Plunkett Research reports 10 of the most pressing trends occurring in the chemicals, coatings and plastics industry. Closely linked with the oil and gas industry, it is estimated that the chemicals industry will generate approximately $930 billion in revenues in 2009. This and more is revealed in Plunkett's Chemicals, Coatings & Plastics Industry Almanac, 2010 edition.

"While the chemicals industry, at present, is most definitely cyclical, gaining and losing ground with changes in the global economy, many long-term trends in the industry point to what will eventually be increasing demand for many types of chemical products once the global economy is back on the upswing," says Jack Plunkett, CEO and Editor of Plunkett Research. "For instance, a swiftly aging population with growing access to, and budgets for, drugs of all types is making demand for life sciences chemicals soar. We will also begin to see worldwide demand for the construction of new commercial buildings and new housing which will fuel the growth for chemicals used in building products of all types."

Plunkett’s 10 Major Trends Happening in the Chemicals Industry:

1) Global Growth in Demand for Plastics Slows – Due to the global economic crisis of 2008-2009, the picture for plastics consumption worldwide has changed significantly. Decreasing sales, plastics plant shutdowns and employee layoffs are becoming commonplace. The closing of manufacturing plants due to the economic crisis will reduce ethylene demand substantially. For example, at Dow Chemical Company, plans were announced in July 2009 for a major corporate restructuring which will include the shutdown of as many as 20 manufacturing plants, including an ethylene cracker in Louisiana, and ethylene derivative facilities in Louisiana and Texas. This will reduce demand by about 30% on the U.S. Gulf Coast.

2) China’s Plastics Import Market Slows as Domestic Production Picks - The global economic crisis has had an impact in China, as it has throughout the world. Growth in the plastics industry in China was only 9.3% in the first quarter of 2009, according to officials at the China Plastics Processing Industry Association. This follows years of double-digit growth. At the same time, overall GDP growth in China slowed to about 6.1%. Exports of Chinese plastics fell as well: down 18.5% to the U.S.; down 17.3% to the EU; and down 7.7% to Japan (all in the first quarter of 2009). However, due to government stimulus funding and the need for reconstruction in the areas affected by the May 2008 earthquake in Sichuan province, China’s plastics sector may soon resume double-digit growth, perhaps as early as 2010.

3) Petrochemicals Plant Construction in the Middle East Slows - Middle Eastern plastics producers may be able to generate products such as PE at lower cost due to a ready, local supply of natural gas and other petrochemicals, making their products more competitive globally on a cost basis. This has spurred the construction of a number of new petrochemical and plastics plants throughout the Middle East. As of July 2008, one analyst determined that refinery projects announced or underway in the Middle East totaled $146 billion. While plans for new petrochemicals plants in the Middle East have been announced in impressively large scale, many projects have recently been delayed, downsized or cancelled altogether. This is due to several factors. To begin with, a construction boom in the Middle East created intense demand for cement, structural steel, engineers, equipment and skilled workers. Construction costs soared quickly, making some planned projects economically unfeasible. Another problem is difficulty in obtaining financing for some projects due to the financial market crisis.

4) Polymers Enable New Display Technologies with PLEDs/May Hold Key to High Efficiency Polymer Solar Cells (PV) - The plastic substance known as PPV (polyphenylenevinylene) emits light when layered between electrodes. Organic polymers based on plastic substrates, capable of conducting electricity, may be inexpensive to manufacture, flexible and lightweight. They have exciting uses in lighting, and may soon be used in highly efficient photovoltaic (PV) solar cells. Organic polymer solar cells offer potential breakthroughs over conventional solar cells, which are constructed from such inorganic materials as silicon and gallium arsenide. While silicon and other inorganics require difficult, precision processing at high temperatures in vacuum conditions, polymers can be processed at room temperature. Another manufacturing advantage lies in the fact that polymers are non toxic. They are also quite flexible, which can make solar cells easier and less expensive to install.

5) New Refineries Will Ease Supply Shortages - The last time a new refinery was opened in America was 1976. That’s not to say that refining capacity hasn’t changed—in fact, while many refineries have closed, the 150 remaining refineries have added significant capacity, but still nowhere near enough to satisfy America’s ravenous appetite for gasoline, diesel, aviation fuel and heating fuel. More than one-half of these refineries have been closed due to historically low profit margins and the vast investments that would have been needed for them to meet evolving environmental standards. While the number of refineries has dwindled, the capacity of remaining refineries has been steadily enhanced at great investment. Looked at another way, refining capacity has declined slightly while demand has increased by more than 20%. Consequently, America is depending on a growing stream of imported refined products in order to survive. Massive investments are being made in new petrochemical and refinery plants in the Middle East and India, which will ease supply shortages.

