2005 Project Delays Decline for Improving North American Chemical Processing Industry

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Capital spending for the North American Chemical Processing Industry (CPI) has increasingly strengthened over the last two years, as demand in both domestic and international markets has improved. An evaluation of capital projects planned to begin construction during the first six months of this year indicates that the number of delayed projects has decreased substantially in comparison to the same period of time in 2004.

Industrialinfo.com reported over 450 capital projects scheduled to begin construction during the first half of 2005, with an estimated total investment value (TIV) of $6.4 billion. Ongoing research and project verification to monitor the status of these projects revealed that less than 20%, approximately 90 projects representing a TIV of $1.3 billion have been delayed or rescheduled. Over 30 projects were placed on-hold, and less than 6% were cancelled. Of the nearly 90 projects that were delayed, a majority of those projects are still scheduled for a construction start during the last half of 2005, representing a TIV of over $600 million in capital spending. The remaining delayed projects are scheduled for early 2006, and only a few have been deferred until 2007.

Click on the image at right to view a chart showing the project fallout.

Compared with the first six months of 2004, the results indicate one third fewer project delays, half as many project cancellations, and a slight reduction in the number of projects placed on hold. By continuously monitoring and reverifying project spending plans of North American CPI plant owners and measuring the percentage change in project fallout, otherwise known as Gap Measurement, Industrialinfo.com presents an up-to-date accounting of past and future capital spending trends.

The CPI continues to perform strongly as it has for the last two years despite a continued increase in feedstock and energy costs. Capital spending in most sectors of the CPI during the next several years will be focused on upgrading and replacing technology that was installed decades ago and designed to operate on much cheaper feedstock. Some level of consolidation through acquisitions, as well as the closure or retiring of older plants and production units is expected in the coming year. These changes will allow CPI producers to remain competitive in the global CPI market.

Key indicators in the health of the CPI are the performance and level of spending for olefins and petrochemicals. Huntsman and BP have added a substantial amount of ethylene capacity to the domestic market since the start of the year, and plans for more capacity by ChevronPhillips and Dow appear imminent. Market prices for many petrochemical and commodity chemicals remain high, and are expected to sustain that level through 2006, and maybe into 2007.

Industrial Information Resources (IIR) is a Marketing Information Service company that has been doing business for over 22 years. IIR is respected as a leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.