At the IHS Global Petrochemical Conference in Houston last week, Dave Witt, senior vice president of IHS and general manager of IHS Chemicals, pointed out that the North American shale revolution will significantly affect the profit distribution pattern of the global chemical industry. North American chemical industry profits have been higher than the global average since 2009, and this trend is expected to continue until 2018.
When talking about the factors behind the global chemical supply, demand and profit trends, Witt said: “From a profit point of view, the global chemical industry has undergone a polarization phenomenon: on the one hand, North America relies on obvious raw material advantages, the chemical industry Earnings are picking up significantly; on the other hand, the chemical industry in other regions is facing difficulties, and high costs lead to weak earnings.”
Witt pointed out that the global financial crisis has led to a lack of profitability in the chemical industry, but there have been signs of recovery in 2013. Looking ahead, the capacity utilization rate of the global basic chemicals and plastics industry is expected to rebound in 2014, but the scope is limited, and the downturn in the chemical industry will be extended to 2018. Despite this, some things in the industry are changing. The EBIT of the chemical industry in Western Europe will continue to be below the global average, and the volatility in the Asia-Pacific region will be greater. IHS is more pessimistic about the recovery in the Asia-Pacific region and predicts the biggest change in chemical profitability. It is North America. Historically, the profitability of the North American chemical industry has remained at the same level as the global average, but the success of the shale gas revolution will allow the region to enjoy raw material advantages for a long time, and the profitability will increase significantly.
Witt also analyzed the impact of changes in ammonia and ethylene profits on the global chemical industry landscape. According to IHS analysis, in 2008 North American ammonia production accounted for 10% of global production, and profits accounted for 8% of the world. However, by 2018, North American ammonia production will account for 12% of the global total, and profits will account for 20%. In 2008, North American ethylene production accounted for 25% of global production, and profits accounted for 19% of the world. However, by 2018, North American ethylene production will fall to 24% of global share, and profit share will rise to 30%. The good earnings expectations of the chemical industry in North America have led to a significant increase in foreign direct investment in the chemical industry in the region.