Name : Niyatee Ravipati

Andrew ID: nravipat

Report Assignment 1 (due beginning of class, Tuesday 10
September): Industry Structure and Statistics

Prepare a short report (approximately two pages) outlining the size
and scope of the United States chemicals industry. Note the overall
size of the industry as well as some of its most important products or
categories of products in terms of both annual production amount
and value. Use the most recent data you can find. Include whatever
additional and supporting material and detail you believe relevant.
Reference all of your sources of data.





The Chemicals industry is highly diversified permeating through several other
industries. Almost all industries use its products at the beginning point in their supply
chain. In 2011, The US chemical Industry had a sales of $763 billon, it directly
employs 788,000 people and indirectly about 2.7 million people by industrial
suppliers.

Investments in Research and Development summed to $56 billion dollars in 2011 and
due to the strong enforcement of Intellectual property rights, today two fifths of all the
patents in the country are chemical engineering related.
The Chemicals industry in the United States is currently on a boom due to shale gas
emergence. It is restructuring the investments in Research and Development and
several major companies are returning their focus to in situ plants from their overseas
investments due to the cost efficiency that shale gas advantage is giving to several
otherwise expensive processes. I will discuss this further in the subsequent portions of
my report as I feel that this is a major influence on the current market for the
Chemicals Industry.


The Chemicals industry is a rather broad term which contains several sub sectors like

Basic Chemicals: These include organic and inorganic chemicals, plastic resins and
petrochemicals
Specialty Chemicals: These include electronics, adhesives and sealants, water
treatment chemicals, paints, catalysts and coatings. These chemicals are performance-
oriented and cost varies according to the purpose served.
Agricultural chemicals: Include fertilizers and pesticides
Pharmaceuticals: These include diagnostics, prescription drugs, vaccines and over-
the-counter drugs for human and veterinary applications.
Consumer Products: These include soaps, detergents, and cleaners, as well as
toiletries and cosmetics. While consumer products are an established segment
of the industry, technological innovation and product development are
important due to the short shelf life of the product.


Petrochemicals are currently on a boom in the US due to the emergence of shale gas.
Technological advancements including hydraulic fracturing and horizontal drilling
have enabled natural gas producers to safely and responsibly develop vast deposits of
shale gas found thousands of feet deep beneath the Earth's surface. This means not
only stable and abundant supplies of natural gas for power generation, transportation
and industrial uses, but it also means hundreds of thousands of new jobs will be
created as production of this resource, whose production again falls into the chemicals
industry. Natural gas is also a major factor in the US. According to an in-depth
economic analysis by IHS global insight, natural gas companies directly employed
roughly 622,000 Americans in 2008 and
To arrive at these estimates, IHS Global Insight used U.S. Bureau of Labor Statistics
data to estimate the number of workers involved in the production and transportation
of natural gas. For this study, they recognized about 622,000 direct jobs in 2008,
including those generated by:





This graph shows the additional production due to shale gas emergence in different
sectors.


Major oil and gas companies like Chevron and Exxon Mobil are benefiting greatly
also those which produce specialty chemicals like coatings and paints like PPG, Du
Pont and Dow chemicals are also riding on this high.

Global megatrends like the increasing population rate also have an economic impact
on the market. The global population rate is increasing at the rate of of 1.2% currently
and the US growth rate is 0.8% with an increased focus on urbanization leading to a
spike in the energy demand, food industry and also primarily the electronic chemicals
or specialty chemicals due to the increase in the demand for consumer goods in high
income developed countries like the United states. The increasing population also
gives incentive for alternative energy sources. Dow chemicals accounts for 25% of
wind turbine parts in the United States. Also in electronic chemicals, Dow supplies
95% of the chemicals and innovations used in smart devices.
The lowering of energy prices also gives an advantage to specialty chemicals; global
demand for electronics is buoying up the electronic chemicals sales. Catalysts that
help convert biomass into transportation fuel is a niche market right now as the
increasing population provides a growing need for alternative fuel from a
sustainability perspective.
Coming to the pharmaceutical industry, the United States has the worlds largest
market for pharmaceuticals. 80% of the research and development on biotechnology
related research is done here. In 2010 the pharma sector employed 272,000 people.
According to pharmaceutical Research and Manufacturers of America (PhRMA). The
United States spent $67.4 billion on research and development in 2010.
A potential area for growth in this industry is over the counter medicines (OTCs) and
generic medicines. The increasing life expectancy and decreasing fertility rates in
developed countries like the US is leading in an increase in the ageing population, by
2020 it is predicted that 22% of the population will be over 65 years of age. Also the
consumer trend to self prescribe and the conversion of several drugs from prescription
to non-prescription also contributes.
The animal health industry has a global market of $22 billion only in terms of animal
medicines and an overall market of $92-102 billion including both personal
companion and animal husbandry.
The increasing population and income is leading to increase in the ownership of
personal companion animals and hence their health care. It is also providing an
increasing demand for protein, hence the food processing industry is projected to
reach to $13 billion by 2016 with an increase rate of 3.9% annually.
The fertilizer industry was declining in the US until recently. Now for the first time
since the 1990s new fertilizer plants are being built in the US due to the shale gas
boom since it provides a highly cost effective way to produce nitrogen fertilizer and is
an effective way to turn the gas into money. The nitrogen fertilizer production process
is dependent on natural gas and hence this trend provides easy access to a low cost
feedstock. Dow chemicals and Du Pont are investing in fertilizer again and the market
is about $30 billion. Pesticides have a market of about $15-20 billion.

The chemical industry is a good vantage point to view the state of the global economy
as many of its products are involved in the production process of numerous other
subsidiary products. Chemicals go into practically everything including from tiny
batteries to automobiles and aircrafts. I feel that the current state of the chemical
industry in the US is influenced to a large degree by the shale gas advantage and also
obviously by global megatrends like population growth amongst others as I have
shown above.