Energy now locked in shale rock is fueling a renaissance in U.S. chemical manufacturing that will drive rising exports of chemicals and related products even higher, according to the head of the American Chemistry Council.
“Abundant and affordable supply of natural gas has transformed the U.S. chemical industry from the world’s high-cost producer five years ago to among the world’s lowest-cost producers today,” ACC President and CEO Cal Dooley said May 21.
The Washington-based group estimates chemical exports increased about 1 percent to $189 billion in 2012. But exports leaped 9.4 percent in 2011, climbing from $171.2 billion in 2010. Since the end of the recession in 2009, chemical exports have risen 29.9 percent. Exports have more than doubled over the past decade. In its year-end 2012 report, the ACC forecast 4.7 percent growth in chemical exports in 2013 and 6.2 percent increase in 2014, when exports will hit $209 billion.
The U.S. Census Bureau estimates exports of chemicals and related products reached $207.4 billion in 2012, with imports trailing at $195.6 billion. That was a slight increase — $300 million — for exports and a $2.7 billion decline in imports. Since 2009, however, the federal data also show exports up 29.7 percent in dollar value, and imports rising 29.3 percent. Total U.S. trade in chemicals was $403 billion in 2012, according to the Census Bureau, up 29.5 percent since 2009.
At a May 21 Senate Energy And Natural Resources Committee forum on natural gas supply and exports, Dooley provided detail on 97 chemicals and plastics projects announced through March 2013 that he said represent $71.7 billion in investment.
“Dozens of companies are making plans to invest in new U.S. chemicals production capacity,” he said. Roughly half that investment is from foreign firms. “The fact that such large numbers of foreign-owned companies are choosing to source their chemistry in the United States is unprecedented in recent history, and a testament to the value and affordability of America’s shale gas and ethane supplies.”
Domestic companies also are bringing production back to the U.S. to take advantage of lower energy costs. Dow Chemical is in the middle of a multiyear plan to expand ethylene and propylene production on the Gulf Coast, restarting an ethylene “cracker” near Hahnville, La., last year and building a new propylene plant in Texas for start-up in 2015.
“Our plan is to further integrate Dow’s businesses with the advantaged feed stocks, based on shale gas deposits and long-term ethane and propane supply agreements,” Dow Executive Vice President Jim Fitterling said when announcing the U.S. expansion in 2011. Exports are a key part of the plan — Dow Chemical will use its U.S. facilities to boost sales in the Americas.
Natural gas and oil provide the energy needed to power chemical plants and, in many cases, the raw material used in manufacturing chemicals and plastics, which in turn support dozens of “downstream” industries from textiles to pharmaceuticals producing everything from diapers to automotive and electronic components.
Over time, the shale gas and oil boom, coupled with potential free trade agreements with Asia and Europe, could dramatically increase U.S. chemical exports, Dooley said. “We are especially excited about a potential U.S.-EU trade agreement, which would yield huge benefits for our industry and the broader manufacturing sector.”
Eliminating industrial tariffs between the U.S. and European Union could save up to $600 million a year in intra-company trade alone, the ACC said.
Total chemical shipments dropped 1.5 percent in value in 2012 but are expected to increase nearly 9 percent over the next two years, hitting $833 billion in 2014, according to the ACC. U.S. chemical shipments rose 8.3 percent in 2011 and 12.3 percent in 2010 after dropping 15.5 percent in 2009. Chemical shipments did not return to 2008 levels until 2011, when they were valued at $759.3 billion.