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-based chemistries, according to the American Chemistry Council’s (ACC; Washington, D.C.; www.americanchemistry.com) Mid-Year 2022 Chemical Industry Situation and Outlook.
“Following several years of weak growth related to trade tensions, COVID-19, and disruptive weather events, chemical output is looking to have its best year in more than a decade in 2022, with expansion across all chemistries,” said Martha Moore, ACC chief economist and managing director and author of the Outlook. “Investment in sustainability solutions – from innovative lower-emissions technologies to advanced recycling and recovery – will increasingly be a key driver of chemical industry capital spending.”
ACC’s Outlook begins with a review of the global economy, which continues to struggle with supply chain problems and inflation, exacerbated by the Russian invasion of Ukraine and COVID-related lockdowns in China. While these challenges are likely to persist, slower growth in consumer spending and shifting consumption patterns away from goods should help relieve some pressure. Global GDP will grow 3.2% in 2022 and 3.2% in 2023, while industrial production will grow 3.9% in 2022 and gain 3.6% in 2023, ACC projects.
In the United States, several economic growth drivers remain in place, including strong employment, healthy household and corporate balance sheets, and solid manufacturing growth. Despite a contraction in the first quarter, GDP is expected to grow by 2.8% in 2022 and 2.1% in 2023 after a 5.7% gain last year. Business investment will grow 5.7% in 2022 and 3.5% in 2023 after gaining 7.4% in 2021. The unemployment rate will average 3.6% in 2022 and 3.7% in 2023 after a 5.3% reading last year.
Light vehicles are an important end-use market for chemistry, with over $3,200 in chemistry per vehicle. A shortage of semiconductors continues to constrain global vehicle makers. U.S. vehicle assemblies are recovering, but shipping constraints and disruptions to supply chains for vehicles and parts, especially in Europe and China, are limiting supply. Pent-up demand is expected to provide a push to sales once supply chain constraints ease. ACC expects vehicle sales to edge higher to 15.1 million in 2022 and 16.3 million in 2023, compared with a pre-COVID level of 17.0 million in 2019.
Housing starts climbed to 1.60 million in 2021 and are expected to rise to 1.65 million in 2022, then ease to 1.57 million in 2023. Affordability constraints including higher prices and mortgage rates will be headwinds to further expansion. Gains in employment, wages, and household formations will be supportive, however.
U.S. chemical output is looking to have its best year in more than a decade in 2022, with growth across all chemistries. After a 1.6% gain in 2021, ACC expects output to grow by 4.1% in 2022 and expand 2.4% in 2023. Shipments will grow 9.6% in 2022 and 3.4% in 2023 after an 11.3% gain last year. Basic chemicals will grow by 4.3% in 2022, with the largest gains in bulk petrochemicals and organics (4.6%), plastic resins (4.4%), and inorganic chemicals (4.4%). Specialty chemicals output will grow 6.2% in 2022, pulled by strong demand and restocking. Capital spending will jump 12.3% in 2022, to $34.5 billion, and 5.5% in 2023, to $36.4 billion.
Chemical industry payrolls expanded in 2022, with strong growth through mid-year. Employment surpassed pre-COVID levels in January, and the industry is projected to add more than 11,000 jobs (up 2.2%) in 2022. Job growth continues through the forecast horizon, with gains of several thousand per year. The chemical industry remains a major U.S. employer. Its workers are among the highest-paid in the manufacturing sector—averaging more than $90,000 in 2021—and those earnings support local communities.
Total chemicals trade rebounded in 2021, rising by 26.8% over the previous year to reach $281.4 billion. In 2021, imports increased by 32.7% and exports rose by 22.3%. Gains were led by petrochemicals trade, which continue to drive trade expansion heading into the first quarter of 2022. Nominal chemical exports are forecast to grow 13.3% in 2022, to $173.5 billion, while imports will rise 19.7%. As the pace of imports growth exceeds exports, the U.S. chemicals trade surplus will fall to $19.9 billion in 2022, ACC projects. Chemicals trade is forecast to moderate in 2023 and return to a modest growth trend through 2026. Net exports of chemicals are expected to reach $35.2 billion by 2026.
To view the Mid-Year 2022 Chemical Industry Situation & Outlook, please visit the ACC Store (americanchemistry.com