Chemicals, Solvents & Intermediates, Olefins

December 19, 2024

Modest recovery in US chemical volumes expected in 2025

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HIGHLIGHTS

US chemical demand projected to increase following two years of decline

Recovery expected in 16 of 20 key sectors tracked

Tariffs changes could impact US exports and investment

US chemical makers face a mix of market and geopolitical challenges and opportunities heading into the New Year with demand forecast to recover in 2025.

The American Chemistry Council (ACC) anticipates slight improvement in US chemical volumes in 2025, projecting a gain of 1.9% in its "Year-End Situation & Outlook" report released Dec. 12. Growth will be supported by a slow recovery across various end-use segments both domestically and internationally, said Martha Moore, ACC chief economist.

A gain would follow two years of declines in US chemical volumes due to persistent manufacturing and industrial weakness. "We expect to see a rising industrial tide, including construction improving," Moore said. "More than 80% of basic and specialty chemicals are consumed by the industrial sector, and industrial production stalled in 2024 following essentially stagnant growth in 2023."

Demand in the US and abroad was hampered by strikes, supply chain disruptions and several hurricanes. "We see another decline in basic and specialty chemical volumes in 2024 before a modest recovery in 2025," she added.

Globally, chemical production growth should continue into 2025, with worldwide volumes expected to rise by 3.1% after growth of 3.5% in 2024. The largest increases are projected in the Asia-Pacific region, the former Soviet Union economies, Africa and the Middle East.

The outlook across key US chemical end markets is improving; ACC expects 16 of the 20 key sectors it tracks to expand in 2025. This marks improvement from 2024, which saw 12 of the 20 sectors expanding, and 2023, when only eight sectors grew. End markets linked to electronics, including semiconductors, computers and electrical equipment, performed well, while those associated with housing and broader construction continue to face challenges.

Chemicals should be on the front edge of industrial recovery, Moore said. "Because of its position in the supply chain, we expect chemical demand to pick up before the broader industrial sector," Moore said.

Recovery in the automotive and housing sectors remains critical to demand improvement and the outlook is positive for both sectors. The average automobile built in North America contains over $4,400 worth of chemical products, including 426 pounds of lightweight and durable plastics and composites. US light vehicle sales are expected to rise 3.2% in 2025, to 16.2 million, according to the ACC.

Housing starts fell to 1.35 million in 2024 but are expected to rebound slightly to 1.40 million in 2025 as interest rates ease. Roughly, 33,000 pounds of chemical products are in the average single-family home built in the U.S.

"In 2025, we anticipate gains across all segments, in line with a modest recovery in construction and manufacturing," Moore said.

Chemical makers also face trade uncertainty in the year ahead. The potential for new tariffs under the incoming Trump Administration poses risks with industry exposed on both the export and import fronts. "If tariffs are raised to the levels that have been talked about, that would be very troubling to the US economy and to chemical demand," Moore said. Recovery in US chemical exports in expected in 2025 as global demand for goods slowly improves. The ACC forecasts 2025 US chemical exports at $175.4 billion, a year-on-year increase of 4.8%. Some 28% of US chemical output is exported, according to the ACC.

The longer-term outlook for US chemistry remains positive, with the ethane feedstock advantage continuing to favor US production. Shale-advantaged investment continues in the US, with electronics, specialty and low-carbon projects also drawing investment. ACC expects chemical capital expenditures to grow 3.2% in 2025, with 25% of capital budgets tied to sustainability.



Rob Westervelt

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