6) Environmentalists Campaign for Chemical Industry Reform - Concern for the environment is nothing new, yet decisions affecting the chemical sector are making headlines. Microsoft curtailed its use of polyvinyl chloride (PVC), also known as vinyl, for computer packaging products. Another potentially harmful chemical is bisphenol-a, or BPA. Some animal studies have linked BPA to hormonal changes. The Canadian government is rumored to be on the verge of declaring it toxic. In early 2009, environmentalists won a rare skirmish against the chemicals industry in China. The site for a proposed $3.6 billion plant outside Zhangzhou was moved 60 miles to spare the 1.5 million residents of the nearby port city of Xiamen from toxic fumes generated by the production of paraxylene, a petrochemical used in making polyester and cleaning agents.

7) Bio-Plastics Become a Reality/Plastic Packaging Made from Corn and Soy - The next big thing in plastics is the use of corn sugar and soybeans as opposed to petrochemicals to make packaging that is biodegradable. The hope is also that bio-plastics may be cheaper to produce than their traditional, petrochemical-based counterparts, and that they may be more environmentally acceptable. Archer Daniels Midland formed a joint venture with Metabolix, a Massachusetts-based bioscience company to make a polyester called polyhydroxy-alkanoate (PHA) that can be used to make shopping bags. Likewise, bio-refiner Cargill, Inc. is vastly increasing its production of soybeans and corn derivatives to make plastics for use in carpets, disposable plates and cups, candles, lipsticks and body panels for automobiles and construction equipment. Plastic packaging made from corn sugars is rapidly gaining favor over oil-based plastics with retailers such as Wal-Mart, Wild Oats Market and food suppliers including Del Monte and Newman’s Own, especially in light of fluctuating oil prices.

8) Chemical Company Mergers and Acquisitions Slow/Bankruptcies Making Headlines - The global mergers and acquisitions bonanza of 2006 and 2007 in the chemicals and plastics business is all but over. While transactions in the billions used to be the norm, the global economic recession has made funding difficult. In 2009, Dow Chemical was able to close its acquisition of specialty chemicals manufacturer Rohm and Haas for $15.3 billion, despite the fact that Dow suffered problems when a joint venture in Kuwait had to be abandoned. Bankruptcy news in the chemicals sector is becoming increasingly common. The most newsworthy example is the declaration by Lyondell Chemical, a subsidiary of LyondellBasell, in early 2009. This was quickly followed by the bankruptcy filing of Tronox, a maker of paint components.

9) Nanochemicals Hold Promise for Advanced Coatings and Specialty Chemicals - The micro-scale science of nanotechnology may be in its infancy, but it offers great promise in the chemicals and coatings sector nonetheless. Nanotech advances will eventually affect everything from LEDs, where brighter monitors and displays may be possible, to slicker, denser paints for industrial, marine and architectural applications. Watch for rapid changes within the chemicals sector, as many factors with the potential for driving the industry in new directions are at work. These include a growing use of biotechnology to create biochemical products such as enzymes and solvents; consolidation, mergers and acquisitions on a worldwide basis; high raw components costs; increased environmental regulations and concerns; rapid growth in demand for plastics and other chemical products; the rise of nanotechnology in such chemicals sectors as composites, coatings and exotic materials; technological breakthroughs in such areas as ceramics; and the rapid rise of China as both a producer and consumer of chemicals and chemical products.

10) Ethanol Production Soared, But a Market Glut May Slow Expansion - Soaring gasoline prices, effective lobbying by agricultural and industrial interests, and a growing interest in cutting reliance on imported oil put a high national focus on bioethanol in America in recent years. Corn and other organic materials, including agricultural waste, can be converted into ethanol through the use of engineered bacteria and superenzymes manufactured by biotechnology firms. This trend has given a boost to the biotech, agriculture and alternative energy sectors. At present, corn is almost the exclusive source for bioethanol in America.

Additional information is available in "Plunkett's Chemicals, Coatings & Plastics Industry Almanac 2010," as well as on our web site, www.PlunkettResearch.com.

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