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ACC Sees U.S. Chemical Industry Growth Outpacing GDP

U.S. chemical production will continue to expand over the next several years and the American chemical industry will eventually outpace the nation's overall economic growth - according to the recently published "Year-End 2015 Chemical Industry Situation and Outlook" by the American Chemistry Council ("ACC").

The Washington, DC-based chemical industry trade group noted that notwithstanding softness across a number of major markets, a sluggish global economy, slowdown in China and headwinds from a stronger dollar, the U.S. chemical production expanded 3.6% in 2015. The growth was aided by strength across light vehicles and housing markets. These two major chemical end-use markets had a strong year. Light vehicle sales rose 5% while housing starts moved up 12% in 2015.

The ACC expects the momentum to continue through the second half of the decade on the heels of new capital investments and capacity additions. The trade group envisions U.S. chemical production to rise 2.9% next year and 4.4% in 2017.

Moreover, the ACC expects the domestic chemical industry to grow at a faster clip than the overall U.S. economy during the second half of the decade and sees production to rise more than 4% annually on average during that period. The trade group expects U.S. GDP to rise 2.6% in 2015 and envisions growth to moderate toward the end of the decade.

Demand for chemicals is expected to grow over the next several years on the back of new capacity. Per ACC, over 261 new chemical projects have been announced by chemical makers (worth more than $158 billion) since 2010 to take advantage of ample natural gas supplies with 34% of them already complete or under construction.

The shale gas boom and abundant supply of natural gas liquids have provided the U.S. petrochemicals producers a compelling cost advantage over their global counterparts. The ACC expects this competitiveness to drive new capital investment in the country. New capacity is expected to provide a significant boost to chemical production as these investments come on stream in the coming years.

The shale revolution has made the U.S. an attractive investment hotspot and incentivized a number of chemical companies to pump in billions of dollars to ramp up capacity in the country. Chemical makers including Dow Chemical DOW , LyondellBasell Industries LYB , Eastman Chemical EMN , Celanese CE and Westlake Chemical WLK are investing heavily on shale gas-linked projects to take advantage of ample natural gas supplies.

The ACC also noted that global chemical production advanced at a slightly slower pace in 2015 vis-à-vis 2014. While global chemical output slowed to a 2.8% growth in 2015 (from 3% in 2014), prospects are expected to improve next year with production rising 3.3%, gaining further steam with a 3.7% increase in 2017. The trade group expects the developing nations of Asia-Pacific and Africa and the Middle East to see strongest growth in the long haul.

The U.S. chemical industry, a more than $800 billion enterprise, is heavily linked to the overall condition of the nation's economy. It has been consistently leading the U.S. economy's business cycle due to its early position in the supply chain. The industry is gradually gaining strength, aided by an improving U.S. economy, sustained healthy momentum in the automotive space and rebounding construction markets.

Despite multiple challenges, the industry's recovery momentum is expected to continue moving ahead, aided by strength in the light vehicles market, positive trends across the construction markets and significant shale-linked capital investment.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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