Processing Magazine

Commercialization of shale gas points to bright outlook for US chemical industry

June 27, 2012

NEW YORK — With the commercialization of shale gas in the U.S., the U.S. chemical industry has seen a remarkable turn of fortune, according to a KPMG report, “The Future of the U.S. Chemical Industry.”

According to KPMG''s chemical industry specialists, the outlook for U.S. chemical companies feels overwhelmingly upbeat. With a new and abundant source of low-cost feedstock, the U.S. market has suddenly transformed to become one of the most advantageous markets for chemical production in the world.

However, according to KPMG, there remain a number of risks on the horizon. The first — and likely most problematic — is that the exponential addition of new capacity in the chemical industry will lead to an oversupply that outstrips demand within the national market, returning the industry to the cyclicality that was such a problem in the past.

Tied to this are the growth projections for global chemical sales. While the U.S. economy has returned to growth, overall it remains a mature market that could not absorb all of the announced new capacity. Similarly, Europe and Japan have seen somewhat sedate growth, while the emerging markets have boomed ahead with China, India and Latin America in the lead.

"Clearly, U.S. Chemical companies will need to place strong focus on developing their supply lines into the new growth economies, and this will require a significant transformation of operating models for U.S. companies who have traditionally been focused on the domestic marketplace," said Mike Shannon, global and U.S. leader of KPMG''s chemicals and performance technologies practice. "The opening up of many emerging markets to import growth can be a slow and complex process, and U.S. chemical companies need to take actions today that will guarantee markets for products to be produced in four or five years time."

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