The US chemical industry had a tough 2023, and next year it will have to weather a tougher economic climate, possibly even a downturn.
The estimated decline in US chemical output in 2023
The increase in US chemical output forecast 2024
Source: American Chemistry Council
That was the message delivered by the American Chemistry Council, a chemical industry trade group, in its industry forecast on Nov. 28. The ACC estimates that the industry’s output, excluding pharmaceuticals, will decline by 1.0% in 2023. It predicts a modest turnaround to 1.5% growth next year.
“We saw weakness really emerge last year in the third quarter, and it’s continued through much of this year,” ACC chief economist Martha Gilchrist Moore told reporters on a conference call.
Moore said the weakness was caused by inventory destocking. Consumers worldwide went on a spending spree as countries came out of COVID-19 pandemic restrictions. When demand cooled down, retailers and manufacturers realized they had too much inventory and eased their own purchases.
That trend has played out and the industry is recovering, but next year it must contend with an economic slowdown that could blossom into a downturn. “There are many reasons to think we’re poised for a downturn,” Moore said.
For example, Moore pointed out, student loan repayments are starting up again, credit card debt defaults are increasing, and consumers have worked through much of the savings they accumulated during the pandemic.
After posting 2.3% growth in gross domestic product in 2023, the US will experience economic growth of only 1.1% in 2024, the ACC expects.
Some sectors will likely suffer from slow sales due to high interest rates on loans. For example, the auto industry, a major consumer of chemicals such as polymers, saw a sharp recovery in 2023 and is expected to sell 15.5 million light vehicles in the US, up from 13.8 million in 2022. The ACC expects sales to be flat in 2024.
The trade group anticipates the housing market to continue to slide. US housing starts dropped from 1.55 million in 2022 to 1.39 million this year, and the ACC expects an even lower figure—1.35 million—for 2024.
With their subsidies for sustainability and other industrial investments, the US Inflation Reduction and CHIPs Acts helped boost business investment by 4.1% in 2023. However, higher borrowing costs and slower consumer spending will cool growth in investment to 0.6% in 2024. Further, the ACC expects no growth in the US industrial sector in 2024.
A bright spot for the US chemical industry will continue to be its relatively cheap natural gas feedstocks. In recent years, chemical companies have built massive petrochemical and polymer projects to exploit that advantage. And polymer exports have indeed been buoyant, increasing 14% through September compared to the same period last year. “This is what everybody was waiting for: competitive US product going out to the world market,” Moore said.