MOSCOW (MRC) -- Chemical production is rebuilding momentum after shocks linked to the global COVID-19 pandemic, according to Chemweek with reference to the American Chemistry Council’s (ACC) Year-End 2020 Chemical Industry Situation and Outlook.
US chemical production volume excluding pharmaceuticals is expected to fall by 3.6% in 2020 followed by growth of 3.9% in 2021. The US decline is the sharpest since 2008 and 2009, during the financial crisis.
Global chemical volumes are expected to fall 2.6% in 2020, the largest drop in at least 40 years, followed by a 3.9% rebound next year. ACC estimates a 7.8% drop in activity from peak-to-trough in headline global production, from December 2019 lasting until roughly June 2020. “China was the first nation to emerge from the downturn and by September this year, had fully recovered and entered an expansion stage of the cycle,” says ACC chief economist Kevin Swift. “Other nations have not fared as well, but at a global level, a trough was reached in June and a recovery emerged. As of mid-November, nearly all nations and regions are participating in recovery.”
The year has been difficult but industry is well into recovery, says Martha Moore, senior director of policy analysis and economics at ACC. “We’re maybe even ahead of some of our manufacturing peers,” Moore says. “Long-term prospects continue to be very positive because of the energy advantage that we have in the United States. We really need this health crisis to abate, however, and we expect that to happen in 2021. Once that health crisis abates we’re going to see that the recovery gains some traction and domestic and use markets are going to recover.” ACC expects the highest growth to be in basic chemicals, followed by consumer products and specialties.
ACC’s Chemical Activity Barometer, a leading indicator of broader industrial activity, rose for a seventh straight month in November. “Key indicators were mixed (in November), but remain largely positive,” said Swift. CAB readings are consistent with continued economic recovery into 2021.
US GDP tumbled 3.8% during 2020, down from a 2.3% gain in 2019. US growth is expected to rebound 3.7% in 2021, led by stronger consumer spending. Industrial production fell 6.9% in 2020 with declines occurring in nearly every sector. Industrial production is expected to rise 3.7% in 2021. Growth is anticipated for nearly all sectors in 2021, with the largest gains in motor vehicles, aerospace, appliances, iron and steel, petroleum refining, and plastic and rubber products.
“The post-pandemic outlook is for broad-based growth in chemicals supported by solid fundamentals,” Moore says. “Growing customer demand, stabilizing export markets, and a competitive edge linked to domestic supplies of shale gas and natural gas liquids (NGLs) are among the factors pointing to continued gains in US chemistry.”
US basic chemicals demand fell 1.3% in 2020, helped a bit by continued growth in plastic resins, one of the areas to maintain positive growth, up 0.9%, this year. Basic chemicals should rebound with 5.0% growth in 2021, led by 6.9% growth for plastic resins. US specialties volumes were down 10.8% in 2020 as lockdowns were especially negative for the oilfield chemicals, rubber processing, foundry chemicals, and printing ink sectors. Specialty volumes are forecast to improve 2.4% in 2021, led by recovery in rubber processing, antioxidants, plastic compounding, catalysts, plastic additives, and lubricant additives.
US chemicals trade was notably lower in 2020, and it will be a year or two before total trade flows return to pre-COVID-19 levels, Swift says. Total chemicals trade is projected to shrink 7%, to USD220.8 billion, in 2020. Exports will fall 9%, to USD124.0 billion, in 2020 before expanding 8% 2021. Imports will fall 5%, to USD96.8 billion, in 2020, then recover 9% 2021. Potential changes in global supply chains could affect trade levels longer term. “Concern about supply chain disruptions will lead to near and on-shoring, accelerating any such decisions already in consideration prior to the pandemic,” Swift says.
The US will remain a preferred destination for chemical investment thanks to advantaged energy and feedstock access. ACC estimated a nearly 40% gain in basic olefins capacity during the 2010s. Basic olefins capacity could expand another 20% over the next decade. During recent years, the chemical industry accounted for nearly one-half of total construction spending by the US manufacturing sector even though it accounts for about 15% of manufacturing value-added. Some 345 new chemical production projects, valued at more than $207 billion altogether, have been announced through late November 2020. The rate of increase will slow from the 2010s boom, but ACC still forecasts average annual gains of over 4%/year in US chemical industry capital spending in the 2021–25 period.
As MRC reported earlier, the ACC's Chemical Activity Barometer (CAB) for November showed continued economic recovery in the US, with the three-month moving average (3MMA) rising 0.8% sequentially, versus a 1.0% gain in October and a 1.5% gain in September. The figure last declined in May. Year-over-year (YOY), the October 3MMA CAB declined 2.4%.
We remind that Russia's output of chemical products rose in October 2020 by 7.2% year on year. At the same time, production of basic chemicals grew in the first ten months of 2020 by 6.3% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-October output. October production of polymers in primary form grew to 857,000 tonnes from 852,000 tonnes in September. Overall output of polymers in primary form totalled 8,340,000 tonnes over the stated period, up by 17% year on year.