Industry performance in the remaining months of 2013 and early 2014 is likely to be similar to 2012’s growth of 1.6%.
Overall, North American chemical companies’ credit quality is expected to stay healthy, supported by the recovery of the general economy. Euler Hermes projects industry revenue will slightly outpace GDP advances.. Liquidity will remain stable for most major industry players due to conservative corporate balance sheet management, high cash reserves and easy access to credit.
“The U.S. chemicals industry is a cyclical business, highly dependent on the global economy’s changes and reliant on the costs of basic commodities, especially oil and gas,” said Sergey Shchepochkin, author of the report and industry sector credit analyst at Euler Hermes. “The chemicals industry is often considered an early indicator for the economic cycle, as many products are consumed at early stages of the production supply chain.”
The strength of the American car manufacturing industry remains one of the most positive factors in chemicals demand. Additionally, chemicals manufacturers continue to benefit from the extremely low price of domestic natural gas, which has significantly reduced petrochemical producers’ input costs. This has allowed them to increase exporting activity as they have become more competitive in the global marketplace. The U.S. petrochemical manufacturing subsector is projected to grow in the mid-single digits at a pace slightly ahead of GDP growth through 2018. This is largely due to increasing demand from key buyers, including plastic and rubber manufacturers.
“In contrast to the U.S. market’s strength, global markets are likely to experience weaker demand for chemicals, plastics and coatings due to slower growth in Brazil, China and India, along with a nascent recovery in Europe,” said Shchepochkin.