Despite a slowdown in global manufacturing, the U.S. chemical process industries (CPI) have continued to expand and remain a positive contributor to growth. In its “Year-End 2019 Chemical Industry Situation and Outlook,” which was issued in December, the American Chemistry Council (ACC; www.americanchemistry.com) says that “With a weaker outlook for the U.S. industrial sector, slow growth in key trading partner economies, new tariff burdens and unprecedented uncertainty related to U.S. trade policy, the chemical industry is one of few manufacturing segments expected to grow over the next year.”
The upside: energy costs
As the largest energy-consuming manufacturing sector in the U.S., the CPI have been benefitting from the abundance of domestic natural gas. And the affordable, natural gas supply has driven global CPI investments in the U.S. According to the ACC, about 340 new chemical production projects at a total value of approximately $204 billion have been announced in the past decade, with 70% of them including either foreign direct investment or foreign partners.
Examples of recent announcements include one made in June by ExxonMobil and SABIC. The two companies are moving forward with construction of a 1.8-million-metric-ton ethane steam cracker, two polyethylene units and a monoethylene glycol unit in Texas. The project is a 50/50 joint-venture between ExxonMobil and SABIC called Gulf Coast Growth Ventures (www.gulfcoastgv.com). Startup is anticipated by 2022. Estimates indicate over $22 billion in economic output during construction.
In another announcement made in July of this year, Chevron Phillips Chemical Co. and Qatar Petroleum agreed to jointly pursue a new petrochemical plant in the Gulf Coast region to include an ethylene cracker and two high-density polyethylene units. The cost would be $8 billion. A final decision on the proposed plant is expected in 2021 with possible startup in 2024.
The ACC anticipates that over the next five years, most of the growth in the U.S. will occur in the Gulf Coast region, followed by the Midwest and Ohio Valley regions. Petrochemicals, organic intermediates and plastic resins are expected to bring the most capital spending, for example for process equipment, instrumentation and structures.
The downside: trade tensions
While the outlook for the CPI is positive, much depends on global trade policies, which have been volatile, particularly in recent months. According to the ACC report, increasing trade tensions in the second half of 2019 resulted in decreased expectations for chemicals trade growth. The report states that “With resolution of the trade tensions, uncertainty will be alleviated and prospects should improve during 2020, with global chemicals output rising 2.0% and 2.7% in 2020 and 2021, respectively.”
The CPI continue to look for ways to increase efficiencies by reducing waste, and through more efficient use of raw materials and energy. Technologies and policies related to sustainability and climate change issues are garnering much interest. We look forward to continuing to cover these and many more advances in the CPI for our readers this year. Best wishes to all for 2020.