Trade Wars Hurt Industry Confidence
Rising global trade tensions have hurt business confidence and dampened demand for chemicals.Consumers are cutting back on big-ticket items such as cars, homes and consumer electronics.That is slowing growth.Capital expenditure will also be adjusted according to market conditions.
The outlook for economic growth is not good
The global economy is facing multiple headwinds.Growth is sluggish in Europe, China has slowed, India is slowing and Brazil has yet to fully recover.While the ACC chemical activity barometer, a composite measure of the U.S. economy, has shown strength in recent months, offering a glimmer of hope that things could improve by the end of the year, it may be short-lived.
On the trade front, the U.S. also faces a slowdown in the global economy and reduced external demand for chemicals caused by trade barriers.One of the biggest fears is that we're going to get into a bad trade war.Because the tariffs hit both production and consumption."
The ACC expects U.S. GDP to grow 2.5 percent in 2019, driven by increased business investment. However, that is down from 2.9 percent in 2018, and growth is expected to slow to 1.9 percent in 2019 and 1.8 percent in 2020.
The industry is looking forward to normalizing trade
While us tax reform, deregulation and low-cost raw materials have provided favourable conditions for the country's petrochemical producers, trade headwinds point to slower growth prospects.A recent plan to impose tariffs on all imports from Mexico has hit the industry hard.In addition, the trade war shows no sign of ending.These threats are hurting business and consumer confidence.The development of global industry is based on international trade.The us, Mexico and Canada trade agreement (USMCA) needs to be ratified.
Rising trade tensions, falling solvency of European Banks and rising levels of global debt are all affecting the broader economic environment.Auto markets in China and Europe continue to weaken with no sign of recovery in sight.Weakness in China's auto industry in particular is leading to a global glut of many major plastic products.For downstream products, the Chinese market is very important.Chinese demand for products such as polycarbonate, ABS and HIPS has approached or exceeded 50% of the world's total.
According to the ACC, U.S. light vehicle sales will fall from 17.2 million in 2018 to 16.8 million in 2019, 16.6 million in 2020 and 16.5 million in 2021.Clearly, the auto industry's cycle has peaked.
Europe's car market has been more stable than Asia's, but it is too early to predict a recovery in the second half.It depends on international trade and consumer confidence.
Poor investment outlook
Us shale gas continues to attract significant investment, according to ACC data.By the end of May 2019, the United States had announced 336 new chemical projects with a total investment of $204 billion, of which 70 percent was foreign.However, the pace of investment will slow down in the future, especially if the outlook for trade is uncertain.
ACC expects capital spending in the U.S. chemical industry to grow 5.4 percent to $35 billion in 2019.However, capital expenditure growth in the us chemicals sector will slow to 4.9 per cent in 2020 and a further 4.1 per cent in 2021.
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