THOUGHTS

Chemicals Renaissance in US and Transportation Bottlenecks

Jul 5, 2017

The dramatic growth in the chemicals industry has caught the fancy of industry experts, investors, as well as the public. Especially the chemicals market in the US has witnessed a whooping investment of $161 billion in the past 7 years making industry experts predict a renaissance for the chemicals manufacturing industry. Abundance in shale gas, along with low cost of feedstocks are two major factors which has triggered the growth of this market in the US.

Chemistries which has pushed the industry on the verge of renaissance

Methanol, polyolefins, and olefins are the three chemistries which has ushered in renaissance in the specialty chemical industry. For instance, olefins are regarded as building blocks for products like propylene and ethylene. Methanol, on the other hand, is a chemical that is heavily used in manufacturing other chemicals as well. The high availability of shale deposits in the US has not only brought down the cost of production of natural gas, but has also led to immense technological innovations in this area.

The US basically has a cost-advantage over the other producers of shale gas. This is the reason why, even though shale deposits are found in other regions as well, it is in the US that this natural resource has been used in the best possible manner.

How transport infrastructure is critical for the growth of chemicals industry?

As far-fetched as it might sound, the growth in the chemicals industry has highlighted the lacunas in the United States transport infrastructure. Industry experts predict the cost of delays due to transportation to come up to $22 billion. The loopholes in the primary modes of transport like rail, sea, and roadways, will also result in high operational costs which is sure to affect the manufacturers in the chemicals industry in a negative manner.

Roadways is the primary mode of transport adopted by the chemicals industry in the US, followed by the railways and then the seaways. The major bottleneck emerges in the form of regulatory requirements which the drivers for the chemicals industry must adhere to undergo. When it comes to the sea ways, the major problem is that the gulf ports are not regarded as ideal locations by players in the chemicals industry. The non-gulf ports on the other hand often face problems due to disputes between warehouse unions and maritime associations.

The need of the hour is to address the issues by bringing all the stakeholders – chemical manufacturers, shippers, as well as policy makers – on the same platform. Only when the transportation related issues are addressed will the renaissance in the chemicals industry come in full bloom.

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