In 2011, U.S. investment in chemical surged 19.8 percent

In 2011, US investment in chemical surged by 19.8%. This growth continued into 2012; Last year, capital expenditure increased by 15.5% to about $38.1 billion.

The capital expenditure cycle usually lags behind the industry activity cycle - profit and operating rate are the main determinants of expenditure（ Other factors that affect the level of investment include the business cycle, long-term business expectations, tax policy, cost of capital, debt burden, credit supply, and prescribed expenditures, such as due to regulation.) Overall, increased production and utilization, cost control resulting from early cost reduction efforts, low raw and other raw material costs (compared with Europe and Northeast Asia) and higher sales prices led to a strong recovery in profits from 2010 to 2012. Given the new developments in shale gas, the current rise in profits is likely to last longer than the most recent cycle. In addition, utilization has increased, although it is still below the level of a few years ago and the long-term average.

With the improvement of operating rate and profit margin, as well as the reduction of capital cost, American chemical industry will increase investment in new plants and equipment. It is clear that obsolete assets need to be replaced, which will stimulate some spending. However, the US competitiveness improvement brought by shale gas will be the most important driving factor. The investment cycle of this industry has obviously started anew; Capital spending quickly exceeded its recent peak.

By mid-2015, the economic recovery will be strengthened to expansion, and more capital expenditure is expected to be used to increase production capacity in the next five years. Because of shale gas, the United States is increasingly becoming the preferred location for factories. Shale gas development will bring a lot of new investment in petrochemicals and derivatives. Various industry consultants estimate that the basic olefin capacity will increase by 35% to 40%. It is expected to achieve double-digit growth by 2015, after which capital expenditure will only slow down slightly. By 2017, the capital expenditure of the US chemical industry will reach US $64.5 billion, more than double that at the beginning of this century.

Getting gas from shale is probably the most important domestic energy development of the past 50 years. After 10 years of high and volatile natural gas prices, which destroyed industrial demand and led to the closure of many natural gas intensive manufacturers, shale gas provides a new era of US competitiveness, which will bring greater investment, industry growth and employment.

Increasing domestic shale gas production will help lower US gas prices and create a more stable supply of natural gas for fuel and electricity. In addition, the project will promote the supply of cheaper natural gas liquids, including ethane. Ethane is a key petrochemical raw material.

As we have noted, US chemical companies have announced more than 50 projects in the past two years to take advantage of the rich supply of natural gas and liquefied natural gas. These projects include new ethylene cracking units as well as units for derivatives (i.e. polyethylene, ethylene oxide, etc.), methanol, ammonia and ethylene by-products.

To illustrate the potential of these investments, figure 1 shows ACC's estimates of incremental production for 50 projects (Orange) that cover our baseline forecast (blue). Including the output generated by new investment, the average annual growth rate before 2017 is likely to be 4.6%, more than double the average annual growth rate of 2.2% generally predicted.

Further development of shale gas and ethane can drive greater expansion of domestic production capacity, far beyond the chemical industry, if policy makers develop balanced regulatory policies and allow practice（ ACC supports an integrated energy policy to maximize the use of all domestic energy sources, including renewable energy, alternative energy, coal and nuclear energy, and oil and gas; Give priority to improving the energy efficiency of industrial facilities, residential buildings and buildings; And rely on sound economic methods to encourage the use of all kinds of energy, including the recovery of energy from plastics and other materials and renewable resources. The United States must ensure that its regulatory policy allows shale gas to be used as an important energy and manufacturing raw material while protecting our water supply and the environment.)

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