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Chemical Industry Expected to Continue Growing Through 2013

The US chemical industry managed to grow at a steady pace in 2012, despite strong headwinds from the European debt crisis, weak demand in the US economy, and a relative slowdown in emerging countries, such as China.

02/05/2013 · 2 minute read

The US chemical industry managed to grow at a steady pace in 2012, despite strong headwinds from the European debt crisis, weak demand in the US economy, and a relative slowdown in emerging countries, such as China.

Most companies are expected to follow the course in 2013 and drive their strategic agenda. Companies in the industry continue to invest in emerging economies, acquisitions, and product innovation, especially around global mega-trends such as sustainability and green chemistry, alternative energy supply, and increased availability of clean water and food.

As expected, M&A activities have slowed down significantly in 2012 following a record breaking year in 2011. The value for mega-deals (transactions greater than $1 billion) is expected to reach between $25 billion and $30 billion, roughly a third of 2011 value. Large deals continue to be dominated by strategic buyers that are looking to take advantage of low borrowing cost and accelerate their growth prospect.

Driven by the recovery in several end-use markets, including automotive and construction, and the continued expansion of shale gas production, the US chemical industry is expected to see stronger growth in 2013. Access to shale gas is being viewed as one of the most significant developments in domestic energy in decades, and is likely to have a major impact on the US chemical and manufacturing sectors in the future.

Having a larger supply of low-cost natural gas — commonly used as a feedstock and energy source by chemical companies — is providing a meaningful competitive advantage over foreign companies that rely on more expensive oil-based feedstock.

Despite these positive signs, many businesses within the chemical industry remain cautious about the outlook and are prudent in their investments, especially with the uncertainties related to the economy, as well as the uncertainty about policy decisions that could emerge from Washington, D.C. in 2013.

Chemical Risk Update, January 2013

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