Despite a challenging year, U.S. chemical production expanded in 2021 as the post-lockdown spending surge boosted demand for chemicals and other goods and materials, according to the American Chemistry Council’s (ACC; Washington, D.C.; www.americanchemistry.com) Year-End 2021 Chemical Industry Situation and Outlook. The rebound in demand swept across many end-use markets for chemistry, driven by savings, stimulus, and shifting demand patterns toward goods. Tangled supply chains and adverse weather events were downside factors, ACC said.
“While risks for the global economy remain, the U.S. chemical industry is in a strong position going into 2022,” said Martha Moore, ACC chief economist and author of the Outlook. “Supply chain bottlenecks appear to be easing, and momentum is rising as manufacturing activity resumes and inventories are rebuilt. American chemistry is poised to accelerate as strong consumer demand and restocking drive growth.”
U.S. Chemistry Situation and Outlook
After two years of weakness linked to trade tensions and COVID-19, the U.S. chemical industry had been prepared for solid production gains in 2021. Yet in February, winter storm Uri brought freezing temperatures and power outages to the Gulf Coast, knocking out a wide swath of chemical and other industrial capacity. Some other facilities experienced shutdowns or reduced operations due to shortages of raw materials. In August, Hurricane Ida disrupted production of many basic chemicals for more than a month. Supply chain issues in key end-use markets also contributed to softer demand for some chemistries this year. Going forward, the outlook is positive.
Global and U.S. Macroeconomic Situation and Outlook
Tempered by the continuing health crisis and supply chain disruptions, the global economy continues to recover and is expected to grow by 5.7% in 2021 and 4.4% in 2022. U.S. GDP grew by 5.6% during 2021, reversing a 3.4% decline in 2020. After a 7.2% contraction in 2020, U.S. industrial production rose 5.5% in 2021 and will grow by 4.0% in 2022, driven by a rebound in demand for goods.
End-Use Markets Situation and Outlook
Light vehicles are an important market for chemistry, with over $3,200 in chemistry per vehicle. Global vehicle production plummeted in 2020, with lockdowns resulting in order cancellations along the supply and, once production resumed, a slowdown in assemblies as semiconductors manufacturers were unable to meet demand. U.S. vehicle sales rose to 15.3 million in 2021, compared with 17.0 million in 2019 and 14.5 million in 2020, and are expected to be 16.0 million in 2022.
Housing is also a large consumer of chemistry. Housing starts rose during the pandemic as historically low mortgage rates and remote work and learning led to a geographic dispersion of households. Housing starts grew to 1.58 million in 2021 – the highest since 2006, though constraints on building materials, land use, and labor in addition to affordability challenges will curb growth in the short term. Housing starts are set to ease to 1.56 million in both 2022 and 2023.
Trade Situation and Outlook
U.S. imports and exports of chemicals have rebounded strongly in 2021, though the pace of improvement has slowed in the second half due to port delays and other disruptions to logistics. Exports have also been hampered by weather-related production outages along the Gulf Coast. Exports rose to $151 billion in 2021, while imports grew to $127 billion, resulting in a trade surplus of $24.0 billion, down from $28.6 billion in 2020. Exports will rise 7.3% in 2022, to $162 billion, while imports will grow 7.1%, to $136 billion, resulting in a trade surplus of $26 billion. By 2025, U.S. exports will reach $182 billion, according to the Outlook.
Prepared annually by ACC’s Economics and Statistics Department, the Yea-End 2021 Chemical Industry Situation and Outlook is the association’s review of the U.S. and global business of chemistry and the macroeconomy. It offers global and domestic chemical industry data related to production, trade, shipments, capacity utilization, end-use markets, R&D spending, capital spending, employment and wages.