In its annual forecast, cited in the C&EN news story, the American Chemistry Council, which represents large chemical manufacturers, predicts a second-half recovery for industrial activity globally and is somewhat optimistic about 2003 for the chemical industry. There should be 3.5 percent growth in physical chemical volume this year, well above Gross Domestic Product growth, providing a 4.3 percent hike in the value of shipments to $483.5 billion, says Kevin Swift, ACC senior director for policy, economics and risk analysis. This compares to modest growth of only 2.0 percent in 2002.
According to the ACC study, basic chemical shipments are expected to grow 3.8 percent in 2003 to $166.8 billion. The fertilizer industry will head the basics segment with a 5.0 percent increase, followed by a 4.8 percent hike in petrochemicals and intermediates and a 4.3 percent increase in inorganic chemicals.
Despite recovery predictions, a potential war with Iraq and strikes that have crippled the oil industry in Venezuela could have a major impact on higher feedstock and energy costs, C&EN cautions.
Indications of a brighter outlook for the U.S. industry have been slow to develop. Even before the recession officially began in March 2001, cutting profits, workforces and stock prices, the industry was having difficulty. And last year, despite a good third quarter, total chemical production was up just about 2.0 percent over 2001, according to revised government data. Average prices, meanwhile, increased by only 0.3 percent. For the basic chemical category, production growth was greater, averaging a 7.0 percent rise, but this was offset by a 0.5 percent decline in prices.
The result has been poor-to-mediocre financial performance among U.S. chemical companies for much of 2002 with the exception of that third quarter. C&EN's regular sample of 25 chemical companies for that period showed a 43.0 percent increase in earnings. A large part of the hike is attributed to DuPont's whopping 213 percent earnings increase. Without this hike, the other 24 companies had an aggregate earnings increase of 12.8 percent.
The biggest victim in 2002 was the chemical trade surplus, which turned into a deficit for the first time since World War I. The 2002 deficit is expected to be $4.2 billion, or about twice the amount predicted and this trend is going to get much worse, says Martha Gilchrist Moore, senior economist with the ACC. According to ACC's 2003 outlook, a fall in the value of the dollar will improve U.S. export potential, but imports will continue to increase, although at a slower pace than last year.
In addition to issuing its predictions for the chemical industry in the United States, C&EN looks ahead in the new year to these other parts of the globe:
- Canada -- The chemical industry experienced a modest recovery in 2002 and more improvement is likely this year, according to observers. Possibly the most encouraging sign for the industry is that volumes for most industrial chemicals are expected to have increased in 2002, with key Canadian products like ethylene and polyethylene registering double digit gains.
- Latin America -- Despite clinging to its decades-old pattern of sporadic development accompanied by political and economic turmoil, the chemical industry in this part of the world was able to stay the course and even make some important progress in 2002. Further improvement is expected this year.
- Europe -- Chemical producers are slowly recovering from a disappointing 2002 and are cautiously looking to 2003 for modest gains. In particular, drug company prospects are promising because of the development of new products that will give them some competitive advantages.
- Asia-Pacific -- Taking the region as a whole, better-than-predicted growth last year has laid the groundwork for a reasonably good 2003. The relatively bright economic picture could darken, however, if Japan experiences a potential financial meltdown, war develops in the Middle East, or China's economy slows due to a delay in the implementation of reforms.
Journal
Chemical & Engineering News