Chemical companies may enjoy in 2022 results unseen for many years due to strong demand for chemical products as manufacturers rebuild inventories, according to a June 6 report by the U.S. American Chemistry Council (ACC) that groups the biggest petrochemical producers.

Image courtesy of Michael Gaida, Pixabay

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“Despite ongoing supply chain constraints, the U.S. chemical industry expects to deliver solid growth this year as it benefits from inventory rebuilding, steady demand across many end-use industries, and a continued competitive advantage in natural gas,” according to the ACC´s Mid-Year Chemical Industry Situation and Outlook.

Following several years of uncertainties related to trade tensions, to the pandemic, and later to weather events, chemical companies may have in 2022 their “best year in more than a decade,” said Martha Moore, the ACC´s chief economist and the author of the outlook report for 2022.

During 2018-2019, exchanges and escalating tariffs and counter tariffs between the U.S. and its leading trade partners, the European Union and China, created uncertainty related to export markets at a time when investment had been completed in plants designed to take advantage of U.S. plentiful natural gas reserves.

After the two years of trade volatility, the pandemic brought lockdowns that forced petrochemical producers to the challenge of adapting to new, volatile demand profiles. Weather events in 2021 including Winter Storm Uri in February of that year impacted U.S. petrochemical production for months.

Now the ACC expects chemical output will grow by 4.1% in 2022 after a 1.6% gain in 2021. Chemicals output will grow by 4.3% in 2022, with the largest gains in bulk petrochemicals and organics, by about 4.6%, of plastic resins and inorganic chemicals, by about 4.4%, the ACC said.

Specialty chemicals output will grow 6.2% in 2022 pulled by strong demand for restocking.

Capital spending will increase more than 12% from the previous year in 2022 to nearly $35 billion, the ACC projected.

Chemical payrolls increased

Chemical industry payrolls expanded in 2022 with strong growth through mid-year, the ACC said.

Employment in U.S. chemical-related industries in January surpassed pre-pandemic levels as the industry projected to add more than 11,000 jobs in 2022, or a 2.2% increase.

U.S. chemical industry workers “are among the highest-paid in the manufacturing sector, averaging more than $90,000 in 2021,” the ACC said.

U.S. full-time working men had a median income of $57,456 in 2019 while full-time working women earned $47,299, according to U.S. Census figures from that year.

Trade increased

Trade in chemicals rebounded in 2021, rising by 27% over the previous year to over $281 billion, the report said.

Chemical imports increased during 2021 by about 33% and exports rose by 22%.

“Gains were led by petrochemicals trade, which continue to drive trade expansion heading into the first quarter of 2022,” the ACC said.

Nominal chemical exports are forecast to grow 13% in 2022 to nearly $174 billion while imports will rise about 20%, the ACC projected.

Slowdown in 2023

Despite a first quarter contraction, U.S. gross domestic product growth will be about 2.8% in 2022, and then slow to 2.1% in 2023. This is a slower than a 5.7% gain last year.

U.S. business investment will grow 5.7% in 2022 and only 3.5% in 2023. This compared with a 7.4% on-year gain in 2021, the ACC projected.

Chemical output will expand 2.4% in 2023, a slowdown from the 4.1% projected for this year.

Despite inventory rebuilding efforts, there may not be in 2023 a recovery in volume of vehicles sold in the U.S. to levels seen in 2019.

Light vehicles are an important market for chemistry. Polypropylene is the most consumed plastic in the automotive industry, followed by PVC and polyurethanes.

The ACC expects vehicle sales to increase to 15.1 million in 2022 and 16.3 million in 2023, down from 17 million vehicles in 2019.

Housing is another key driver for demand for petrochemical products like PVC, used for fixtures and tubes, or for polypropylene in carpets.

U.S. housing starts climbed to 1.6 million in 2021 and may rise to over 1.65 million in 2022. Then they will ease to 1.57 million in 2023.

The ACC includes the biggest chemical companies operating in North America like BASF, Braskem, Dow, LyondellBasell, Methanex, TotalEnergies, and dozens of others. Chemical companies are involved in production of intermediates for adhesives, food, fuel, coatings, plastics, health, pharmaceutical that reach in one form or another nearly all manufactured products.

By Renzo Pipoli