The outlook for the global chemical industry in 2023 is uncertain

In 2023, chemical producers will face slower economic growth, declining demand, and oversupply in key product
chains.
In stark contrast to upstream energy and refining margins, petrochemical production margins began to weaken at the end of 2022 and will continue to be under pressure
this year.

"Petrochemical excess capacity will severely impact industry margins, making market profitability more dependent on downtime and demand growth
," said Mark Elamo, global senior vice president of oil markets, midstream, downstream and chemicals at S&P Global Commodity Insights.
"The petrochemical market has been under threat of oversupply for the past two years, but the arrival of petrochemicals has been delayed
due to logistical restrictions and extreme severe weather.
"Barring major supply disruptions or supply chain issues, the petrochemical industry's difficulties will continue in 2023 and even spread into 2024
," Ellamo said.
”

According to the "Situation and Outlook at the End of 2022" released by the American Chemical Industry Council (ACC), the US chemical industry performed steadily in 2022, with production growth of 3.
9%, reaching the best level ever, but the outlook for 2023 is very different
.
The growth momentum seen in the first half of 2022 has faded, and ACC economists expect U.
S.
chemical production to decline in 2023 due to
high inventories and weak growth prospects in many export and end-use markets.

Martha Moore, ACC's chief economist and head of economics and statistics, said: "The end of 2022 saw significant challenges in the global economy, adversely
affecting chemical producers.
High inflation has led central banks to take aggressive measures to slow economies in the United States and abroad
.
The ongoing Russia-Ukraine conflict could marginalize Eastern European economies, and spillovers from high energy prices are hurting Western European economies and many emerging market economies
that rely on imported energy and food.
S&P Global forecasts that real GDP growth will slow to 1.
6% in 2023 from 2.
9% in 2022, and industrial production growth will slow to 1.
4%
from 3.
0% in 2022.
Sarah Johnson, executive director of global economics at S&P Global Market Intelligence, said: "Starting in late 2022 or early 2023, the economies of Europe and North America, which account for half of global chemical production, are likely to experience a mild recession
.
High inflation and tight monetary policy will undermine discretionary consumer spending, housing construction, and business investment
.
"The resilience of emerging markets in Asia Pacific, the Middle East and Africa will allow the global economy to continue moving forward, although the pace of growth is likely to be very slow
in 2023.
However, ACC expects both basic and specialty chemicals production to rebound
in 2024.
Moore said that global chemical production will grow at a rate of 2.
9% as chemical production in Western Europe recovers from sluggish levels and production in Asia rebounds, with only Eastern European chemical production expected to be flat
.

Elamo said the demand for plastics' toughness is not enough to ease profit pressures
going into a cyclical recession.
Over the past few years, petrochemical supply has grown faster than demand
.
"Ethylene demand is growing at a rate of 6 million tonnes per year, and supply increments have already significantly exceeded that level, especially in
2021 and 2022," Elamo said.
"In 2020~2022, the global ethylene production capacity will increase by more than 10 million tons, mainly in Asia and North America
.
The pace of expansion will slow down in 2023, especially in Europe and Asia, where ethylene plants based on naphtha will face consolidation
.
Some producers may also need to take permanent shutdowns of unprofitable assets
.

Among the regions, market participants pay more attention to the Chinese market
.
Market participants predict that China's economic growth will rebound significantly in 2023, with an expected growth rate of 5.
5%, and lead the recovery
of chemical demand.
"When it comes to basic chemicals and specialty chemicals, China dominates all key indicators
," Ellamo said.
"China currently accounts for 40% of basic chemicals demand and 34%
of production capacity.
In terms of market value, China accounts for 26%
of demand for specialty chemicals.

Investment bank Jefferies analyst Lawrence Alexander said the recovery in Chinese chemical demand may bring opportunities
to U.
S.
chemical companies.
Overall, the U.
S.
economy will decline moderately this summer and autumn, with improvements in some areas in Europe and China
.

In the U.
S.
market, ACC is relatively pessimistic
.
The agency expects U.
S.
chemical (excluding pharmaceuticals) production to decline 1.
2 percent in 2023, with basic chemicals down 1.
5 percent, specialty chemicals down 1.
2 percent, agrochemicals up 0.
6 percent, and consumer chemicals down 1 percent
.
ACC predicts a mild recession in the U.
S.
economy in 2023, with U.
S.
GDP growth expected to be flat
.
The challenges facing U.
S.
chemical producers in 2023 include: transportation and logistics costs, increased raw material costs, attracting and retaining a high-quality workforce, trade uncertainty, and a weak U.
S.
economy and spending power
.