The North American Chemical Processing Industry Continues to Show Strength

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Researched by Industrial Info Resources (Sugar Land, Texas). As the year continues to unfold with overall good mentions for most industries, the chemical processing industry (CPI) is making exceptionally good progress towards growth with minimal project fallouts analyzing Industrial Info’s GAP Measurement for the industry. During 2006, the CPI experienced just over $1 billion in project cancellations or major delays and so far in 2007, capital and maintenance spending has actually increased to approximately $78 million more than originally forecast. Looking closely at the CPI’s GAP Measurement for the first half of the year total spending has closely met its forecast with the industry’s increase in spending expected to take place in the last quarter of the year.

Spending in petrochemical plants, one of the largest investment segments of the CPI, remains strong despite consistent pressures by costs related to energy, feedstock, plant security and emission compliance projects that offer little or no return on investment. Years of wise spending within this group of plant owners targeting debottlenecks, reliability projects, and incremental capacity increases has aided most producers in remaining profitable and setting them in positions to sustain their growth as the market continues to show signs of acceptance for significant new capacity. It has been several years since any major new capacity for ethylene has been added and the potential for new capacity within the next five to seven years appears more likely than recent years.

Click on the image at right to view a CPI Gap chart.

A great deal of the growth that will be seen in the CPI this year is expected to take place in the United States’ Southwest market region currently forecast at nearly $1.8 billion in capital and maintenance during the remaining months of this year. Some of the largest new investments influencing growth other than petrochemicals are polypropylene (PP) and polyethylene (PE). Formosa Plastics Corporation USA has approved plans for debottlenecks of PP capacity at their Point Comfort, Texas plant beginning late this year and Basell North America has also approved plans for construction to begin this summer on the retrofit and restart of idle PP capacity at its Pasadena, Texas plant due to be online early next year.

In support of growth for those segments already mentioned plus the seemingly endless growth forecast for the Petroleum Refining industry, producers of industrial gases and chlor-alkali products both have very positive growth curves forecast this year and beyond. Demand for hydrogen has grown consistently for a decade largely due to new fuel standards imposed on the refining industry. Demand for traditional gases such as oxygen, nitrogen and others have also enjoyed sustained demand in recent years and current trends indicate an increase in project activity for these producers over the next couple of years. The closure of older chlorine technology in recent years combined with a consistent increase in demand has positioned several producers to announce significant capacity increases with several beginning this year.

Momentum for the success of this year has been built by several years of growth in the CPI both domestically and abroad. International exports continue to provide an opportunity for producers of commodities with access to transportation logistics capable of serving growth markets abroad. Growth in Asia and the Middle East continues to outpace the abilities of these regions to meet their own demand.

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