The performance of the US chemical industry is likely to disappoint over the next 2 years. Output will fall by 1.6% in 2023, followed by modest growth of 1.2% in 2024, according to a midyear outlook report from the American Chemistry Council (ACC), a trade association.
Expected decrease in US chemical production in 2023
Expected increase in US chemical production in 2024
Source: American Chemistry Council
The ACC’s midyear forecast is more pessimistic than the one late last year, when the council predicted that US chemical output would decline by 1.2% in 2023. Chemical output rose by 2.2% in 2022, the group says, driven by a rebound in spending on goods after the COVID-19 pandemic.
“The pandemic-driven rebound has subsided, and we expect consumer spending to continue to slow,” Martha Moore, the ACC’s chief economist, says in a press releaseaccompanying the report. “Going into the second half of the year, there is tremendous uncertainty, and the risk of recession remains high.”
The ACC expects US gross domestic product growth, which was 2.1% last year, to slow to 1.3% in 2023 and 0.7% in 2024.
Over 85% of US chemical output is consumed in the industrial sector, the report says, and the outlook for industrial production remains weak. The ACC expects overall industrial production to fall 0.6% this year.
For example, US sales of light vehicles, each of which contains more than $4,000 of chemistry products, the ACC says, will be tempered by higher borrowing costs, though the group does expect vehicle production to rise. High interest rates are also crimping the housing market, another big chemical outlet, after several strong years. The ACC expects new home construction to fall to 1.32 million this year from 1.55 million in 2022.
International markets won’t be a panacea: the ACC expects US chemical exports to fall by 4.5% this year. “Looking abroad, China’s post-zero-Covid recovery has been slow and Europe continues to struggle with disruptions from Russia’s invasion of Ukraine,” the report says.
The association continues to be bullish on the long-term outlook for the US chemical industry. Ample supply of natural gas liquid feedstocks favors US production for the foreseeable future, the ACC says. And legislation such as the Inflation Reduction Act and the CHIPS and Science Act is prompting capacity expansions in chemical-consuming industries.