Trade group expects US chemical turnaround

The US chemical industry has had a couple of down years, but its leading trade group, the American Chemistry Council (ACC), predicts that 2025 will be the year when it turns the corner.

“Coming into the end of the year, the US economy is reasonably healthy,” said Martha Moore, the ACC’s chief economist, in a briefing for reporters on Dec. 12. Inflation is easing, consumer spending is buoyant, and investment in equipment is robust. In its year-end economic forecast, the ACC expects the US gross domestic product to finish 2024 with 2.7% growth before easing to 2.0% growth in 2025.

US chemical production, excluding pharmaceuticals, will finish the year down 0.4%. In 2023, production volumes fell 0.2%. The ACC attributes the 2024 decline to repressed end-use markets. But with declining interest rates supporting investment and consumption, the ACC expects US chemical output to increase 1.9% in 2025.

“The industrial sector, which of course is where chemicals play, that remains pretty, pretty stagnant,” Moore said. She singled out semiconductors and electrical equipment as bright spots. Demand for chemicals used in these markets increased 8% in 2024. “The data center build-out has really created a lot of demand,” she noted.

Moore expects further interest rate cuts from the Federal Reserve to stimulate sales of homes and durable goods. Construction, a major source of chemical demand in the US, has had a terrible year. Housing starts are on track to fall to 1.35 million in 2024 from 1.42 million in 2023. They should climb back to 1.40 million in 2025, the ACC predicts.

Similarly, the trade association expects that US sales of motor vehicles—another big consumer of chemicals—will increase sharply to 16.2 million in 2025 from 15.7 million in 2024.

Trade is another bright spot for the US chemical sector, which has production cost advantages over other global regions. But potentially upsetting trade flows, the incoming Trump administration has threatened to increase tariffs by, for example, tacking another 10% on imports from China and erecting 25% tariffs on two major trade partners, Canada and Mexico.

“There’s a lot of uncertainty about what trade policy is really going to look like—you know, how much of it is talk and how much of it is going to translate into actionable policies,” Moore said. “But certainly if tariffs are raised to the levels that have been talked about, that would be very troubling to the US economy.”