Number of North American Chemical Projects Placed On Hold Continues to Grow

Researched by Industrial Info Resources (Sugar Land, Texas)--There are few, if any, segments of the industrial marketplace that are not feeling the effects of the economic slowdown currently facing producers around the world. The North American Chemical Processing Industry (CPI) weathered the initial phases of this economic storm during the late summer months of 2008 with relatively few casualties. As the year progressed, downstream customers began to deplete their inventories to prolong or reduce the amount of replacement feedstock they must purchase. These were some of the first signs to indicate the CPI would begin to more noticeably feel the effects of the ongoing economic crisis.

As the year came to a close, numerous indicators began to appear confirming the industry would have to drastically retool and re-evaluate capital spending plans, cut back production and even close non-core business units to battle economics that appear certain to drag on well into the new year. Chemical giants such as Dow Chemical Company (NYSE:DOW) (Midland, Michigan), BASF Corporation (OTC:BASFY) (Ludwigshafen, Germany), Huntsman Corporation (NYSE:HUN) (Salt Lake City, Utah), Flint Hills Resources (Wichita, Kansas) and many others began to cut jobs, close plants, reduce contract workers and other similar actions during the last months of 2008. In January 2009, LyondellBasell Industries (Rotterdam, Netherlands) filed for bankruptcy for the company's U.S. operations, and rumors of others following begin to circulate. For additional information regarding LyondellBasell, see news article from January 8, 2009 - LyondellBasell Files for Bankruptcy, the First in the Chemical Industry for the New Year.

In the past six months Industrial Info has identified slightly more than $700 million in capital projects placed on indefinite hold that were originally planned to begin construction during 2009 in the North American CPI. Almost all of these projects were in some phase of planning or design and had not yet reached a stage of being approved or funded. Another $250 million in CPI project spending planned for this year was identified as cancelled entirely. A small portion of these project cancellations included plans for maintenance turnarounds--approximately $33 million spread across nearly a dozen projects.

Despite how depressed the markets have become since the start of the year, chemical industry majors appear to be making the right decisions in regard to conserving capital, keeping maintenance a priority and closely watching the short-term outlook. LyondellBasell has indicated that it is planning to resume ethylene production at the Chocolate Bayou complex in Alvin, Texas, before the end of January. This unit restart, mixed with plans for other very large plants currently idle in the region, could help bolster confidence in the industry before the first quarter of 2009 ends. No expectations exist of the market's improving dramatically anytime soon, although construction on more than $2 billion in CPI capital and maintenance spending is proposed to begin during the first quarter of the year. See related new article from January 6, 2009 - North American Chemical Industry Prepares to Start New Year with $2.4 Billion in Total Spending for additional information.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.