Capital spending by the chemical industry is on the rebound as per global engineering and construction (E&C) companies. Projects are in progress in Asia and the Middle East, as well as in USA, where shale-gas exploitation has changed the economics of production. However, given the current global political and economic uncertainty, risks are intensifying and projects are proceeding with greater deliberation.
Chemical capital spending in Western Europe slipped from US$54.9 bln in 2008 to US$45.1 bln in 2009, recovering marginally to US$46.3 bln in 2010, as per American Chemistry Council (ACC). Chemical capital spending in North America fell from US$33 bln in 2008 to US$29.1 bln in 2009 before increasing to US$31.6 bln in 2010, while in Japan figures dipped from US$8.6 bln in 2008 to US$7.9 bln in 2009 and increased to US$8.3 bln in 2010.
During the global recession many chemical projects were either postponed or canceled. In the past few quarters, the chemicals industry has seen a strong turnaround, as demand and production increase.
Chemical companies are still making capital investments in the developed economies. Much of the work is focused on upgrading facilities, debottlenecking, meeting regulatory requirements and increasing efficiency. However, new opportunities are emerging in green chemistry and sustainability. Alteast two to four domestic ethylene plants are expected to be active in the next 24 months in the United States for major expansions or grassroots plants. However, uncertainty is suppressing growth, and decision-making has become more protracted worldwide. Delays continue by way of clients awarding contracts or delay releasing the next stages of work. Also adding to delays are client concerns about the macro environment, specifically political and economic uncertainties. The large scale projects have associated problems with getting board approvals multiple times. Chemical capital spending continues to move forward, as client determination to proceed with prospects shows momentum, especially with projects that have been dormant and that are now starting to resurface.