the age of uncertainty: a global economicoutlook · •global manufacturing in recession;...
Post on 18-Jun-2020
3 Views
Preview:
TRANSCRIPT
THE AGE OF UNCERTAINTY:A GLOBAL ECONOMIC OUTLOOK
23 September 2019
Pine Chemicals Association
Vancouver, BC
Martha Gilchrist Moore
Sr. Director – Policy Analysis and Economics
Presentation
Overview
Near-Term Outlook
Longer-TermDemand Trends
Trade Tensions
Near-Term Outlook
Europe 37%
North America
29%
Japan 14%
OtherAsia-
Pacific5%
LatinAmerica
4%
Africa & Middle East
3%
India China
1% 5%
Former Soviet Union
(FSU)2%
Shifting Center of Gravity: Chemical Demand
China 38%
Europe 17%
North America
16%
Japan 5%
OtherAsia-Pacific 10%
Africa & Middle East
4%
India2%
LatinAmerica6%
Former Soviet Union (FSU)
2%
20181989
176%
105%
84%
67%
48% 42% 40% 39%32% 32% 32% 31% 31% 30% 30% 29% 29% 29% 25% 23% 20% 20% 18% 15% 14% 12%
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
% of GDP from Exports
Relative Importance of Trade
Source: Oxford Economics
Global Economy Has Lost Momentum
• Trade volumes slowing affecting most economies (some more than others)
• Labor markets deteriorating across the globe
• Inflation remains relatively low
• Short-term investment outlook is poor
• Banks increasingly risk averse, despite looser financial conditions
• Consumer spending lower across many economies
• Global manufacturing in recession; industrial production expected to grow just 1.5% in 2019 before recovering to 2.5% in 2020
• GDP forecasts lowered for many key economies
• Global GDP forecast lowered to 2.7% for 2019 (slowest rate since 2009) and 2020
• Increasing downside risks
Increasing Uncertainty in U.S. and Global Outlooks
Occurrences of the word “uncertainty” in Federal Reserve Beige Book
35
30
25
20
15
10
5
0Jul 18 Sep 12 Oct 24 Dec 5 Jan 16 Mar 3 Apr 17 Jun 5 Jul 17 Sep4
'18 '18 '18 '18 '19 '19 '19 '19 '19 '19
Source: Federal Reserve
Global Economic Policy Uncertainty Index
Source: Scott Baker, Nick Bloom, and Stephen J. Davis
2017 20222018GDP
2019Trade Volumes
2020 2021Industrial Production
% growth5
4
3
2
1
0
Global Economy Slows in 2019
Source: ACC Survey of Forecasters
53
52
51
50
49
48
47
46
45
44
A reading above 50 indicates expansion, while a
reading below 50 indicates contraction
PMIs Suggest Downturn in Global Manufacturing
9Sources: Institute for Supply Management, JP Morgan, IHSMarkit
20
15
10
5
0
-5
-10
-15
-2094 96 02 16 1898 00
OECD CLI+6
04 06 08 10
Global Industrial Production
12 14
Global Trade
The OECD CLI + 6, Global Industrial Production, and Global Trade
% Y/Y Change (3MMA)
Sources: OECD, various national statistical agencies, ACC analysis
• Longest economic expansion on record (122 months), but momentum is slowing; U.S. is at or near peak in business cycle
• 2018 boost from fiscal stimulus has faded; investment growth decelerating
• Uncertainty created by tariffs and trade situation are exacerbated by weak demand abroad
• Confidence waning, but remains relatively high
• Labor market still strong; but starting to slow
• Consumer spending still solid on continued gains in employment and real wages
• Fiscal cliff in 2020 likely avoided
• Two rate cuts and more cuts likely; dollar appreciating
• GDP growth of 2.4% in 2019 and 1.9% in 2020
U.S.: Still Resilient, but Slowing
Global Economic Outlook
% Change in Real GDP
Sources: BEA, OECD, IMF, author’s estimates
World USA UK Euro Area Japan Brazil Russia China India
2016 2.5 1.6 1.8 2.0 0.6 -3.3 0.3 6.7 8.2
2017 3.2 2.4 1.8 2.4 1.9 1.1 1.6 6.8 7.2
2018 3.1 2.9 1.4 1.8 0.7 1.1 2.3 6.6 7.1
2019 2.7 2.4 1.2 1.1 0.9 1.5 1.3 6.1 6.7
2020 2.7 1.9 1.2 1.3 0.4 2.2 1.8 5.8 7.1
2021 2.8 2.0 1.9 1.3 1.0 2.0 1.9 5.1 6.9
End-Use Industry Outlook: Advanced Economies
< 10%
-10% - -2%
-2.0% - 0.0%
0.0% - 1.0%
1.0% - 5%
5% -10%
>10%
2017 2018 2019 2020 2021 2022 2023
Oil & natural gas extraction
Aerospace
Food, beverages & tobacco
Construction
Coatings
Agriculture
Machinery
Wood & wood products
Electronic components
Textiles, leather & apparel
Motor vehicles & parts
Paper
Printing & recorded media
End-Use Industry Outlook: Emerging Markets
2017 2018 2019 2020 2021 2022 2023
Food, beverages & tobacco
Construction
Wood & wood products
Machinery
Agriculture
Coatings
Textiles, leather & apparel
Printing & recorded media
Paper
Motor vehicles & parts
Electronic components
Oil & natural gas extraction
Aerospace
< 10%
-10% - -2%
-2.0% - 0.0%
0.0% - 1.0%
1.0% - 5%
5% -10%
>10%
Global Semiconductor Sales
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0-50
-30
-10
10
30
50
89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
3-Month Moving Average of Sales (right) % Change Y/Y (left)
