As this year heads to a close, market outlooks abound with predictions of what 2008 will have in store for the chemical industry. Regardless of each study’s final analysis, there are major factors that will continue to weigh heavily on the chemical industry going into 2008.
The weakness of the dollar, the impact of REACH, competition from emerging markets and consumer confidence all will affect the industry. However, rising energy costs combined with so many varying factors offsetting net income has many of us in the industry concerned.
Just this week, some of my colleagues from regional chemical companies in Pennsylvania implored the federal government to increase energy supplies available to them.
Increased energy supplies would help them remain competitive in the global markets, they say. Randall Dearth, CEO of Lanxess Corp., a SOCMA member company told officials that the domestic chemical industry has lost 100,000 jobs since 2000. He says this is mainly the result of cheaper natural gas prices.
Along with the group of regional chemical companies, would like to see an increase of the supply of natural gas as prices have tripled since 2000. This price increase has cost the industry $60 billion so far. This is why many in the industry see companies moving overseas, particularly to the Middle East, to decrease the cost of energy.
Dow Chemical, another of SOCMA’s members, has been pushing for national policies prodding other industries to curb consumption, as
well as recommending the federal government allow for greater access to areas that may lead to more natural gas and oil discoveries. Many of SOCMA’s members do not use nearly as much energy as a company like DOW does. But energy demand is still a concern as prices increase dramatically. SOCMA’s position is to ensure federal policies and programs are flexible as well as permit off-shore drilling for natural gas. We’d also like to see an increase in research and development tax credits and the development of other programs that will incentivize reduced emissions and other energy efficiency measures.
Through our ChemStewards® program, SOCMA works with members at improving their energy usage and efficiency within their manufacturing processes. Energy is going to remain a large concern for the industry and all companies should plan accordingly.
