Specialties: Buoyant Industries Such As Electronics And Autos Will Fuel Growth

Although global demand for basic chemicals will slow in 2012, specialty chemicals serving industries such as electronics, autos, and cosmetics will continue to show good gains, says T. Kevin Swift, chief economist at the American Chemistry Council.

“Specialties tend to do better later in the business cycle,” Swift explains, and they follow growth trends in the industries they serve. For example, the U.S. aerospace industry will grow 14% in 2012 as Boeing ramps up production of its next-generation Dreamliner airplane, Swift says. Epoxy resins, carbon fibers, and other materials from the chemical industry will benefit as a result.

Swift projects the U.S. semiconductor industry will grow 6% in 2012 and nearly 10% in 2013. Intel, for instance, is building new chip facilities in Arizona and Oregon that should open in 2013. Makers of etchants and other electronic chemicals are likely to do well in the years ahead.

U.S. auto sales should rebound in 2012, Swift says, and with them sales of specialties such as lubricant additives, emission control catalysts, plastic additives, and air-conditioning chemicals. According to an ACC study issued last month, every light vehicle produced in the U.S. contains on average $3,297 worth of chemicals.

Food additives and chemicals for personal care and household use did relatively well during the recession, and they are likely to keep growing, says Gillian S. Morris, vice president of the chemicals and materials practice at consulting firm Kline & Co. Another bright spot is specialty chemicals used in hydraulic fracturing fluids to extract natural gas from shale deposits, Morris says.

A slowdown caused by the financial turmoil in Europe could adversely affect specialty chemical use in the region. But Morris is cautiously optimistic that Europe will work out its problems. She says the strong economic fundamentals of Germany, the U.K., and France bode well at least for those economies and thus their specialty chemical markets.

Global demand for fluid catalytic cracking catalysts is likely to grow 1–2% in 2012, says Shawn A. Abrams, vice president of W. R. Grace’s refining technology business. Mature markets for the catalysts, used to refine oil into fuels and chemicals, will be flat, whereas emerging markets in the Middle East, South America, and Asia will see some growth.

Because of volatile prices for the rare-earth elements, Abrams notes, costs for refinery catalysts are on the rise. In response, catalyst makers such as Grace have developed low- or no-rare-earth alternatives, and Abrams sees a trend among refinery customers to adopt the newer alternatives.