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➡ After 2 challenging years, US chemical output is forecast to increase in 2025.
➡ Despite a downturn in petrochemicals globally, US producers should hold up well because of low production costs.
➡ A risk to watch is tariffs, as potential duties imposed by the administration of Donald J. Trump could spark a trade war.
Despite a robust US economy, weak spots such as manufacturing and construction have put the country’s chemical enterprise in a slump. That scenario should start to change this year as lower interest rates percolate through the economy. Longer term, the US industry is in a good competitive position, but possible tariffs from the incoming administration of Donald J. Trump pose a risk.
“On the eve of a change in government, the US economy is in a good place,” Goldman Sachs says in its US economic outlook. Inflation is falling back toward a normal rate of about 2%, and worries about a recession are fading. The investment bank says the US economy grew 2.8% in 2024, and it forecasts an increase of 2.5% in 2025.
The American Chemistry Council (ACC) estimates economic growth of 2.7% for 2024 and projects 2.0% growth in 2025. The trade group estimates that US chemical output, excluding pharmaceuticals, declined by 0.4% in 2024, but it expects growth to resume at a 1.9% rate in 2025.
“The industrial sector, which of course is where chemicals play, remains pretty stagnant,” Martha Moore, the ACC’s chief economist, told reporters last month.
An exception has been the electronic materials sector, where business is booming because of construction of data centers and semiconductor fabrication plants. The consulting firm Gartner looks for global semiconductor sales to jump 14% in 2025, to $717 billion, after a 19% surge in 2024. The ACC forecasts that sales of chemicals used in electronics will grow 8% in 2025.
The ACC also expects lower interest rates to spur more spending in major chemical-consuming sectors. US housing starts, which fell about 5% in 2024, to 1.35 million units, will climb to 1.40 million in 2025; automotive sales should also increase substantially, the group says.
Prospects for the US petrochemical industry are better than those for other regions. Overbuilding of capacity, largely in the US and China, has led to the longest and deepest downturn in decades. According to the consulting firm Wood Mackenzie, 24% of the world’s ethylene capacity—or 55 million metric tons per year—is at risk of closure. Most vulnerable are older, smaller ethylene crackers in Europe and Asia that use high-cost oil-based naphtha feedstock.
Only a couple of crackers in the US are susceptible, because most use natural gas liquids like ethane as their raw material. “Ethane continues to be much more advantaged versus naphtha,” says Shruthi Vangipuram, senior research analyst for base chemicals at Wood Mackenzie. “The US asset base is consistently performing much better than even the newer refinery-integrated complexes in China.”
One puzzling aspect of the US petrochemical industry is the lack of new construction, Vangipuram says. A project by Chevron Phillips Chemical and QatarEnergy in Texas is the only one that has been given the official go-ahead. “With such a strong cost advantage . . . you’d anticipate more domestic cracker investments. But really the pipeline is very, very slim,” Vangipuram says. She blames the relatively high cost of building a new facility in the US—$10 billion or more, which is twice what it would cost in China.
A downside risk to the US economy: tariffs. The incoming Trump administration has promised to raise them by 10% on goods imported from China and other countries. It has also threatened to tack 25% tariffs on goods from Mexico and Canada.
“The change in power in Washington and anticipation of hawkish trade policy is likely to weigh on the consumer spending engine,” Morgan Stanley says in its economic forecast. The tariffs would increase inflation in the second half of 2025 and then slow consumer spending. “The drag on growth becomes evident in 2026,” the investment bank says.
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