Core Segments of the North American Chemical Industry Struggle to Keep Leading Roles

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Traditionally, most industry observers look at the Chemical Processing Industry (CPI) and consider producers of petrochemicals, inorganic chemicals, plastics and resins to be among the largest and most aggressive spenders in the industry. For the most part, this is true and even during times such as these in which spending is down across every segment of the industry, the producers still spend big dollars to keep up with maintenance requirements and ongoing process requirements. Total spending in the plastics and resins sector is expected to be down this year by as much as 23% compared to the original forecast for 2009. Petrochemical spending could end up being down by nearly 30% based on current active status projects still planned for this year. Producers of inorganic chemicals such as acids and specialty chemicals appear to be impacted the most at nearly 49%.

Despite huge spending declines in these core segments of the CPI, they still represent more than two thirds of the total spending that Industrial Info is tracking for a construction start in 2009 as part of its North American Project Database. Each of these segments is expected to reach nearly $2 billion or more in new construction starts before the year ends.

The very sharp decreases in traditionally strong segments of the CPI are certainly significant, although they are much smaller in comparison to some of the niche segments of the industry. Spending during 2009 for producers of rubbers and rubber-processing chemicals is expected to be down nearly 66%, while spending by adhesive and sealant producers is expected to be off by almost 50%. Carbon black investments are expected to fall off by 88% this year despite the very cheap cost of natural-gas feedstock. Each of these CPI segments shares the same burden, a lack of demand in both domestic and global markets.

Despite the very challenging economic landscape ahead of the CPI and all industrial plant owners, each segment of the industry will likely begin to see a return in demand at different times based on improvements in different markets. For example, producers of petrochemicals will likely be among the last in the CPI to resume investment spending. Consumer markets will have to improve substantially and remain strong for a long period of time before petrochemical, plastics and resin producers begin to invest in growth projects or capacity additions. Inventories across the country are at extreme lows and will have to be filled to pre-recession levels before any significant levels of new investments are approved.

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.