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World Chemical Outlook

It looks like a chancy year, with winners and losers in different areas as supply, demand, and politics shift

by Business Department
January 14, 2013 | A version of this story appeared in Volume 91, Issue 2

Credit: Shutterstock/C&EN
Image of a chemistry-themed slot machine.
Credit: Shutterstock/C&EN

With each passing year, chemical executives must look back with increasing fondness at 2010, a year when chemical output rose 5% in the U.S. and 10% in Europe. Since then, growth in the two largest chemical markets has slowed to a crawl. The outlook is for more of the same in 2013.

This year, U.S. chemical production is expected to grow by a modest 1.9%, not much better than the 1.5% increase in 2012, according to the American Chemistry Council, a trade group. The European Chemical Industry Council predicts that European chemical production will rise 0.5% in 2013, an anemic figure, although an improvement compared with the 2.0% contraction experienced in 2012.

Back in 2010 the industry roared out of the Great Recession with low inventories and streamlined operations. But since then, economic malaise has stifled growth in the developed world. Last year growth even slowed in developing countries in Latin America and Asia, depriving Western manufacturers of outlets for goods they couldn’t sell at home.

In 2013, demand in the developing world will rise, but not enough to spark significant activity in the West. Economic growth in Brazil, for example, should reach 4.0%, an improvement over 2012 but well below the fiery 7.5% expansion of 2010. Likewise, although Chinese growth should notch up a bit to 8.1% this year, the double-digit expansion of 2010 is a distant memory.

Several bright spots dot the generally overcast landscape. U.S. chemical manufacturers can look forward to another year of low-priced natural gas to fuel their facilities and provide cheap raw materials. The recent teeter at the edge of the fiscal cliff doesn’t seem to have worsened the U.S. industry’s prospects.

Executives in the fine chemicals sector, who monitor their drug industry customers more so than the general economy, are optimistic about 2013. Likewise, scientific instrumentation manufacturers are upbeat about prospects for the energy, environmental, forensics, and food markets. And global demand for specialty chemicals should increase a healthy 3.1%.

But Europe’s financial instability continues to cast a long shadow over the chemical enterprise, and industry executives are bracing themselves for another round of budgetary brinkmanship in the U.S. at the end of February. With uncertainties like these, the future of the industry sometimes seems no more predictable than the results of a pull on a slot machine.

World Chemical Outlook was compiled by Assistant Managing Editor Michael McCoy, Senior Correspondents Marc S. Reisch and Alexander H. Tullo, and Senior Editors Melody M. Bomgardner, Lisa Jarvis, and Rick Mullin in New Jersey; Senior Correspondent Jean-François Tremblay in Hong Kong; Senior Correspondent Ann M. Thayer in Houston; and Senior Editor Alex Scott in London.



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