ACC expects modest US chemicals volume recovery in 2025 – economist

NEW YORK (ICIS)–The American Chemistry Council (ACC) expects a 1.9% rebound in chemical volumes in 2025 after two consecutive years of declines as the US economy undergoes a soft landing and the housing market improves in the second half of the year, its chief economist said.

“We do expect the Fed rate cuts to stimulate demand for durable goods and investment, and certainly loosen things up in the housing sector,” said Martha Moore, chief economist at the ACC, at a press briefing.

“When the differential between the mortgage rates most people got during the pandemic years and what they are now starts to come closer together, that will hopefully increase some transactions in the housing market,” she added.

The economist also sees an improvement in manufacturing and industrial production globally in 2025, which should help US exports, although trade policy is very much uncertain with the threat of tariffs by the incoming Trump administration, she noted.

Yet she sees a recovery in demand for US chemicals, although a modest one, in 2025, and weighted to H2 2025 as the lag effects of the US Federal Reserve’s rate cuts take hold. Yet here there is also uncertainty on the trajectory of rate cuts, given sticky inflation.

“Weakness persisted in 2024, led by specialties and basic chemicals… but next year we expect to see volume growth across all segments,” Moore stated.

“We’ve got good energy fundamentals here in the US and the ethane advantage persists. Capacity expansions in manufacturing from reshoring [in the US] and nearshoring [in Mexico] are expected to drive chemical sales in the years ahead,” she added, noting that Mexico is one of the US’ top trading partners.

The economist sees 2024 US chemical volumes down 0.4% following a decline of 0.2% in 2023, capping off a dismal period for the industry. Volume declines in 2024 are expected to be led by specialty chemicals (-3.2%) and basic chemicals (-1.5%), offset partially by agricultural chemicals (+1.2%) and a strong gain in consumer products (+5.0%).

Within US specialties, there is softness in architectural coatings and automotive chemicals, she noted.

The global picture in chemicals is quite different, with a 3.8% gain in volumes expected for 2024, led by Asia Pacific (+4.8%). Europe volumes should rise 1.9% in 2024 off a very sharp decline in 2023.

Looking to 2025, Moore expects world chemicals output to increase 3.1% with gains across all regions.

For the overall US economy, the economist sees 2025 GDP growth to slow to 2.0% versus an expected 2.7% in 2024. She sees housing starts improving to 1.40 million in 2025 from 1.35 million in 2024, and light vehicle sales rising to 16.2 million in 2025 from 15.7 million in 2024.

TRUMP ADMINISTRATION IMPACT
With the incoming Trump administration, the ACC will be closely tracking developments on regulations, transportation and tariffs.

“We’ll be keeping an eye on any policy and regulatory changes, [especially] chemical management regulatory policies – things like TSCA (Toxic Substances and Control Act),” said Scott Jensen, director of Issue Communications at the ACC.

“We’ve had some issues in the past few years when it comes to new and existing chemical reviews, and then of course we’ll be keeping an eye on trade and tariffs pretty closely, along with transportation issues,” he added.

LOOMING DOCKWORKERS STRIKE
Most immediate on the transportation and trade front is a potential US East Coast and Gulf Coast dockworkers strike on 15 January if the union and shipping companies do not reach a deal working out a dispute on the future of automation at the ports.

“It’s a big deal. Those are some of the biggest ports for us to not only export chemistry but also import,” said Jensen.

On 12 December, President-Elect Donald Trump backed the International Longshoremen’s Association (ILA) union and its members, saying the harm to workers far outweighs the benefit of money saved by automation.

Focus article by Joseph Chang

Thumbnail shows a flask used in chemistry. Image by Fotohunter.