Neil Eisberg | Editor
While the UK chemical industry appeared moderately optimistic about the future in late August 2020 (C&I, 2020, 84, 9, 4), the picture was not quite so positive in the EU, according to the most recent report from Cefic, the European Chemical Industry Council. As Cefic Director General, Marco Mensink noted: ‘While like other manufacturing sectors, the EU chemical industry has been severely hit by the current economic downturn during the Covid-19 outbreak, we are now encouraged to see some first, although very modest, signs of recovery in the European chemical output.
‘At the same time, it is clear that the impact of the crisis varies between the sectors of the chemical industry and overall decline in cross-sectoral manufacturing activity, including automotive and refining, is likely to affect the pace of some investments.’
Chemical output in the EU27 fell by 5.2% over the period January to June 2020, compared with the same period in 2019. The weakest month appears to have been April, however, June output was up 2.9%, compared with May. Cefic points out this is still around 9% below the pre-pandemic level in February 2020.
SMEs are likely to suffer more during this crisis as they continue to face liquidity problems as they ‘do not have a large backstop’, compared with large chemical concerns. ‘They will continue to face delayed payments in the near future from customers, but it is too early to capture a complete measure of these effects,’ according to Cefic.
Meanwhile, Cefic believes global chemical output fell by 3.4% in H1 2020, compared with 2019. China, however, has bounced back – output has already experienced a V-shaped recovery curve with production in July 2020 the highest ever.
In the US, the Mid-year 2020 Chemical Industry Situation & Outlook, published by the American Chemistry Council (ACC) in late June 2020, suggested the global recession may have bottomed out. It also said, however, that although the 2020 outlook is one of the poorest in decades, with global GDP shrinking by 4.6%, it is expected to grow by 5.3% in 2021. ‘Global industrial production will contract 3.8% in 2020 before increasing by 5.3% in 2021,’ says ACC.
Focusing on the US, ACC said GDP would shrink by 6.0% in 2020, before expanding by 4.1% in 2021. ‘US industrial activity started the year on a weak note even before Covid-19-related supply disruptions emerged in February,’ said ACC chief economist Kevin Swift. ‘After suffering the sharpest pullback on record in April, many industrial sectors are showing signs of recovery. Industrial production is set to fall 10.5% in 2020 before increasing by 3.1% in 2021.’
Martha Moore, senior ACC Director of policy analysis & economics, noted: ‘As key end-use and export markets struggle, US chemical volumes will contract as well. Chemical volumes will fall 9.3% this year, while shipments will decline by 13.5%. In 2021, volumes will rebound 12.3% and shipments increase by 14.5%.’ There will also be a major impact on investment: ‘Capital spending will fall 17.6% to $29bn in 2020, then increase by 15.7% to $33.5bn in 2021,’ she added.
Total US chemicals trade is expected to fall by 16.4% to $199bn in 2020, with a sharp 14.5% decline in exports, before rising 10.9% in 2021. Imports are forecast to fall 19.1% in 2020, but grow 11.9% in 2021. The ACC does not see a full recovery to pre-Covid levels likely until late 2022 or 2023.
More recent data collected by ACC show that global chemicals production rose by 1.4% in July 2020, following a 1.6% rise in June, compared with declining activity throughout the period January-May. Production increased in all major regions with the exception of Latin America, Africa and the Middle East. US chemical production was down 5.9% in July 2020, compared with July 2019.
One US chemical sector that has shown growth is speciality chemicals, where market volumes grew 2.2% in July, following a 5.0% rise in June, compared with a 0.3% gain in May and a 12.7% decline in April. The ACC says of the 28 speciality product categories it monitors, 27 expanded in August, compared with 26 in July and a decline across all of them in April 2020. On a year-on-year basis, however, there were gains in only three categories: cosmetic additives; electronic chemicals; and flavours and fragrances.
In many countries, there have been calls for governmental recovery packages to help industry survive through the current pandemic. The UK chemical industry was ahead of the pack with its proposed sectoral deal, which is still being worked on by the UK Chemistry Council, including SCI involvement. In the EU, Cefic has also called for a so-called sectoral Green Deal, designed to prioritise investments into innovative solutions such as e-crackers, chemical recycling, hydrogen and infrastructure.
It remains to be seen if the investment called for is available as governments tackle all the other challenges generated by Covid-19.