E&C Activity in the North American Chemical Industry Begins to Feel Slowdown

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Researched by Industrial Info Resources (Sugar Land, Texas)--The engineering and construction (E&C) companies of North America are beginning to feel the undeniable effects of the slowed Chemical Processing Industry (CPI). At the close of 2008, Industrial Info was tracking more than $4 billion in project spending planned to begin construction in North America. Over the last few months, that number has subsided to an estimated $3.4 billion. Despite this large decline in project activity, an overwhelming majority of these remaining projects are approved and nearly one-third is in some phase of civil or site construction.

The nearly $3.4 billion identified in this analysis consists of more than 170 individual capital and maintenance projects. Not surprisingly, more then half of the project activity and a great deal of the total spending is concentrated in the United States' Southwest market region, consisting of Texas, Louisiana, Arkansas and Oklahoma. Although spending in the petrochemical sector of the CPI has slowed almost equally with the rest of the industry, these are still the largest of all chemical plants, and even a modest expansion or incremental capacity creep can be very costly and require the expertise of an E&C firm.

Among the largest projects planned to begin construction this year where E&C services have been identified includes plans by Terra Industries Incorporated (NYSE:TRA) (Sioux City, Iowa). Terra is working with E&C firm Ventech Engineers Incorporated (Monroe, Louisiana) to build a $180 million urea ammonium nitrate unit addition at its Woodward, Oklahoma, plant. At least five or more projects exceeding $100 million each are planned to begin construction this year where E&C services have been selected or awarded.

Even as some economists begin to suggest signs that the global economy has hit its bottom, the CPI will trail most other industries in showing tangible results or signs of improvement. Consumer demand is expected to rise slowly, equaling a slow return to full operating rates in the CPI. E&C companies have been staffed at very high levels for several years in a row to keep up with the fast pace and demand in both domestic and international markets during the last few years. The chemical industry's ability or inability to pick up the pace with the rest of the economy could mean the difference between short-term success or continued hardships for a great deal of the E&C community. Chemical spending abroad is still significantly larger then the entire chemical spending in North America and for those E&C firms capable of supporting international growth, this could help to diversify growth plans.

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Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.