The chemical industry generates a staggering $5 trillion globally, $800 billion of which is from sales and production within the U.S. That’s 15% of global output and 25% of U.S. GDP. This is an important economic sector and one indicator of the health of the overall economy.
Hard hit during the great recession of 2009, the U.S. chemical industry has been in recovery since 2014, according to Zacks. The American Chemistry Council (ACC) reported chemical industry production increases across all chemical-producing regions for an 11 month period from March 2014 to February 2015.
In 2014, chemical makers heavily invested in projects involving shale gas in order to take advantage of the abundant supply following a shale gas boom and are currently taking advantage of lower pricing for petroleum products used in manufacturing. Improvements in the housing, agriculture, and automotive markets strengthened demand in emerging markets throughout most of 2015, and on-going growth in end-use markets (commercial construction and electronics) portend a positive 2016 if these trends continue.
Expectations for 2016 output remain on the upswing, “though the growth pace will slow a bit to 3.1%”, forecasts the ACC. “Consumer spending remains strong as further improvements in the labor market and rising confidence support growth,” says T. Kevin Swift, ACC’s chief economist.
96% of manufactured goods involve chemicals and chemical products, making this an industry to watch when trying to predict future chemical demand. Other industries that rely on significant amounts of chemical products are consumer goods, agriculture, construction, and services. The chemical industry itself consumes 26% of its own output.
Basic chemicals, synthetic rubber, and specialty chemicals are expected to be in the top growth segments.
One major change that will affect many who work in the chemical industry is the Dow Chemical and DuPont merger, which will have to cast aside some divisions in order to comply with antitrust laws.
In December, DuPont announced it would be cutting 10% of its global workforce, which comes to about 5,300 positions. ACC says that DuPont’s layoffs, in addition to other companies’ changes to streamline their organizations, could negate any expectations of increasing U.S. chemical employment.
Despite fluctuating oil and natural gas prices, foreign market uncertainty, and the Dow-DuPont merger, the future of the chemical industry has a positive outlook. Gross exports for chemical products are expected to reach $123 billion by 2030. The U.S. chemical industry may generate a $77 billion trade surplus by 2019, and domestic chemical sales should reach the $1 trillion mark by 2019.
Sources:
https://www.nasdaq.com/article/chemical-industry-recovery-stays-the-course-industry-outlook-cm379427
https://www.zacks.com/commentary/42845/chemical-industry-stock-outlook
