Headwinds but no chemical recession for the US in 2020

Continued trade conflicts and slow growth in the rest of the world caught up with the US chemical industry in 2019, according to the American Chemistry Council (ACC), the US chemical industry’s main trade association. The ACC says US chemical production will rise only 0.6% this year, well below its prediction of a 3.6% increase, and it forecasts a paltry 0.4% rise in output in 2020.

“A slowdown is definitely occurring,” says Kevin Swift, ACC’s chief economist. But he notes that the group’s Chemical Activity Barometer, an indicator of production activity, “doesn’t signal a recession.”

Martha Moore, the trade group’s economic and policy director, says the slowdown will continue well into 2020 before recovery begins in the latter part of the year. And long-term prospects for the US chemical industry are good. Shipments, set to hit $553 billion this year, will increase to $668 billion in 2024, she says.

The US chemical industry’s foreign trade surplus, expected to reach $32 billion this year, will jump to nearly $49 billion in 2024. Driving that increase will be rising exports of basic chemicals, thanks to surging energy supplies and increased availability of ethane, a key raw material obtained from natural gas. The surplus prediction anticipates that US negotiators will eventually work out a trade deal with China.

High employment levels, low interest rates, and strong vehicle sales will have helped the US gross domestic product (GDP) increase by 2.3% in 2019, though the ACC predicts GDP growth will slip to 1.8% next year. The outlook outside the US is not nearly so good. ACC data show the Eurozone’s GDP will grow by 1.2% this year and the same amount in 2020.

In Germany, Europe’s largest chemical maker, production is likely to rise just 0.5% in 2020, according to the German Chemical Industry Association. Production dropped 7.5% this year.

The industry group’s data include pharmaceuticals. Excluding the pharma sector, which declined 16.5% this year, German chemical production dropped by 2.5%. “Our member companies do not expect their business to improve in the next months,” says association president Hans Van Bylen, who is also CEO of the detergents maker Henkel.