December 8, 2008

Volume 86, Number 49

p. 6

Economy

Tough Times Ahead

Global recession will dramatically slow chemical output

Melody Voith

IN THE WANING WEEKS of 2008, the chemical industry is confronting slower growth and economic indicators that point to another year of bad news.

According to the American Chemistry Council (ACC), the U.S. chemical industry's main trade organization, the consensus view is that global chemical output will increase only 2.2% for the year, compared with a peak of 5.4% growth in 2004. The deceleration will continue in 2009, when the group estimates growth will be 1.5%.

T. Kevin Swift, ACC's chief economist, told a press briefing last week that the industry is following the world economy into recession. "The economic outlook in 2009 shows negative [gross domestic products] in the developed world," Swift said. "Even in China and other exporting countries, we are seeing a slowdown."

The outlook is particularly bleak for chemical makers in the developed world, where Swift projects output will decline 0.9% in 2008 and 0.7% in 2009, with a recovery beginning in the second half of next year. In the U.S., "capacity rates will decline, as will capital expenditures. Shipment value and trade will decline next year. Trade had previously been the bright spot but hit a wall in September," Swift said.

Companies serving the automotive and housing industries are already hurting. Last week, DuPont announced a restructuring that would eliminate 2,500 jobs, primarily in businesses that support those industry segments (see page 18).

None of the forward-looking indicators of economic activity that ACC monitors show a rebound in the next six to nine months. According to the National Bureau of Economic Research, the U.S. economy has been in recession since December 2007. Swift pointed out that a 20-month recession would be the longest since the Great Depression.

U.S. chemical companies also face uncertainty in the new Administration's picks to head climate and regulatory agencies. President-Elect Barack Obama "may mobilize his base for aggressive climate-change policy," acknowledged ACC CEO Cal Dooley at the briefing.

Chemical & Engineering News

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