Specialty Chemicals: Robust Demand Should Continue In 2018

Persistent growth in the U.S., continued economic expansion in Asia, and a renewal of demand in Europe all bode well for specialty chemical output in 2018, according to the American Chemistry Council. The trade association projects a 3.0% global production rise in 2018 after a 2.5% increase in 2017.

Ever optimistic, ACC had expected output to jump 3.3% in 2017. But despite an overall pickup in the global economy, some industries that depend on specialty chemicals, such as oil and gas drilling, were weak, ACC says. Industry observers say the elements are in place for a better 2018.

Ray Will, a director at the consulting firm IHS Markit, discerns a number of trends likely to increase demand for specialty chemicals. Among them are a shift to electric vehicles and a move away from the use of fluorochemical coolants in home refrigerators.

China, Will says, plans to establish a system of quotas that will require electric vehicles to make up at least 10% of automakers’ output beginning in 2019 and increasing annually thereafter. The move is likely to bolster demand for battery materials as well as the electrolyte solutions that shuttle a charge between a battery’s anode and cathode.

Chemical makers could be in for a sweet ride if electric vehicles catch on in the U.S., points out credit rating agency Fitch Ratings. While Fitch sets the value of chemicals in a conventional vehicle at $3,000, it estimates the value of chemicals used in electric vehicles at $10,000, mostly related to batteries.

In the world of refrigeration, manufacturers are seeking coolants with low global warming potential. Rather than shift to hydrofluoroolefin refrigerants, many makers of home refrigerators, especially in Europe and Japan, are shifting to hydrocarbon refrigerants, Will says. The hydrofluoroolefins, developed for use in auto air-conditioning, are significantly more expensive, he notes.

The paints and coatings sector should benefit from an uptick in the economy, especially in the U.S., where tax reform will boost capital spending, predicts Phil Phillips, president of Chemark Consulting Group. New machinery and equipment, he says, require a significant amount of paint. Phillips expects paint production to rise about 3.5% in 2018.

Adhesives will grow at a similar rate, Phillips says, singling out a projected increase in demand for urethane adhesives to assemble and seal automobile body components.

Consumer demand for personal care chemicals continues to rise, according to the consulting firm Kline & Co. Trends in the $1.6 billion-per-year specialty ingredients market include growing demand for blue filters said to protect skin from computer screen emissions and cosmetics formulated to protect skin from air pollutants, says Kunal Mahajan, a chemicals project manager with Kline.