Chemicals and Related Products

Samantha DeCarlo
(202) 205-3165
Samantha.DeCarlo@usitc.gov

  To view changing data, hover over or touch the animated graphic below.

Change in 2017 from 2016:

• U.S. total exports of chemicals and related products: increased by $9.1 billion (4.2 percent) to $227.3 billion
• U.S. general imports of chemicals and related products: increased by $8.3 billion (3.2 percent) to $268.1 billion

Total trade in chemicals increased in 2017, with U.S. exports rising slightly faster than U.S. imports.  Increases occurred despite disruptions due to Hurricane Harvey, which hampered many petrochemical production sites in the Gulf Coast region.^[1] Growth in the chemicals and related products sector is largely attributable to continued domestic access to cheap and abundant feedstock,^[2] which placed U.S. chemical manufacturers in an advantageous position.^[3]

The value of U.S. chemicals imports and exports rose due to increases in both price and demand. First, their price rose to reflect recovering crude petroleum prices, which had declined sharply in 2016.^[4] As crude petroleum is a feedstock for many chemicals and plastics, the recovery of crude and natural gas prices to values similar to 2015 levels impacted nearly all areas of the U.S. chemicals industry. Some of the most substantial impacts occurred in the petrochemicals and related plastics sectors, as higher crude prices translated into higher prices for the downstream products (and therefore higher trade values). A visual representation of the general relationship of crude petroleum and natural gas to raw materials and everyday products can be seen in figure CH.2.

Figure CH.2: Petrochemicals flowchart:  Click the figure, which will open in a separate webpage.  In the newly opened webpage, click on the circles to expand the general pathways from crude petroleum and natural gas to raw materials.  Upon hovering the mouse over a chemical name, the digest and HTS code(s) associated with the material can be seen.  These are general relationships.  Chemical reactions involve specific conditions and utilize multiple raw materials.   

In addition to price effects, these sectors were also affected by increasing demand. Consumer demand for downstream products made from plastics and petrochemicals was consistently high due to the high durability, low cost, and lightweight nature of plastics materials.^[5] Total trade increased in related industries such as downstream miscellaneous plastic products, while domestic exports increased $739 million (2.9 percent) and general imports increased $8.3 billion (3.2 percent). These trends reflected the symbiotic relationship between crude petroleum prices, downstream chemical industries and pricing, and consumer demand for plastic products.

Overall growth in total sector trade mitigated losses in U.S. pharmaceuticals imports and exports.  The pharmaceuticals industry continued to operate under the threat of patent cliffs,^[6] stiff competition in innovation and development, corresponding research and development costs, increasing pricing pressures from consumers, growing market share for generic pharmaceuticals and biosimilars globally, and heightened scrutiny by regulators, which have tended to inhibit clinical innovation.^[7] The past several years have experienced some stabilization and the introduction of new blockbuster drugs to market, but peak sales per asset continued a long-term decline.^[8]

As noted in table CH.1, the markets accounting for the largest increases in U.S. exports in 2017, by value, were China (up $2.2 billion, 15.8 percent), Mexico (up $1.8 billion, 6.1 percent), and Canada (up $1.6 billion, 4.9 percent).  Conversely, the largest increases in imports, by value, came from China (up $3.8 billion, 12.7 percent) and from Ireland and Japan (both up $2.3 billion, or with increases of 12.7 percent and 16 percent, respectively). These increases in both U.S. imports and U.S. exports were able to offset substantial declines in trade with Belgium (imports down $1.0 billion, 20.6 percent; exports down $2.0 billion, 15.3 percent) and the United Kingdom (imports down 2.0 billion, 17.4 percent; exports down $750 million, 10.1 percent).

Table CH.1: Chemicals and related products: U.S. exports and general imports, by selected trading partners, 2013–17

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data. The countries shown are those with the largest total U.S. trade (U.S. general imports plus U.S. domestic exports) in these products in the current year.

U.S. Exports^[9]

U.S export values increased in many subsectors, especially those directly related to the petrochemicals industry, such as petroleum-derived products.^[10] There was also a notable increase in U.S. exports of chlor-alkali chemicals (chemicals produced via the chlor-alkali process). Overall, the largest increases by value occurred in certain organic chemicals and chlor-alkali chemicals (table CH.2).^[11]

Table CH.2: Chemicals and related products: Leading changes in U.S. exports and imports, 2013–17

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data.

