U.S. chemical production expanded at a slower pace in 2019 due to trade challenges and slower growth in several key end-use markets for chemistry, according to the American Chemistry Council’s (ACC) “Year-End 2019 Chemical Industry Situation and Outlook.”
Weakness in global manufacturing and uncertainty in trade policy are expected to further moderate U.S. chemicals output growth in 2020. However, output from new capacity linked to the shale gas could provide tailwinds.
“Due to slowing growth prospects across much of the globe and rising trade tensions, exports of chemicals and some chemistry-containing goods fell this year,” said Kevin Swift, ACC Chief Economist and Co-Author of the Outlook.
Total U.S. chemicals trade is projected to fall 3% to $242 billion in 2019, then recover by rising 1% in 2020. Exports are predicted to fall 2.5% to $137 billion in 2019 before expanding by 1.1% to $138 billion in 2020. U.S. chemicals imports will fall 3.9% in 2019, to $105 billion.
Industrial output decelerated, rising just 0.9% in 2019 as trade tensions disrupted supply chains, energy investment eased, and slower growth in key trading-partner economies negatively affected demand for U.S. exports. Industrial output is expected to decelerate further in 2020 before strengthening in 2021, with growth of 0.5% and 1.4%, respectively. Growth in key end-use industries will be mixed for 2020, with the largest gains in construction materials, oil and gas extraction, refining, semiconductors and aerospace.
U.S.-based chemical manufacturing will have a competitive advantage in global markets due to abundant and affordable supplies of energy and feedstock. Total chemical production volume (excluding pharmaceuticals) rose 0.6% in 2019 and is expected to grow 0.4% in 2020 and 2.3% in 2021. Basic chemicals production is projected to increase 0.7% in 2020 and 3.1% in 2021.
“American chemistry is expanding as shale-advantaged investments come online and additional capacity additions are planned,” said Martha Moore, Senior Director of Policy Analysis and Economics at ACC and Outlook Co-Author. “The industry added high-paying American jobs for the seventh consecutive year. Continuing a tradition of innovation, companies remain dedicated to providing the essential materials for a growing population and finding sustainable solutions for the future.”
Solid growth in specialty chemicals continued this year. Many specialty market segments started to turn downward toward the end of 2019, with expected growth of 2.6% overall in 2019. As end-use market demand eases further in 2020 and energy investment falls, a small decline of 0.4% in specialty chemicals production is expected. Specialties growth could resume as the industrial sector recovers in 2021 and beyond, ACC said.
U.S. GDP is expected to grow 2.3% in 2019, down from a 2.9% gain in 2018. Trade-related uncertainty and a pullback in business investment have been only partially offset by favorable consumer spending. Deceleration to a 1.8% pace in 2020 is expected, with below-trend growth in 2021 as well. Long-term U.S. economic growth is projected to be more muted. The U.S. chemical industry will be a positive contributor as its customer industries recover and its feedstock advantage remains strong, ACC said.