US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Is the Crude Oil Situation a “Double Punch”, a Two-Sided Coin, or Both?

March 10, 2020 - On Monday March 9, crude oil fell to its worst day since 1991, with the coronavirus hampering demand at the same time OPEC and Russia went into a supply-side trade war. This is the double-punch that hit the energy industry hard and was a big reason for the S&P 500 having its 19th worst one-day drop by percent change and the worst since 2008.

However, there’s a flip side. Crude oil and gas prices are falling, potentially benefiting industrial users and consumers. Not only is industry using less oil as global demand pressures are reduced by curtailed business travel and manufacturer closures in quarantined areas, but Saudi Arabia is increasing supply.

Lower crude oil prices will help chemical producers outside of the US, at least on the raw material side, since there are a number of companies that produce ethylene and other basic chemicals from crude oil instead of from natural gas. However, that will likely not be enough to offset the drop in demand for more chemical end-use products as the effects of canceled events, flights, vacations, etc., ripple their way through the global economy.

Consumers will likely be happy about the lower gas prices. However, with many limiting or delaying travel plans out of real and/or perceived risk of either contracting COVID-19 or being stuck in a quarantine zone in this volatile time, they are not likely taking advantage of it in the way they ordinarily would. A return to higher levels of consumer confidence will be needed for consumers to absorb this higher level of production.

For more information, please see The Freedonia Group’s coverage of Chemicals, Plastics & Other Polymers, and Consumer Goods. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Chemicals      Covid-19      Energy & Petroleum      Plastics & Other Polymers    

COVID-19 & US Plastic Resins – Salt In The Industry’s Wounds

In a recent Plastics News article, watchers of the chemical market give a relatively optimistic outlook for the effect of COVID-19 on plastic resin markets. Market disruptions are described as likely to be “temporary” and to even provide some growth opportunities, such as PET for water bottles and polyethylene for cleaning chemical containers. Additionally, China appears to be recovering from its virus-induced economic shutdown.

However, the coronavirus could hardly come at a worse time for US plastic resin producers. The industry is going through a shale gas-driven building boom, with billions of pounds of new resin production capacity opening in the past few years and billions more in the works. Yet sluggishness in the US manufacturing sector during 2019 dried up demand for plastic resin, raising the question of where all the new capacity is going to go. Sustainability pressures – including bans on single-use plastic products – are also on the rise.

Resin producers had hoped for a rebound in 2020, but instead are faced with another economic shock from COVID-19. While the jury is still out on how severe the economic effects of the virus will be, even a “minimal” or “temporary” downturn is not what the US plastics industry was looking for.

For more information, see Freedonia Group’s coverage of the plastics industry.

  Chemicals      Covid-19      Plastics & Other Polymers    

Coronavirus Concerns Causing Starbucks to Temporarily Eliminate Beverage Service in Reusable Cups

In January 2020, Starbucks announced a new set of sustainability goals through 2030, which included further movement from single-use to reusable packaging. This shift includes cups as the company has been both participating in the NextGen Cup Challenge and giving customers $0.10 discounts if they bring their own cup or request to use a reusable ceramic mug in-store.

However, Starbucks, which is headquartered in Seattle where a virus cluster has resulted in 10 reported deaths related to COVID-19 to date, announced on March 4 that it would be suspending the use of reusable cups as part of its efforts to respond to the public health crisis. This move is framed by Starbucks as temporary, and the reusable cups will be back when the outbreak dissipates.

The impact, although temporary, is not insignificant. This is a speedbump on the path toward getting Starbucks customers – and others – to change their habits, something that is needed for greater adoption of reusable cup policies.

Still, foodservice businesses are expected to increasingly consider more sustainable packaging options (e.g., fiber-based, recyclable, compostable, and reusable products) for cups, lids, and carryout containers in the coming years.

For more information see The Freedonia Group’s Foodservice Single-Use Products report.

  Covid-19      Packaging      Plastics & Other Polymers    

Supply Disruptions in the Chemical Industry: China Is Coming Back Online, but What’s Next?

Chemical & Engineering News reports that chemical production in China is beginning to recover from the COVID-19 coronavirus. Many chemical plants that were closed in January and early February have reopened. 

However, most chemical plants are running at reduced capacity, and Western firms are still feeling pressure in their supply chains. The uncertainty mimics a similar situation that occurred in 2017 and 2018, when environmental pressures forced the extended shutdown of numerous plants in China, resulting in shortages and high prices for specialty chemicals such as silicones.

Even if China’s chemical industry is getting back to business, the spread of the virus outside of China is increasing worries that further disruptions could be on the horizon.

For more information, see Freedonia’s Global Silicones, Global Rubber Processing Chemicals, and Global Construction Chemicals reports.

  Chemicals      Covid-19      Plastics & Other Polymers