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ACC: Chemistry output to increase in 2024

Dec. 15, 2023
The American Chemistry Council predicts all chemical segments will see ‘modest recovery’ next year, with overall production growing by 1.5%

The American Chemistry Council (ACC) expects a “modest recovery” across all chemical segments in 2024, with overall chemistry output expected to increase by 1.5%, after an “unprecedented” destocking cycle that commenced in the third quarter of 2022 and continued through much of this year, curbing production.

“This is consistent with the findings of ACC’s Economic Sentiment Index that found chemical firms felt that overall business activity and major customer demand deteriorated in Q3 but were expected to improve over the next six months,” Martha Gilchrist Moore, ACC chief economist, reported in the trade association’s year-end outlook.

“Because of the chemical industry’s early position in the supply chain, we would expect to see a turnaround in chemicals before improvement in the broader economy.”

Production downturn

U.S. output of basic chemicals fell 2.5% in 2023, with declines in petrochemicals and organic intermediates, synthetic rubber, and manufactured fibers output, ACC said. Slightly higher production of plastic resins, which were up by 0.5%, resulted from stronger exports. Specialty chemical output also was lower 2023, with declines in coatings and other specialty chemical categories. ACC also saw declines in fertilizers and crop protection chemicals. Production of consumer products benefited from higher consumer spending and was up 4.2%.

The longer-term outlook for U.S. chemistry is positive, with the natural gas liquids feedstock advantage continuing to favor U.S. production for the foreseeable future. In addition, capacity expansions in customer industries motivated by recent legislation and re-/near-shoring of manufacturing to North America will support U.S. chemistry going forward, ACC maintained.

Following two years of double-digit growth, external demand for manufactured goods and chemical inputs has softened. Weakness in the economic environment and the industrial sector, especially, resulting in a 7.5% decline in U.S. chemical exports in 2023 followed by 3.1% growth in 2024. U.S. chemical imports also declined this year, by 10.5%, but are expected to grow by 8.2% in 2024, the association added.

Additionally, capital spending is expected to slow to 1.1% in 2024, with higher borrowing costs depressing investments, and chemical industry employment is expected to remain stable next year before growing in 2025.

Long-term outlook, risks

“Moving beyond the short-term downturn, prospects for U.S. chemistry remain positive with competitive energy fundamentals and the resurgence in U.S. manufacturing from once-in-a-generation legislative initiatives to promote clean energy, infrastructure, and a strong domestic manufacturing base,” Moore wrote.

Caveats to this outlook include unforeseen regulatory impacts, Fed policies, geopolitical conflicts, unexpected financial volatility, and “external” shocks.

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