased fuel and materials companies, says buy-in from such major firms is a strong endorsement of synthetic biology’s ability to compete at large scale with synthetic chemistry. “You wouldn’t expect companies like Cargill and Helm to proceed with a project like that unless the economics were solid.”

Kennedy says Genomatica is also pursuing projects to make butylene glycol, caprolactam, hexamethylenediamine, and other small molecules.

Similarly, the gene-editing and strain-optimizing powerhouse Ginkgo Bioworks dotted 2022 with announcements of new customers looking for its help to produce organic acids, personal care ingredients, enzyme catalysts, and medicines. The firm says many more partnerships will become public in 2023.

Weiss expects to see growth in 2023 in the types of molecules that companies are making by fermentation—especially flavors, fragrances, and other specialty chemicals. He also says fermentation will continue to edge toward larger volumes. “I think the trend lines are good that this may be a field that’s beginning to come up to speed and put numbers up on the scoreboard.”

David Yankovitz, a chemical analyst at Deloitte, says companies will capitalize on years of heavy investment in core IT infrastructure​—projects that have introduced mobile devices, sales portals, and a shift of enterprise computing to the cloud. Rothman and Yankovitz concur that the next phase of investment across the industry will center on improving supply chain resilience and on transparency, particularly in managing carbon dioxide emissions.

Henrik Hahn, chief digital officer at Evonik Industries, agrees with the consultants. He adds that much of the benefit to be gained at this point will accrue from consolidating so-called lighthouse projects done in isolation and implementing a standard for deploying digital technology.

“In the past there were lighthouse topics, like having an online shop, doing social media outreach, doing data analytics,” Hahn says. “This is all now part of a framework approach where we more and more elaborate a standard procedure that, in the end, scales within the company.”

Melanie Kalmar, chief digital officer at Dow, also emphasizes the importance of working toward a standard digital infrastructure. Dow has put $400 million into digital platforms in recent years, she says. “Our focus is going to be driving further adoption of what we’ve implemented to really get the most out of the capabilities.”

Dow is also bringing employees up to speed in a new world of work by presenting technologies as “digital assists,” Kalmar says. “It’s not just, ‘Here’s a tool you will use in your job.’ It’s, ‘Here is how we are going to change how you do your job because you have these tools’ ”.

Universities are concerned that individual agencies will be able to add their own questions above what is required in the form, says Deborah Altenburg, associate vice president for research policy and government affairs at the Association of Public and Land-grant Universities. Schools want to “make sure that the bar is very high if you’re going to allow agencies to add something, because then you’ve made it different,” which defeats the point of a universal form, she says.

Another requirement is that universities with over $50 million in US funding must create their own research security offices to oversee cybersecurity, foreign travel security, research security training, and export control training.

Rebecca Keiser, chief of research security, strategy, and policy at the National Science Foundation (NSF), says that after an internal review, all the requirements will go out for public comment—hopefully sometime this month. “We’re all really anxious to get these draft standards out as soon as we possibly can,” she says, because universities are eager to move forward.

Training for scientists is another part of the new mandates. The CHIPS and Science Act, which Congress passed in July 2022, required the NSF to fund training modules that university research security offices can use. Those contracts were scheduled to go out in December, and Keiser hopes the resulting training will be available before the end of 2023.

The NSTC is just starting work on another NSPM-33 requirement: common consequences across agencies for failing to report foreign funding or other conflicts. Until now, most consequences have been handled case by case, Keiser says, and that complicates the process. “We want to be really careful that we don’t overgeneralize, but we also want at the same time to be very clear about what could trigger particular consequences,” such as termination of a grant or referral to law enforcement, she adds.

The NSF previously announced that it would start using an artificial intelligence tool to search for unreported conflicts of interest or foreign interference. Keiser says that will happen as soon as guidelines for how the tool will be used come out, hopefully this month.

Agencies seem enthusiastic about the possibilities of the plans they’re developing, says Heather Joseph, executive director of the Scholarly Publishing and Academic Resources Coalition (SPARC), an organization of libraries and academic institutions that promotes open access. “It’s a sea change in how the agencies are approaching it.”

The National Institutes of Health (NIH), which has been at the forefront of public access among agencies, has already created a data openness plan that will go into effect this month. Making publications available isn’t enough, says Lyric Jorgenson, the NIH’s acting associate director for science policy. “At the end of the day, data are the catalysts for every biomedical discovery.”

Just like the OSTP directive, the NIH plan applies to data whether or not they underlie a publication. “A ‘no’ finding is just as important as one that gets put in the journal. It is very important that we get that information out there,” Jorgenson says.

The NIH has tried not to be prescriptive about how a scientist’s data are made available, she says, since it is dealing with many types of data and different data-sharing cultures.

The same is true for the OSTP, which is not telling scientists how to make their publications available. They may publish open access—many federal funders allow payments, when required, to be charged to their grant—or place them in a repository.