After sparing capital spending in late 2008 and 2009, chemical companies around the world have collectively spent more on new plants and equipment in 2010, the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com) says in its Year-end 2010 Situation and Outlook report.
After dropping by 4.1% between 2008 and 2009 ($239 billion to $229 billion), global capital spending in the chemical industry increased by 7.7% to $247 billion in 2010, says the ACC report, which was released Dec. 2. Going forward, capital spending in the chemical industry around the world is projected to increase further, with an projected rise to $280 billion in 2011 and to $317 billion in 2012.
The looming wave of capital spending was among the points highlighted by ACC chief economist Kevin Swift at a press briefing to announce the report’s release.
In addition to a projected increase in capital spending, Swift also called attention to an increase, by 17%, in U.S. chemical industry exports for this year. Favorable exchange rates, growth in emerging market economies and competitive natural gas prices are all factors to help explain the shift from a trade deficit in chemicals to a trade surplus of $3.7 billion in 2010, Swift explained. The chemicals trade balance is significantly more positive for the U.S. if pharmaceuticals are excluded from the calculation. The trade surplus is projected to expand in 2011 to $7.2 billion before slipping back to $5.4 billion in 2012, the ACC report says.
Swift also pointed out that U.S. R&D spending in the U.S. chemical industry increased in 2010. The total was up by 2.8% to $50.8 billion this year, and the report projects further increases each subsequent year through 2015, when the total is likely to top $62 billion.
In much of the world, especially in emerging markets, the wider economic recovery has “evolved into expansion,” the ACC report states, a situation that “fosters an environment conducive for further recovery of chemical production.”
The outlook for the overall U.S. economy, however, has “faded,” compared to the end of 2009, the report explains. “Underlying demand remains weak” following an economic boost from inventory restocking that has played out, the report added.