Strong domestic natural gas supplies are enabling the U.S. chemicals manufacturing sector to gradually improve, according to a new report by the American Chemistry Council (ACC).
According to the ACC's 2010 Year-End Situation and Outlook, U.S. chemicals exports will be up by 17% in 2011 over this year. The gains are expected to shift the trade balance for the industry to a $3.7 billion surplus from a $1 million deficit, which would be the best performance in a decade. The annual report was prepared by ACC's Economics and Statistics Department.
The "dynamic shift" over the past five years in U.S. gas markets has helped to revive the chemicals industry, the report noted. Growth in chemical export markets is being driven by "favorable energy costs, resulting from developments in extracting natural gas from shale, and growth in emerging markets, where recovery, and now expansion, has been strongest."
The availability of more ethane, which is the basis for "hundreds" of manufactured products, has been key. And low gas prices compared with oil "has enabled U.S. chemicals manufacturers to become more competitive than producers in much of the rest of the world," the ACC stated.
Last week cheap ethane provided by liquids-rich natural gas production prompted Dow Chemical Co. to announce that it would boost its ethane cracking capabilities on the Gulf Coast over the next two-three years (see Daily GPI, Dec. 3).
"Shale gas extraction has been a 'game changer' for America's chemical manufacturers, enabling us to remain highly competitive in a global market," said ACC CEO Cal Dooley. "We want to ensure that the appropriate regulatory policies are in place to capitalize on this energy source, while ensuring protection of our water supplies and the environment."
Following steep declines in 2008 and 2009, domestic chemical production volumes increased across all regions of the United States in 2010, said the ACC. The largest gains were in the Gulf Coast and Ohio Valley regions, boosted by export demand for basic chemicals and plastics. Output is expected to grow "moderately" in all regions in 2011 and continue to improve through 2012.
Growth in emerging markets, most notably in China, India and Brazil, is increasing demand for chemistry feedstock materials, said the report. Production of chemistry products in emerging economies increased by 12.2% in 2010, and in 2011, "as emerging nations continue to present good growth prospects, trade in chemicals will continue to expand."
Even though the chemicals industry overall is recovering, jobs in the U.S. sector are not expected to increase in the coming year because of efficiencies. The ACC noted that since the beginning of the recession, the chemistry industry has lost more than 80,000 jobs. The $674 billion U.S. chemistry enterprise accounts for more than 10% of U.S. exports and provides about 780,000 jobs in the United States.
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