“The first half [of the year] was negative,” recalls Kevin Swift, Ph.D., chief economist at the Arlington, Va.-based American Chemistry Council (www.americanchemistry.com). But he suggests that the outlook for chemicals points to moderate growth over the next several years. That growth depends on “strengthening domestic demand and an improvement in exports abroad.” Demand for chemistry-derived products links to spending in consumer goods and housing, Swift explains. Given what’s happening now economically, though, “spending may be muted for a couple of years.” He cites continued high unemployment rates as one principal reason. Another reason is “a hard level of debt,” he believes, leading to “consumers cutting back on growth of their purchases.”Many companies have found that they’ve inadequately predicted demand, a shortcoming that created excess inventories and too many workers, observes Jamie Bohan, senior marketing-segment manager for specialty chemicals with automation provider Honeywell Process Solutions (hpsweb.honeywell.com), Phoenix. So now, “companies are trying to position and capture demand growth as the economy recovers, while still maintaining low inventories and without adding workers.”But Swift acknowledges that basic chemicals—inorganics, organics and synthetics usually associated with supply chains—experienced “fairly strong growth” in the last part of 2009 and early in 2010. He expects some growth in the last half of 2010. That increase should be “especially strong for thermal plastics.”Further, exports unfolded as a last-half-of-2009 positive development. “The global-level chemical industry bottomed out in March 2009. But it didn’t bottom out in the United States until June or July 2009,” Swift comments. During the year, depressed natural-gas prices and the weak U.S. dollar drove stronger growth overseas, he says. Those lower natural-gas prices came from high reserves during 2009, but the manufacturing recession also created less demand for natural gas, he notes.Troubles past?So does a crisis still exist in chemicals? That depends. “The industry was severely impacted by the recession and world trade,” Swift stresses. But he says there was an upward trend in third-quarter earnings in 2009. “I think that large plant closures are behind us. And operating rates have been improving since last summer.”He adds that expectations in the industry also have improved from what they were six to 12 months ago. “We believe capital spending fell 20.1 percent last year. We’re expecting [only] a 2 percent drop this year—a hangover from the recession.”But that slump is over, Swift asserts, based on the judgment of the National Bureau of Economic Research Inc. (www.nber.org), Cambridge, Mass. “They typically look at four indicators: constant-dollar personal income, constant-real-dollar sales, industrial production and non-farm-related payrolls,” he explains. The first three indicators “bottomed out” in June or July 2009.Good news on payrolls growth will come, Swift predicts. “I think you’ll see in the first quarter of 2010 that non-farm payrolls will begin to add jobs. But it may be two or three years before the number of jobs reaches the 2007 fourth-quarter peak.” And that assessment, he says, “would define a jobless recovery.”Even so, the chemical process industry faces two significant automation-related challenges, Bohan remarks. The first is an aging and low-skilled workforce. “This [problem] was exacerbated by layoffs in the recession and grows more critical with each passing year.” The second is the aging automation installed base in the mature regions, she states. “Many companies are reluctant to invest in new platforms with uncertain demand and some product lines with questionable futures.” Maybe in two or three years, they won’t be, if Swift’s forecasts come true.C. Kenna Amos, [email protected], is an Automation World Contributing Editor. American Chemistry Councilwww.americanchemistry.comHoneywell Process Solutionshpsweb.honeywell.comNational Bureau of Economic Research Inc.www.nber.org
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