Recently, several institutions have conducted a thematic outlook on global chemical demand in 2021 following the Covid-19 outbreak, and discussed some key issues for the chemical industry in 2021 and beyond. Overall, the chemicals market is recovering and will continue to improve, on the back of good news, such as ongoing vaccination, although some areas remain severely affected during the winter.
The economic recovery is providing momentum
IHS Markit forecast last month that global GDP growth would reach 4.5 percent in 2021, fueling a recovery in demand for chemicals. "The market will experience a slow start and a strong finish in 2021 due to the Covid-19 outbreak," said Sarah Johnson, executive director of global economics at Egenhuarmai. Global real GDP is forecast to fall by 4.0% in 2020, the biggest decline in 74 years.
Johnson says there will be some differences in the overall recovery because the recovery starts at different points in each region. China's recovery began in the second quarter of 2020, but Japan and several major European economies are not expected to return to pre-pandemic levels until 2023 or 2024. Western Europe has been hit particularly hard by the new outbreak and will recover slowly. The Asia-Pacific region was the first to recover, led by China, and will account for more than half of global growth over the next decade.
Chemical production resumed growth
Global chemical production is expected to rebound 3.9 per cent in 2021 after falling 2.6 per cent in 2020, the biggest decline in 40 years, according to ACC estimates. The ACC estimated that the Covid-19 outbreak led to a peak-to-trough decline of 7.8% in total global chemical production from December 2019 to June 2020, but by mid-November, almost all countries and regions were recovering.
Regional performance was also mixed, with Latin America's chemical production down 7.2 per cent, North America's 3.9 per cent, Europe's 2.2 per cent and the Asia-Pacific region as a whole down 2.1 per cent, the ACC said. In 2021, chemical production growth will resume in all regions, with Asia, led by China, showing the strongest growth prospects. China's chemical production is forecast to grow by 5.4% in 2021, the Asia-Pacific region as a whole by 4.4%, North America by 4.1%, Latin America by 4.6%, and Europe's chemical industry by 3.1%.
After 2021, global chemical production will continue to grow, the ACC said, with projected growth of 2.6 percent and 2.3 percent in 2022 and 2023, respectively, and an average annual growth rate of 2.1 percent through 2030. Developing countries in Asia Pacific, Africa and the Middle East will see the strongest growth, as will chemical production in North America and a return to growth in Latin America.
The industry is also cautiously optimistic about chemical production growth. "I am optimistic about 2021, but there are still a lot of uncertainties," said Craig Rogerson, chairman and CEO of American Hansen.
Prospects for the U.S. chemical industry are looking up
Martha Moore, senior director of policy analysis and economics at the ACC, said US demand was recovering despite the sharp decline in the US chemicals market. "The long-term outlook for the US chemical industry remains positive because of the US energy advantage," she said. Once the crisis is resolved, the U.S. chemical industry will gain momentum for recovery, and so will the residential and industrial markets." The ACC expects the fastest growth to be in basic chemicals, followed by consumer goods and specialty chemicals.
The ACC's latest Chemical Activity Barometer (CAB) shows the U.S. CAB Composite Index rose for the seventh consecutive month in November. Going into 2021, CAB data will be consistent with continued economic recovery. The ACC expects U.S. economic growth to rebound 3.7 percent in 2021, led by a rise in consumer spending and 3.7 percent in industrial production. Nearly all sectors will see gains, with autos, aerospace, appliances, steel, oil refining, and plastics and rubber products among those with big gains. "The post-pandemic outlook is supported by solid fundamentals, with demand for chemicals growing across the board," Mr Moore said. Continued growth in customer demand, stable export markets, and competitive advantage with domestic shale gas and natural gas liquids (NGL) supplies are all factors contributing to the continued growth of the U.S. chemical industry."
In 2020, the demand for basic chemicals in the United States decreased by 1.3%. Driven by the continuous growth of plastic resins, the United States plastic resins still maintained positive growth, with an increase of 0.9%. In 2021, US base chemicals will show a rebound trend, with a projected growth of 5.0%, and plastic resins will grow by 6.9%. U.S. specialty production declined 10.8 percent in 2020, mainly due to the negative impact of downtime in the oilfield chemicals, rubber processing, foundry chemicals and ink industries. U.S. specialty chemicals production is expected to grow 2.4% in 2021 as demand recovers for rubber processing, antioxidants, plastic compounds, catalysts, plastic additives, and lubricant additives.
The United States will remain the preferred destination for chemical investment because of its advantaged access to energy and raw materials. The ACC estimates that U.S. base olefins capacity increased by nearly 40% between 2010 and 2019. Over the next 10 years, U.S. basic olefins capacity will grow by another 20 percent. By the end of November 2020, some 345 new chemical production projects have been announced, with a total investment of more than US $207 billion. While capex growth will slow from the boom years of the 2010s, the ACC still forecasts capex growth in the U.S. chemical industry to average more than 4% a year between 2021 and 2025.
