The businesses of chemicals, coatings and plastics are closely linked, and those sectors, in turn, are closely linked to the oil and gas industry. Plastics comprise a branch of petrochemicals—that is, chemicals refined from petroleum. (Although a small amount of plastics is now being produced from plants such as corn.) Total world consumption of oil for industrial uses is about 30 million barrels daily—mostly for use in chemical processes. Coatings, which include paints, are chemical concoctions. Other everyday chemicals products include pharmaceuticals, fertilizers, dyes, fibers, packaging, adhesives and explosives, among many, many others. Among the more visible end products are PVC (polyvinyl chloride) pipe for plumbing and other purposes, plastic bottles and other food containers, vinyl window frames, flooring and carpeting made from vinyl and other synthetics, as well as clothing of all types made from synthetic fabrics.

This is a research-based industry that requires massive capital expenditures on the production end. According to the American Chemistry Council, U.S. chemicals companies invested $49 billion in research and development in 2010 alone.  BASF, the world’s largest chemical firm, estimates it will invest 12.6 billion Euros in capital expenditures from 2011-15.

It is also a cyclical business, highly subject to costs for basic commodities (especially oil and gas) and open to rapid changes in fortune due to the ups and downs of the global economy. The global recession was disastrous for the chemicals industry as a whole, as demand plummeted for everything from plastic packaging to paint used on construction projects to industrial chemicals.

The global chemicals industry will total about $3.7 trillion in 2011, according to Plunkett Research estimates, or about 6% of global GDP. The U.S. chemicals and plastics sectors combined will generate about $770 billion in revenues in 2011.

U.S. chemicals products shipments totaled $677.1 billion in 2010, up from $659.6 billion in 2009, according the U.S. Bureau of the Census. About 783,800 people were employed in the American chemicals manufacturing sector in 2010, 623,200 in the plastics and rubber manufacturing sector, and 55,800 in the coatings manufacturing sector. Employment has been declining dramatically in recent years, along with employment in most basic manufacturing sectors in America. This is due to increasing productivity and technology-based efficiency in manufacturing plants, along with a continued move of many types of manufacturing offshore. However, in 2008 and 2009, the decline in employment was very much driven by the recession. Large numbers of plants were closed or idled in 2008-09. Global trade was off considerably.

For 2011, the chemicals industry looks brighter, particularly if U.S. and European economies can shake off their doldrums and begin significant growth. Meanwhile, Asian economies, along with Brazil, were enjoying robust economic growth as of mid 2011, which boosted the chemicals sector. On the consumption end, outside of Asia and Brazil, the currently slow construction industry in the U.S. and Europe will have a dampening effect, as building materials of a wide variety are based on chemicals.

While the chemicals industry is most definitely cyclical, gaining and losing ground with changes in the global economy, many long-term trends point to increasing demand for many types of chemical products. To begin with, a swiftly aging population with growing access to, and budgets for, drugs of all types is making demand for life sciences chemicals soar. Eventually, worldwide demand for the construction of new commercial buildings and new housing will once again fuel growth for chemicals used in building products of all types. The extremely rapid industrialization and commercialization of markets in China and India, two nations where an immense proportion of the world’s population live, is creating demand for industrial and consumer chemicals of all types. Finally, a rapidly-expanding transportation market worldwide, including the growing number of automobiles and trucks on the road, will create greatly increased demand for chemicals, coatings and plastics used in the manufacture of automobiles. (Lightweight plastics are extremely important for the manufacture of fuel-efficient vehicles.)

Growing demand for consumer products and convenience products, such as processed foods and beverages, is enhancing demand for plastic packaging on a worldwide basis. Meanwhile, makers of many components in major commercial and consumer products are switching to plastics due to the durability, light weight and long life of plastic. As industry leader BASF puts it, “In brief, plastics will be the material of the 21^st Century.” Global consumption of plastics is now in excess of 180 million metric tons yearly. (BASF invested 1.5 billion Euros in research and development during 2010, and deployed by 9,600 employees at dozens of R&D sites worldwide.)

Meanwhile, consumer concerns and environmental activism about packaging have come to the fore. Plastic grocery and shopping bags have become evil in the eyes of some. In the U.S. alone, plastic bags are about a $4 billion industry. In America and elsewhere, bags to a growing extent are seen as a big burden to landfills and an even bigger eyesore in the form of litter. Recycling is modest at best. Various answers are being developed. Biodegradable bags would be welcomed by many consumers, even if they drove up costs a bit, and reusable string, nylon or canvas bags are very much in vogue. Paper bags are now more in evidence; at least they are clearly biodegradable. Meanwhile, more than two dozen U.S. cities have proposed or legislated bans on the use of plastic bags, and the entire nations of Taiwan and Bangladesh have outlawed them.
View More