North American Chemical Project Cancellations for Second Quarter Nearly Double from One Year Ago

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Researched by Industrial Info Resources (Sugar Land, Texas)--The economic upset across the world has taken a significant bite out of capital and maintenance spending in the Chemical Processing Industry (CPI) originally planned for the second quarter of this year in North America with more than $780 million identified in project cancellations. This is almost double the level of project delays and cancellations for the same quarter last year, which was recorded at $402 million representing 46 individual projects. Despite these setbacks, this still leaves an estimated $1.7 billion in active projects with the potential of beginning some phase of construction during these three months.

Geographically, the three market regions with the largest number of project cancellations are the Great Lakes, Northeast and Southwest. This really isn't significant for the Southwest region, as it is expected that the region with the greatest overall activity will also be susceptible to a larger amount of project fallout. The Northeast region hasn't been kind to the CPI for many years. As the industry has become smaller and more niche focused, in many cases, plants in this region have found themselves distanced from synergistic logistics, including end markets, transportation and even feedstock. Although the Great Lakes region has lost a great deal of momentum and market with the downsizing of the automotive industry, it is still home to a large number of chemical plants that contribute to North American CPI.

Economic times for the industry are bad, although the outlook is better compared to other industrial sectors. A number of large projects important to the momentum of other downstream industry are moving forward as planned. Even faced with bankruptcy and a depressed olefins market, LyondellBasell Industries (Rotterdam, The Netherlands) is moving ahead with plans to spend nearly $70 million on optimizing the performance of its Morris, Illinois, plant. Construction of two hydrogen units is expected to begin this month totaling more than $200 million: one in Texas and the other in Illinois. These are just a few examples of chemical companies demonstrating the ability to look beyond the current short-term difficulties and focusing a positive outlook on the future.

There are several segments of the CPI that are expected to be affected less than others by the current economic challenges. These include agricultural chemicals and industrial gases, specifically fertilizers and hydrogen. Other segments expected to be affected for longer periods but possibly rebound quicker include specialty chemicals, formulators and some petrochemicals. Those expected to rebound the slowest are plastics, polymers, resins and consumer commodity driven segments.

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