North American Chemical Project Cancellations Drop by 16% in 2006

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Researched by Industrial Info Resources (Sugar Land, Texas). Industrial Info reported a significant 16% drop in the number of capital and maintenance project cancellations in the Chemical Processing Industry (CPI) during 2006 compared to 2005. At the close of 2006, Industrial Info had reported a total of 119 projects originally planned to begin construction during 2006 that were either cancelled or placed on hold, representing a total investment value (TIV) of more than $2.2 billion. This is a decrease from the 142 projects reported to have been cancelled, or indefinitely put on hold during 2005 with a TIV of over $3.5 billion.

Click on the image at right to view a chart showing the comparison of CPI project cancellations by product for 2005 vs. 2006.

This decrease in cancellations equals an increase in planned project activity and another vote of confidence in the overall strength of the CPI in North America. Industrial Info’s adjusted Confidence Factor for the CPI is currently an estimated 66.1% and has remained very close to that level for much of the past two years. The Confidence Factor measures the number of active and completed projects against cancelled project activity over a five-year span to determine the level of confidence in future projects actually maturing and moving forward.

Looking closer at the projects cancelled or delayed last year, roughly 78 projects were permanently cancelled while only 41 were placed on hold temporarily or indefinitely. Cancelled projects equaled the largest percentage of the TIV at $1.4 billion. A great deal of the cancelled or delayed project activity took place in Texas, home to the largest population of chemical plants in North America. Despite these delays, Texas was still expected to realize over one billion dollars in project activity during 2006 with another $2.2 billion being tracked for future investments in 2007 and beyond.

The segments of the CPI most impacted by project cancellations or delays were fertilizers & agricultural chemicals and pigments. These two industry segments saw over $550 million in cancelled or delayed projects during 2006 with an average project TIV of $32 million and $52 million, respectively. This was a major change in comparison to 2005 when only $116 million in project activity was cancelled or delayed. The two industry segments that dictate a great deal of the spending across all of the CPI, petrochemicals and plastics, saw the opposite outcome in 2006. Only $1.1 billion in projects were identified as cancelled or delayed last year compared to over $1.5 billion in 2005. This matches well with the increased level of spending and optimism the industry is still enjoying.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 24 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.