Despite the challenges posed by the pandemic, global supply chain issues, and adverse weather events on the Gulf Coast, the American chemical industry expanded in 2021 — although the latter two factors did constrain production. A post-lockdown surge in spending boosted demand for chemicals and other goods and materials. The rebound in demand swept across many chemicals-intensive end-use markets driven by excess savings, stimulus, and shifting demand patterns toward goods.
Now, supply chain bottlenecks appear to be easing, and momentum is rising as manufacturers resume work and rebuild inventories. While risks remain for the global economy, the U.S. chemical industry is in a strong position going into 2022.
However, growth momentum has moderated, as the Delta variant of COVID-19 continues to spread and the Omicron variant raises new concerns, supply chains remain tangled, and inflation accelerates. The low vaccination rates in many emerging markets make these markets vulnerable to the ongoing and ever-changing pandemic. Manufacturing worldwide still is expanding but faces headwinds from supply chain disruptions, transportation bottlenecks, and labor shortages. Global trade volumes, which had rebounded sharply at the beginning of 2021, have eased. Bottlenecks at ports and shortages of shipping containers are factors as is lower production of certain categories of goods, e.g., motor vehicles and parts affected by shortages of semiconductors.
In the United States, the recovery that began in April 2020 continues to expand. However, activity in the third quarter markedly decelerated compared to growth in the first half of the year because supply couldn’t keep up with demand. Now, supply and demand slowly are realigning. Port backlogs are starting to clear, and the strong job market will pull more people into the labor force. Higher employment will offset the removal of federal stimulus, and support continued strong levels of consumer spending. Many indicators now point to continued expansion into 2022.
American gross domestic product (GDP) expanded by 5.6% during 2021, compared to a 3.4% contraction in 2020 (Figure 1) but should ease to 4.2% this year. Tempered by the continuing health crisis and supply chain disruptions, the global economy continues to recover but its growth also should slip, from 5.7% in 2021 to 4.4% in 2022.
Read more: 2022 Chemicals Industry Outlook: Upward Momentum Builds