Growth in the value of U.S. domestic exports is largely due to the strength of the plastics and petrochemicals industries and their respective value chains.^[12] Product pricing in these sectors is closely tied to the value of crude petroleum,^[13] as well as general supply and demand. This means that the slight increase in the price of crude petroleum in 2016, following 10-year lows,^[14] had a part in the increased trade values displayed across many of the plastic and petrochemical 
sectors.^[15]

Growth in other petrochemical-related industries reflects U.S. chemical manufacturers’ sustained access to cheap oil and gas and focus towards investment and growth as petrochemical producers.^[16] In U.S. manufacturing, there has been increased interest in producing chemicals like olefins^[17] and aromatics directly from crude petroleum (see figure CH.2).^[18] Although some of this reinvestment in the domestic industry is in the early stages, exports of primary olefins (up $208 million, 29.6 percent), and of subsequent downstream products, increased in 2017.

The production of olefins, which are important precursors to plastic resins, increased due to vertical integration.  Increased exports of polypropylene resins in primary forms (up $347 million, 13.7 percent) and other plastics in primary forms (up $737 million, 5 percent) reflect availability of olefin feedstock. Polypropylene is one of the most commonly produced plastics in the world,^[19] and it can be used in a variety of applications including piping systems, reusable plastic containers, and clear bags. Again, the availability of shale gas has allowed North American producers to benefit from continued cheap feedstock while increasing U.S. capacity for polypropylene production, making the United States a dominant exporter of polypropylene (see figure CH.2).^[20] 

Growth in U.S. domestic exports of saturated polyester resins offset decreased exports of polyethylene terephthalate (PET) resin (see figure CH.2). PET resin is another widely used plastic, especially for the manufacture of downstream products such as food containers, water bottles, and other forms of plastic packaging. Increases in U.S. domestic exports across many of the thermoplastics primary resin sectors reflected an increase in both the value and quantity of exported materials.

As noted above, the chlor-alkali industry led the increase in U.S. exports of chemicals with export growth of $748 million (31.6 percent) in 2017.^[21] “Chlor-alkali” refers to the electrolysis process that manufactures both chlorine and caustic soda^[22] as coproducts.^[23] Both products are important feedstock in varying sectors worldwide. U.S. liquid caustic soda prices experienced steep price increases during 2017, spurred by tight supply and structural changes in global production capacity and trade flows.^[24] According to industry analysts, the jump in U.S. exports of chlor-alkali chemicals in 2017 reflects two factors: (1) the implementation in late 2017 of European prohibitions against alternative mercury cell production methods,^[25] and (2) reduced exports of caustic soda by China, which produces and consumes half the global caustic supply.^[26]  In the United States, industry production increased by only 2.3 percent from 2016 to 2017.^[27] Since the European regulations have taken effect, the European Union (EU) has become a net importer of caustic soda. Consequently, the U.S. has now begun picking up the supply slack for both China and Europe, as prices continue to climb upwards. The United States exports approximately 25 percent of its overall production of caustic soda.^[28]

The largest decrease in U.S. domestic exports occurred in medicinal chemicals (down $1.3 billion, 2.5 percent). A significant drop in U.S. exports of antisera, other blood fractions, and immunological products to Belgium (down $454 million)^[29] contributed to the overall decline in medicinal chemical exports and is largely attributable to decreases in exports of vaccines for human medicine.^[30] Traditionally, the largest export markets for medicinal chemicals include Belgium, the Netherlands, Canada, the United Kingdom, and Japan. Projecting forward, the Office of the U.S. Department of Commerce reported that the increasing use of low-cost manufacturing bases for foreign-derived sales may inhibit the export potential of U.S. manufacturers, and the expiration of patents for high-value export products will place downward pressure on values.^[31] Despite these pressures, the Department of Commerce reports that high research and development levels may result in new and approved products, specifically in therapeutic markets. Along with the United States' increasing penetration into emerging markets, this could help drive export growth in the long term.^[32]

U.S. Imports

The value of U.S. imports of chemicals and related products increased by $8.3 billion (3.2 percent) in 2017, driven by increases in imports of miscellaneous plastic products (up $2.8 billion, 8.5 percent), miscellaneous inorganic chemicals (up $1.2 billion, 14.1 percent), other plastics in primary forms (up $838 million, 14.2 percent), and natural rubber (up $460 million, 35.2 percent).  Medicinal chemicals drove decreases.

