Shale Revolution Accelerates Chemical Industry

According to the American Chemistry Council (ACC), U.S. chemical production will continue to increase this year and next year. ACC forecasts year-over-year output growth of 3.2% for 2015, 3% for 2016, and even better times ahead.

ACC sees the industry becoming a growth engine for the economy. In the 2017–2019 period, ACC forecasts a 5% rise in the economy, and it expects record trade surpluses for the industry by 2020.

The chemicals industry owes most of its recent success to one crucial factor. The innovative fracking has unlocked reserves tapped in shale formations across the United States. Fracking has released plentiful and inexpensive natural gas and natural gas liquids (NGL), such as ethane, which has revived the U.S. chemicals industry.

U.S. companies now have and enjoy an advantage over foreign companies that use naphtha, derived from crude oil, as a feedstock. Compared to NGL, naphtha is expensive.

The shale gas revolution has turned the global chemicals industry on its head. Less than a decade ago, the outlook for producers of domestic bulk chemicals, such as ethylene, was gloomy with production capabilities being shipped overseas. Now, more and more investments in U.S. production capacity is either underway or in various stages of planning.

As reported by ACC, 238 U.S. chemicals companies have announced investments projects worth a total of $145 billion, up $90 billion in announced projects as of mid–2014. Capital spending in the industry soared from 64% from 2010–2014 to $34.4 billion. ACC expects spending to jump another 37% to $45.8 billion by 2018.

It certainly is a good time for the $800 billion U.S. chemicals industry.