ACC Industry Forecast: The U.S. chemical industry may face a downturn or even a recession in 2024

Industry forecasts recently released by the American Chemistry Council (ACC) show that the U.S. chemical industry have a difficult year in 2023, and the economy will still be sluggish or even in recession in 2024. ACC assesses that although U.S. chemical industry output (excluding pharmaceuticals) fell by 1.0% in 2023, it will improve slightly in 2024 and is expected to grow by only 1.5%.

ACC Chief Economist Martha Gilchrist Moore said that the trend of slowing consumption in the third quarter of 2022 didn't change in 2023. The weakness is due to destocking, as consumption around the world experienced a peak as COVID-19 restrictions were lifted. When demand cooled, dealers and manufacturers found excess inventory and reduced purchases. Moore said: "The industry is recovering, but it will definitely face an economic downturn or even recession in 2024."

After the United States announced GDP growth of 2.3% in 2023, ACC predicted that economic growth in 2024 would be only 1.1%. Due to high loan interest rates, sales in certain industries may be affected. For example, automobile manufacturing is the main consumer of polymer chemicals, and each car consumes an average of about US$4,000 in chemical products.

U.S. automobile sales rebounded sharply in 2023, with light vehicle sales reaching 15.5 million units, up from 13.8 million units in 2022. ACC predicts that sales in 2024 will be the same as in 2023. However, the real estate market will continue to decline. The U.S. housing start rate has dropped from 1.55 million units in 2022 to 1.39 million units in 2023. ACC predicts a lower housing start rate of 1.35 million units in 2024.

Business investment rose 4.1% in 2023, helped by the U.S. Inflation Reduction Act and the Chip and Science Act, which provided subsidies for sustainability and other industries. Investment growth will fall to 0.6% in 2024, driven by higher borrowing costs and slowing consumer spending.

In addition, ACC expects the U.S. industrial sector to experience zero growth in 2024. One bright spot of the U.S. chemical industry is its relatively cheap feedstock, with bulk petrochemical feedstocks in the U.S. typically being natural gas, compared with oil in other regions such as Europe and East Asia.

Moore said, "U.S. natural gas prices have continued to fall over the past decade. Taking advantage of this, chemical companies have established large-scale petrochemical and polymer projects, and polymer exports have indeed been active, up 14% compared with the same period in September 2023. Competitive American products entering the world market are in line with everyone’s expectations."