Chemical Processing Spending Projected to Increase in 2010

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The U.S. Chemical Processing Industry (CPI) is projected to increase spending for capital projects and maintenance turnarounds in 2010, according to Trey Hamblet, Industrial Info's vice president of research for the Chemical Processing Industry. "This year has been incredibly difficult, but I believe the stage is set for a recovery in 2010," Hamblet said. "The Chemical Processing Industry is expected to benefit from a recovery in consumer demand and expansion of global trade. Although measurable improvements may be slow in coming, we are seeing an increase in plant operating rates and a gradual rebuild of inventories. The current outlook for the CPI is that spending will be restored to a healthy level by late 2010."

Hamblet was speaking to about 300 attendees at Industrial Info's "Twenty-Ten North American Industrial Market Outlook," held November 10 at the White Oak Plantation in Baton Rouge, Louisiana. Attendees represented a broad spectrum of industry: equipment vendors, distributors, manufacturing firms, engineering and construction firms, labor unions, and financial service companies. The "Twenty-Ten Industrial Market Outlook" event coincides with Industrial Info's release of the 2010 Global Industrial Outlook, which highlights the industrial spending forecast for the coming year. Since 1993, IIR has published a forecast for capital and maintenance spending for the industrial market in North America, and the 2010 outlook marks the fifth year of projecting spending estimates around the world.

Click on table at right for a listing by region of proposed 2010 CPI construction starts.

U.S. chemicals companies have scheduled the start of more than 720 capital and maintenance projects for 2010, according to Industrial Info, with a total investment value (TIV) of $6.25 billion. About one-third of these projects are located in the Southwest, with an aggregate TIV of $3.1 billion. The Southeast and Great Lakes regions also show brisk levels of capital projects starting next year, said Hamblet.

By segment, petrochemicals, specialty chemicals, and industrial gases are projected to garner the largest percentages of U.S. capital spending, according to Hamblet. Petrochemical projects scheduled to begin next year account for about $1.3 billion, or 21%, of all capital spending in the chemicals industry. Specialty chemicals companies have scheduled more than $1 billion of capital projects to begin in 2010, while industrial gas companies have announced capital projects totaling $937 million.

Click on image at right for details of 2010 CPI spending by sector.

Chemical processors also plan to increase spending "modestly" on maintenance turnaround activities in 2010 compared to 2009, Hamblet told the audience. Industrial Info is tracking 450 turnaround projects scheduled for kickoff in 2010 with an aggregate TIV of $1.15 billion. By contrast, in 2009, companies scheduled 392 maintenance projects with an aggregate TIV of $853 million, he said.

Petrochemical companies have scheduled the lion's share of maintenance turnaround projects for 2010, a total of 132 projects with aggregate TIV of $508 million, Hamblet said. Industrial Info's database shows that companies in the plastics/rubbers, inorganics, and agricultural chemicals segments all have scheduled more turnaround projects with a higher TIV, compared to these segments' comparable spending in 2009.

Hamblet said that, in general, capital investments by chemical plant owners in 2010 will be focused on increasing plant efficiencies and reliability, as well as meeting environmental requirements. There will be comparatively less capital investment to expand plant capacity. As is always the case, he noted, profitability for chemical processors and their decisions about capital projects will be driven by commodity prices, specifically the price of petroleum products.

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.