Manufacturing

American Chemistry Council

Martha Moore, Chief Economist

Following two years of weak growth (first due to trade tensions, and then due to COVID-19), the U.S. chemical industry expanded in 2021 on the back of the global post-lockdown rebound. With strong consumer demand for goods, the table was set for solid gains in U.S. chemical production in 2021.

Then in February, winter storm Uri brought freezing temperatures and ice to the Gulf Coast, causing widespread power outages and freeze damage which knocked out a wide swath of chemical and other industrial capacity. Texas, the largest chemical manufacturing state in the U.S., was especially hard hit as it experienced the coldest temperatures.

Because of the unprecedented damage and wide geographic nature of the event, outages persisted for months at some facilities. Due to these disruptions, some facilities in other parts of the country that depended on raw materials from the Gulf Coast also had to shut down or reduce operating rates, resulting in a severe contraction in chemical production during Q1 and into Q2.

Inventories, which were relatively tight going into 2021 (in part due to lingering disruptions related to Hurricanes Laura and Delta), tightened further. Then, at the end of August, Hurricane Ida made landfall in Louisiana as a destructive Category 4 hurricane, causing extensive damage to chemical facilities in the nation’s second-largest chemical producing state. Capacity for many basic chemicals (including the vinyls supply chain) was disrupted for more than a month.

In addition to weather-related disruptions, softer demand in some chemistries was tied to external supply chain issues in key end-use markets. For example, the slowdown in global vehicle production due to a shortage of semiconductors depressed demand for chemistries tied to that sector, such as engineering resins and coatings, among others.

Following a 3.5% contraction in U.S. chemicals production in 2020, and despite multiple challenges during 2021, we expect chemical production rose by 1.4%. As the recovery continues to build and end-use and export markets strengthen, chemical output is expected to rebound by 4.3% in 2022 as inventories are rebuilt and demand in end-use markets continues to firm.

Looking ahead, against the backdrop of growing demand from end-use markets is the continued competitive advantage U.S. chemical producers enjoy due to the past decade’s development of unconventional oil and gas resources and chemical industry investment. As demand and supply move back into balance and growth in end-use markets stabilizes, production growth for U.S. chemistry will average a little over 2% between 2023 and 2025.

Consumer Brands Association

Katie Denis, Vice President, Communications and Research

The consumer packaged goods industry — makers of food, beverage, personal care and cleaning products that Americans rely on every day — has been under tremendous strain to meet soaring demand. The most recent CPG sales numbers show a 11.0% increase from the same time last year and mark the fifth straight month where demand has risen above levels not seen since the panic-buying of March 2020 — notable even accounting for inflation, which has been lower for CPG prices than overall consumer prices.

Meeting the demand throughout the pandemic has been challenging, but the havoc on the U.S. supply chain has pushed it to its most difficult point yet. The strain on the supply chain has been tremendous and has contributed to 57% of Americans experiencing shortages at the grocery store recently, according to a recent Consumer Brands/Ipsos poll.

Though not for ideal reasons, awareness of the supply chain is up dramatically and should raise its importance in the eyes of policymakers who need to play a role in easing the backlog. Before COVID-19, more than three-quarters of Americans thought less or not at all about the supply chain. Nearly half (46%) of Americans gave the supply chain no thought or didn’t even know what it was and another 30% say they gave it less thought. Today, the once-invisible supply chain is kitchen table conversation.

Solving the supply chain crisis will require dedicated attention from the federal government. Myopic focus on relieving port congestion threatens only to move bottlenecks, not solve for them. To get CPG goods moving, it will take trucks — and truck drivers — to make the difference. But increasing trucking capacity depends on good policy and the will of constituents. A recent Consumer Brands/Morning Consult poll in four key states (Arizona, Georgia, Nevada and New Hampshire) found that the will is there. Around nine-in-ten respondents feel it is important to expand trucking capacity next year to meet supply chain demands. In every state, another eight-in-ten said they wanted their elected officials to address trucking capacity specifically next year.

In addition to adding trucking capacity, the CPG industry needs to grow its workforce. A robust workforce is critical to keeping store shelves stocked with essential goods, and the 130,000 openings in the industry complicate that objective. While strong gains were made in the November jobs report, that momentum may be stalled by the dominance of the Omicron variant of COVID-19 and the uncertainty over the Biden Administration’s vaccine mandate.

Plastics Industry Association

Perc Pineda, PhD, Chief Economist

Low plastics material and resins supply caused the plastics product manufacturing to slow earlier this year but turned around after May. However, it appears that plastics production has been running on high gear to meet higher demand for plastics and plastic products. In November, plastics production was us 7.1% from a year earlier. Compared to the end of the COVID-19 recession in April 2020, plastics products manufacturing rose 23.0%. With 2021 expected to end on a high note, a 4.5% increase in plastics production can be expected in December year-on-year.

Plastics and rubber shipments have been increasing since February this year. It increased 7.5% in October from a year earlier to $22,019 million, according to the latest estimates of the U.S. Census Bureau. Business conditions remained favorable in November and assuming that’s unchanged in December, this year could close with shipments 9.5% higher than December last year.

After many years of stable resin prices, 2021 saw prices climb into double-digits due to ongoing interruption of the pandemic and adverse weather conditions that caused resin shortages. While the causes of resin shortages have been analyzed by many industry observers, strong demand for plastics and plastics products sustained elevated prices throughout 2021. However, data suggest that resin prices peaked in the summer months – price increases moderated thereafter, which is expected through December. It remains to be seen when prices will return to their pre-pandemic levels. Given that supply chain issues could remain unresolved—at least in H1-2022—resin prices could remain elevated, but the rates of increase will continue to moderate as resin supply catches up with resin demand.

Although resin production has increased, the plastics industry continued to experience low labor supply in 2021 – reflecting the economy’s labor participation rate that appears to be stuck around 61.0% since June last year. Plastics products manufacturing saw an increase in employees in August reaching 598.6 thousand. The U.S. Bureau of Labor Statistics (BLS) estimates plastics manufacturing employees at 597.7 thousand in October. Considering the low supply for workers, it is unlikely that hiring increased dramatically in November, albeit in November plastics and rubber unemployment was estimated by BLS at 1.5%. This means that November and December plastics manufacturing employment could be at 596.3 and 596.2 thousand, respectively.

This year saw stable plastics molds exports. Except in February, where exports were $39.9 million, plastics molds exports stayed above $40.0 million through October. May and August exports at $53.1 million and $57.3 million, respectively. It is projected that the two remaining months of 2021 will continue to see exports above $40.0 million. Molds exports in 2021 are less volatile than in 2020. However, the uneven pace of emergence between countries from the pandemic could cause only moderate increases in molds exports in 2022.

Although the U.S. manufacturing sector continues to grapple with supply chain issues, 2021 is looking to be a banner year for US plastics machinery. Demand has been running hot—in primary machinery types and auxiliaries—as converters deal with higher demand. Helped by low-interest rates to finance equipment investment, low labor supply caused processors to enhance productivity through plastics equipment and auxiliaries. Data shows that plastics machinery imports have stayed stable in 2021 as equipment suppliers continue to service robust demand. In October, plastics machinery imports totaled $305.5 million—a 15.0% increase from a year earlier. While imports could slow in November and December, the likely scenario is for plastics machinery imports to increase 13.2% from 2020.