Project Cancellations Reach New Heights in the Chemical Industry This Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--No one needs to be reminded what a challenging year 2009 has been for the Chemical Processing Industry (CPI). The amount of project cancellations identified since the start of the year highlights the trials that the industry has faced. In the United States, Industrial Info has identified more than $2.8 billion in CPI spending that was originally planned to begin construction this year that has been cancelled entirely or placed on indefinite hold. This is an increase of more than $1 billion from 2008 cancellations, when cancelled projects totaled $1.7 billion.

Not only was it a big year for shelving projects in response to the global economic crisis, but there was also a significant number of very large cancelled projects that catapulted the total value. At least eight individual projects each valued at more than $100 million were placed on hold or cancelled, representing more than $1 billion in project activity that didn't move forward this year. Among the biggest projects postponed included Enterprise Products Partners LP's (NYSE:EPD) (Houston, Texas) $170 million plan to convert a former MTBE unit to produce Iso-Octane fuel in Texas. Toray Carbon Fibers America Incorporated (Flower Mound, Texas) deferred plans for a fifth-phase expansion of its Decatur, Alabama, fibers plant, ending a long streak of expansions at the site.

Looking ahead to the approaching year, the number of cancelled projects is decreasing, although it still remains higher than 2008, with an estimated $1.9 billion in projects already cancelled or postponed for 2010. The largest victims so far appear to be energy-related projects in which the addition of cogeneration units was being considered. The cost of energy and feedstock has remained low in comparison to historical pricing, and the short-term outlook for these commodities is that prices will remain low. For years, Mark Twain Waste & Energy Corporation (Louisiana, Missouri) has pursued plans to provide feedstock and steam to a chemical plant owned by Ashland Incorporated (NYSE:ASH) (Covington, Kentucky), but plans for the nearly 500-megawatt cogeneration facility appear to be indefinitely stalled.

The start of 2010 will be difficult as plant owners search for stability in consumer confidence and an opportunity to begin restocking inventories as global markets improve. On the bright side of things, there is some optimism that overall spending will increase next year, although decisions about some of the year's largest projects may not be made until well into the second quarter.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.