The State of The Chemical Industry

March 13, 2023
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The chemical industry generates $486 billion annually and employs 529,000 Americans, and 96% of all manufactured goods are directly impacted by this industry, reports the American Chemistry Council’s (ACC) 2021 Guide to the Business of Chemistry.

“While risks for the global economy remain, the U.S. chemical industry is in a strong position going into 2022,” said Martha Moore, ACC chief economist, in an ACC press release about the organization’s yearly outlook report. “Supply chain bottlenecks appear to be easing, and momentum is rising as manufacturing activity resumes and inventories are rebuilt. American chemistry is poised to accelerate as strong consumer demand and restocking drive growth.”

From an investment standpoint, chemistry stock has traditionally been considered a good investment because the industry has historically overperformed. However, from 2017–2019, in terms of shareholder returns, the market showed a 1.6% decline, reports McKinsey & Co.

McKinsey’s analysis attributes the downturn to a growing number of Chinese competitors in the industry, which has resulted in decreased return on investment capital and a downward trend in volume growth.

Due to increased regulatory requirements, a call to ban fossil fuels, upstream and downstream emissions concerns, and plastic pollution and toxicity reports, the industry remains under fire from multiple directions.

To be fair, these pressures are nothing new, and the industry has proven adept at meeting these challenges.

“As the chemical industry moves into 2022, strong demand for both commodity and specialty chemicals should keep prices robust throughout the year. The industry should also experience increased capital expenditure as leading industry players focus on building capacity and expanding into growing end markets through both organic and inorganic routes. However, the industry could face margin pressures amid raw material cost inflation, which will likely remain high through the first half of 2022,” reports Deloitte’s 2022 Chemical Industry Outlook. “One of the critical areas of focus for most US chemical companies in 2022 will likely be sustainability and decarbonization. Many chemical companies are expected to increase investment in research and development (R&D) capabilities and leverage advances in decarbonization and recycling technologies to lower their and their customers’ carbon footprint, as well as reduce plastic waste. As a result, 2022 should see more industry players create goals and plans around abatement of emissions and monetization of waste.”

Read more: The State of The Chemical Industry