Chemical Shipments to Jump 6% During 2000 and 5.5% Next Year

LAURA ELIZABETH POHL / Dow Jones Newswires 22nov00

NEW YORK -- U.S. chemical shipments are set to rise 6% to $462 billion in 2000 and 5.5% in 2001, boosted by strong shipments in life sciences and specialty chemicals, according to a recent industry survey by the American Chemistry Council of Arlington, Va.

The ACC was formerly known as the Chemical Manufacturers Association.

A surge in imports, which are expected to total $73.5 billion compared with $62.2 billion last year, should reduce the industry's trade surplus for 2000 to $7 billion from $8.3 billion in 1999, said ACC Chief Operating Officer Charlie Van Vlack. Imports from Ireland are expected to have grown by 85%, making that country leapfrog Canada as the biggest source of imports, said T. Kevin Swift, the council's economics director. The association's membership includes 200 U.S. chemical companies.

The falling euro was a concern for U.S.-based multinational chemical companies, but Mr. Swift noted that "even during this period [2000] the companies have done well with exports." The chemical industry is the largest exporting sector of the U.S., Mr. Swift said. Exports are expected to rise 14.5%, driven by increases in shipments to Asia and Mexico, which overtook Japan to become the second-largest receiver of exports from the U.S., he said.

Higher energy prices, which ate into margins as unit feedstock costs rose 61%, are likely to squeeze margins into 2001. However, Mr. Swift said the profit outlook for 2001 "is not bad." Buoyed by a strong pharmaceuticals component, life sciences will drive growth, with shipments in that area increasing to $142 billion in 2001 from an expected $132.5 billion in 2000.

Life sciences combine biotechnology and agriculture with products such as genetically modified crops. Specialty chemicals are used to make products, including detergent and cleaning materials.

For the first time, the council's 2000 survey, "The Business of Chemistry in the USA: Performance and Outlook," gauged electronic-commerce activity in the chemical industry. Mr. Swift said preliminary results show e-commerce made up less than 2% of total sales. The council sees that percentage increasing to 22% of total shipments by 2005. Mr. Swift said a more comprehensive report on the state of e-commerce in the sector will be released in about a month.

ARLINGTON, Va. (November 20, 2000)—Driven by strong gains in life science products and exports, U.S. shipments of the products of chemistry rose 6 percent this year, to a record $462 billion, according to the American Chemistry Council's annual study of conditions in the business of chemistry.

The annual study, conducted by the council's Policy, Economics and Risk Analysis staff, also indicates that business of chemistry product shipments should rise 5.5 percent in 2001. In addition, the study found that e-commerce transactions in the business of chemistry will rise dramatically during the next five years and will account for nearly 25 percent of all sales by 2005.

"The Business of Chemistry in the U.S.A.: Performance and Outlook" found that sales in the business of chemistry's life sciences segment rose 7.3 percent during the year, to $132.5 billion. The life sciences segment includes pharmaceuticals and crop protection products.

Despite a high dollar, U.S. chemical product exports set a record in 2000, the council's study found, rising 14.3 percent during the year, to $80.5 billion. The products of chemistry are the nation's No. 1 export, accounting for approximately $1 of every $10 in U.S. exports.

Imports—largely from Western Europe and Asia—rose at a higher rate, the study found. For the year, the council predicts that imports will jump 18 percent over the year-earlier period. The U.S. trade surplus in chemical products, the council predicts, will be $7 billion for the year, compared to $8.3 billion in 1999.

Shipments of specialty chemicals, which include products such as adhesives and sealants and coatings, rose 6.8 percent, to $104.5 billion. Shipments in the business of chemistry's largest sector—basic industrial chemicals—rose 5 percent during the year, to $172.5 billion. Shipments of consumer products, the smallest sector, rose 5.5 percent, to $52.5 billion.

Kevin Swift, the council's chief economist, said that "for most U.S. companies engaged in the business of chemistry, the second half of 2000 provided some challenges, as higher feedstock and other energy prices lead to a margin squeeze.

The result," he said, "was a waning of profits in the industrial chemical and specialty chemical segments, which were offset by gains in the life sciences sector."

Swift said that "most companies in the business of chemistry look for economic conditions to remain mostly favorable during 2001." He predicted that shipments should rise 5.5 percent next year, to $487 billion. He said exports should top $85 billion and that they will again outpace imports. As a result, he said, the U.S. chemical products trade surplus should rebound to $8 billion.

Firms engaged in the business of chemistry are also the nation's leading spenders on non-defense research and development, and the council's study indicates that R&D spending will rise 4.5 percent this year, despite lower profits, to $30.8 billion. R&D spending is expected to increase another 5.5 percent in 2001, the council said, to approximately $32.5 billion.

The council's study also indicates that e-commerce transactions in the business of chemistry will increase substantially during the next five years. According to the study, by 2005 e-commerce will account for 22 percent of total shipments in the business of chemistry—and 27 percent of all shipments of basic chemicals. Currently, the study found, e-commerce sales account for less than 2 percent of total shipments and 2.5 percent of basic and 1.5 percent of special chemical shipments, respectively.