The Global Chemical Industry: US, China and Global Status and Opportunities, 2015

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1 The Global Chemical Industry: US, China and Global Status and Opportunities, 2015 August 28, 2005 American Chemical Society Martha Gilchrist Moore Moore Economics

2 Opportunities in China Over the Next Decade China will be the growth driver for global manufacturing Population of 1.3 billion growing at 0.6% per year Growing per capita sales position China for explosive growth in chemicals New capacity situated near low-cost feedstocks or proximity to markets

3 Global Chemical Shipments by Segment Pharma. 26% Ind. Gases 2% Inorganics 4% Source: ACC Consumer Products 12% Ag. Chemicals Other 5% Specialties 14% Coatings 5% Petrochemic als 17% Polymers 14% Adhesives 1% Global Shipments: $2.2 trillion

4 Global Chemical Shipments by Country/Region, 2004 Africa & Middle East 4% Central/Eastern Europe 4% Latin America 6% India 2% China 6% Other Asia/Pacific 9% United States 23% Canada/Mexico 2% Japan 10% Source: American Chemistry Council Western Europe 34% Global Shipments: $2.2 trillion

5 Global Chemical Shipments by Country/Region, 2014 India 3% Other Asia/Pacific 15% United States 19% China 12% Africa & Middle East 5% Central/Eastern Europe 4% Latin America Japan 6% Canada/Mexico 8% 2% Source: American Chemistry Council Western Europe 26% Global Shipments: $3.5 trillion

6 Global Chemical Industry Prospects 16% Average % Growth ( ) 14% 12% 10% 8% 6% 4% 2% 0% -2% France Germany United Kingdom Italy (hidden) Other Western Europe Japan Canada United States Russia Other Latin America Brazil Mexico (hidden) Other East Asia India Africa & Middle East Other Asia-Pacific Other Central & Eastern Europe China -2% 0% 2% 4% 6% 8% 10% 12% 14% Average % Growth ( ) Source: American Chemistry Council

7 Chemical Sales per Capita (2004) $2,000 $1,500 $1,000 $500 $0 US Japan France Germany Canada UK Brazil Mexico China India Source: ACC, Census

8 Projected Global Chemical Industry Growth Rates China India Other East Asia Africa/Middle Russia Brazil Mexico Canada US UK France Germany Japan 0% 2% 4% 6% 8% 10% 12% Source: American Chemistry Council

9 Ethylene Consumption Growth ( ) million metric tons 40,000 30,000 20,000 10,000 US: 1.7%/yr Middle East: 10.3%/yr China: 10.8%/yr US Middle East China Source: SRI

10 Direct Investment Currently, China accounts for less than 2% of direct investment in chemicals by US companies Direct investment in China has grown 6- fold since 1994, while direct investment in the chemical industry in China has grown by 7.5 times.

11 US Direct Investment Abroad in Chemicals (2004) Chemical DIA: $107.8 billion European Union 58% Source: Bureau of Economic Analysis Other Europe Other 4% Asia/Pacific 9% Japan 3% China 2% Canada 13% Latin America Africa/Middle 10% East 1%

12 Direct Investment in Chinese Chemical Industry Accelerating $ million 1,800 1,600 1,400 1,200 1, Source: Bureau of Economic Analysis

13 New Ethylene Capacity Announced and Speculative ( ) Middle East 38% North America 9% Other 8% Other Advantaged 3% Asia 42% Source: SRI

14 Structural Changes in US US market mature Competitive advantage from low energy prices lost US chemical industry now a net importer Manufacturing base shifting abroad Growth in service sector, less chemical use Chemical capital investment lagging compared to rest of world

15 Natural Gas Costs around the World ($US per million BTUs) Canada: $8.25 USA: $9.70 UK: $5.65 Baltics: $2.70 Russia: $1.20 Poland: $3.40 Belgium: $5.65 Belarus: $1.45 Ukraine: $2.10 South Korea: $5.20 Turkey: $2.65 Iran: $1.25 North Africa: $0.80 Kuwait: $1.25 Japan: $5.20 China: $4.85 Qatar: $0.70 Oman: $1.00 Taiwan: $5.10 India: $3.25 Trinidad: $1.60 Saudi Arabia: $0.75 Singapore: $3.30 Indonesia: $2.70 Bolivia: $1.65 Australia: $3.85 Argentina: $1.60 Source: American Chemistry Council

16 US Chemical Industry Trade Balance by Sector $ billion Pharmaceuticals Agricultural Chemicals Consumer Products Source: American Chemistry Council Basic Chemicals Specialties

17 US Chemical Trade - China $ billion Source: USITC Trade Balance Exports Imports

18 Direct and Indirect Chemistry Content of Selected Products Plastic bottles Carpet Grain farming Paper Medical supplies (ex. Pharma) Upholstered furniture New Residential Construction Motor vehicles Computers Construction machinery Petroleum refining 0% 20% 40% 60% 80% Moore Economics

19 Chemistry Dependence by Sector Services Finance, Insurance & Real Estate Durable Manufacturing Health Care Nondurable Manufacturing Construction Information Mining Trade & Transportation Agriculture ($ billion) $0 $1,000 $2,000 $3,000 Non-chemistry dependent Chemistry dependent Moore Economics

20 US China Trade: By Category Computers & Electronics Toys, Sporting Goods, Misc. Apparel Footwear & Leather Electrical Equipment & Appliances Machinery Furniture Fabricated Metal Products Plastics & Rubber Products Textile Products Transportation Equipment Nonmetallic Mineral Products Chemicals Primary Metal Wood Products Imports Exports Source: USITC

21 US Innovation Service innovation Some US producers are offering higher value added services rather than molecules. Biotechnology 8% of US chemical sales are derived from biotechnology.

22 Changes in US Chemical Industry Structure $ billion Coatings Agricultural Chemicals Inorganic Chemicals Consumer Products Resins, Rubber & Fiber Petrochem/Derivatives Other Specialties Pharmaceuticals Source: American Chemistry Council

23 Regional Chemical Sales, Per Capita Chemical Sales, and Population Growth $2,000 Per Capita Chemical Sales $1,500 $1,000 $500 $0 -$500 Japan Other Western Europe Italy Germany United Kingdom Central & Eastern Europe France China & East Asia United States Canada Latin America Other Asia/Pacific Africa & Middle East -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% Population Growth Rate (Average % Change ) Source: American Chemistry Council Note: Bubble size represents chemical sales in billions of dollars

24 Conclusions China will become a major producer of chemicals within the next decade, accounting for 12% of global chemicals by 2014 Chinese manufacturing and export sectors will continue to strengthen Large, increasingly affluent population will generate domestic demand

25 Conclusions US will continue to be a leading producer, however its global share will decline US will lead in innovation new materials, processes and services US production will shift towards pharma, with slower growth in basics and agricultural chemicals