Chemical Project Cancellations in 2007 Decline for Second Consecutive Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Chemical Processing Industry (CPI) of the United States and Canada performed strongly last year, and a close look at the number of project cancellations or projects placed on indefinite hold declined for the second year in a row. Early last year, Industrial Info reported that CPI project cancellations during 2006 had declined by a dramatic 16% over 2005, and this year, although the number of CPI projects placed on hold or canceled remained nearly constant, the value of those projects dropped significantly.

Click on the image at right to view 2007 Chemical Processing Industry Project Cancellations.

An estimated 105 capital and maintenance projects that were originally planned to begin construction during 2007 were identified as being canceled or on hold with a total investment value (TIV) of nearly $1.5 billion. This was a decrease of more than 30% compared with 2006. This level of project fallout is minimal compared with past years and reinforces the industry's high Confidence Factor of nearly 70% that it has consistently maintained over the last couple of years. Industrial Info's Confidence Factor measures the number of active and completed projects against canceled project activity over a five-year span to determine the level of confidence in future projects actually maturing and moving forward.

In comparing the TIV of projects on hold versus those that have been identified as permanently canceled, there is a nearly equal split with $736 million in canceled projects and $726 million in projects placed on indefinite hold. The significant difference is the actual number of projects; only 38 projects were placed on hold. Those 38 projects will be closely watched, as they equal a substantial opportunity should they be resurrected.

At least seven of the projects in this analysis had been previously funded or even began some phase of initial construction, and their combined value exceeded $150 million. The majority, $1.04 billion of canceled or delayed project activity, fell into a category of very early planning and never made it to any advanced stage of permitting or execution. Another $230 million was pending final review and approval when it was canceled or placed on hold.

As can be expected, the market regions that generally experience the largest investments each year are also the regions with the largest percentage of fallout. The Southwest region represented nearly half of the total investments identified in this analysis at more than $740 million while slightly less than a third of the project activity with 29 projects. The Southeast region experienced a similar number of project cancellations at 21 projects while the TIV of these projects was sharply less at $300 million.

Industrial Info Resources (IIR) is the leading marketing information services company for the industrial process, heavy manufacturing and energy-related markets throughout the world. Celebrating its 25th anniversary, IIR provides accurate and timely intelligence featuring plant and project information databases, focused market databases, industry forecasting, key industry contacts, industry and territorial map products, direct marketing services and applications, and daily industry news.