The largest decrease in domestic imports was in medicinal chemicals during 2016–17. In 2016 there were fewer U.S. approvals of new molecular entities compared to other years,^[33] and as a result there was reduced import demand in 2017 for specific chemical feedstock or finished products because fewer new molecular entities were being brought to market.^[34] The pharmaceutical industry also confronted patent expirations, which can affect sourcing decisions and trade flows as well as the value of an imported or exported product. For example, expiration of the patent for Copaxone,^[35] owned by Teva (one of the world’s largest drug manufacturers),^[36] contributed to a drop in the value of U.S. domestic imports.^[37] Some of the decrease in imports can partially be attributed to an uptick in the usage of free trade zones (FTZs)^[38] in the pharmaceuticals industry.^[39] For example, general imports under subheading 2933.29.20 in the Harmonized Tariff Schedule of the United States (HTS)^[40] decreased by over $800 million in 2017, and the majority of this loss is attributable to imports from Ireland. The data indicate that U.S. imports for consumption from Ireland for this HTS subheading increased from $93,000 in 2016 to $203,480 in 2017. On the other hand, general imports decreased from $1.04 billion in 2016 to $237 million in 2017, reflecting FTZ use by Ireland in 2016.^[41] 

The category “miscellaneous plastic products” covers a multitude of goods, but some of the growth in imports in this category can be attributed to increased imports of vinyl tile floor coverings,^[42] which continue to dominate domestic flooring choices due to consumer demand for products that provide “quality, durability, superior performance, lower maintenance, lower lifecycle cost and ease of installation.”^[43] Also contributing to the overall increase in imports in this category was an increase in U.S. imports of containers for the conveyance or packing of goods, of plastics.^[44] Together, these two import categories accounted for $1 billion of the total increase in U.S. domestic imports.

Increased natural rubber imports in 2017 compared to 2016 reflected increased natural rubber quantities and prices.^[45] According to publications that monitor the rubber industry, investors began to purchase more natural rubber in early 2017.^[46] The tire industry accounts for 60 percent of natural rubber consumption, and demand from this industry is a major driver of rubber prices.^[47] U.S. new car sales decreased over the course of 2017,^[48] coinciding with an increase in natural rubber global production.^[49] To stabilize the market, the largest producers of natural rubber—Thailand, Indonesia, and Malaysia—have agreed to reduce their global exports in 2018.^[50]

Increases in the value of U.S. imports of miscellaneous inorganic chemicals can be partially explained by noticeable increases in the value of imports of certain organic salts, such as copper sulfate (CuSO₄),^[51] which rose $32 million (39 percent).^[52] Copper sulfate is used in agriculture applications, specifically fungicides, herbicides, and pesticides, and as an additive to animal feed to naturally stimulate appetites in cattle, poultry, and pigs.^[53] Chemical elements and chemical compounds doped^[54] for use in electronics^[55] experienced an increase in imports of $124 million (9 percent).^[56] Based on trade data, most of this increase was not due to an increase in quantity driven by higher demand, but rather to an increase in unit price.^[57]

The situation was somewhat different for domestic imports of crop protection products and formulations (up 13.7 percent). Industry restructuring, coupled with an increase in consumer demand, contributed to a $464 million increase in imports of these goods.^[58] Demand for herbicides, in particular, benefited from the increased use of preemergence soil applications, mixing and matching of established active ingredients, new technologies, and multiple modes of action.^[59]  Strong demand in all crop protection segments (herbicides, fungicides, insecticides) contributed to record sales in 2017.  Coinciding with growth in this sector, there has been restructuring of the world’s largest suppliers of chemical crop protection products, the result of a series of mergers and acquisitions in the industry.^[60] The restructuring has introduced consumer uncertainty about where to supply crop protection inputs, affecting sourcing decision and trade flows.^[61]