Source: Semiconductor Industries Association
Billion
Europe North America South America China
India Japan Other Asia Pacific Rest of World
Millions
1009080706050403020100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Global Light Vehicle Sales by Region
Sources: OCIA (International Association of Motor Vehicle Manufacturers), Wards Intelligence, Oxford Economics
Global Chemical Capacity Utilization
% of Capacity (3MMA)
100
95
90
85
80
75
70
89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
Source: American Chemistry Council
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%180
160
140
120
100
80
60
40
20
0
Production Index (2012=100)
Growth of Global Chemical Industry
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
% change Y/Y (right axis) Production index (left axis)
Sources: ACC, Oxford Economics
U.S. SPECIALTY CHEMICALS LONG TERM OUTLOOK
Electronic Chemicals
Oilfield Chemicals
Plastic Compounding
Plastic Additives
Plasticizers
Flame Retardants
Antioxidants
Corrosion Inhibitors
Paint Additives
Biocides
Rubber Processing
Catalysts
Water Mgmt Chemicals
Food Additives
I&I Cleaners
Adhesives & Sealants
Flavors & Fragrances
Historical (2013-18)
Future (2019-23)
% growth per year
-1 0 1 2 3 4 5 6 7
Average Annual
% Change
Year-over-Year
Segments with Slow Growth Prospects
Pigments, 1.4
Cosmetic Additives, 1.2
Coatings, 1.1
Foundry Chemicals, 1.1
Lubricant Additives, 1.1
Construction Chemicals, 0.7
Dyes, 0.5
Mining Chemicals, 0.3
Paper Additives, 0.2
Segments Contracting
Printing Inks, -0.6
Textile Specialties, -1.0
Longer-Term Trends
25
20
15
10
5
0
-51985-90 1990-95 1995-2000 2000-05 2005-10 2010-15 2015-20 2020-25
Global North America Europe Japan China India Latin America Africa & Middle East
Average growth % per year
Chemical Production Growth
• Population
• India and China currently account for nearly a third of global population
• India will become the world’s most populouscountry over the next decade
• Rising Middle Class
• Increasing Urbanization
• Sustainability
• Infrastructure
• Digitalization/technology
Drivers for Long-Term Rising Chemistry Demand
100%
80%
60%
40%
20%
0%China India
Middle Class Share of Population
2020 2050
40%
20%
0%
60%
100%
80%
China India
Urban Share of Population
2020 2050
Trade Tensions
400
350
300
250
200
150
100
50
0
500450400350300250200150100500
2014 2015 2016 2017
Trade Balance (right)
2018
Exports (left)
2018 YTD 2019 YTD
Imports (left)
$ millions
U.S. Pine Chemicals Trade
U.S. Chemistry Exports to the World
Embedded chemistrycontent of other
exported goods,$49.3
Direct chemical
exports, $140.2
$ billions
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
Trade Conflict Slowing Global Growth
• Tremendous uncertainty on trade: USMCA, Section 301, retaliation from Section 232, and others
• Escalating tariffs and trade tensions between the U.S. and other trading partners (esp. China) is taking a toll on the broader global economy
• Tariffs are a tax and raise costs
• Trade volumes lower, especially in emerging Asia
• Creating headwinds for investment and hiring as firms cannot anticipate demand and costs
• Continued tariffs and trade war has already cut into growth. Escalation will further cut growth prospects
• Significant impact on U.S. chemicals-directly and indirectly
• Updates and replaces 25-year old NAFTA agreement
• Continues reciprocal zero tariffs on more than 11,000 goods imported into U.S.
• Promotes greater regulatory cooperation and streamlined ROOs
• Expands access to agricultural markets in Canada and Mexico
• Includes minimum wage mandates, environmental provisions, guarantees against foreign expropriation of U.S. property, greater intellectual property rules, gender discrimination guidelines, and support for the free flow of data between countries
• USITC expects USMCA to add 176,000 jobs and growth the economy by$68 billion
• Concerns remain regarding duty-drawback and ISDS
USMCA
• In 1975, India was named a beneficiary developing nation under GSP, aU.S. trade preference program
• Nearly 2,000 products (including auto parts, textiles) were allowed to enter the U.S. duty-free
• India was the largest beneficiary of the program with $5.7 billion in imports in 2017.
• In May 2019, after determining that India was not providing “equitable and reasonable access” to its markets (in addition to other criteria), theU.S. withdrew GSP status for Indian imports.
• The Coalition for GSP estimates it will cost U.S. businesses an additional$300 million in tariffs and could disrupt investment
• India has retaliated with higher tariffs on 28 U.S. products ($1.4 billion)
Removal of GSP Status for India
• Citing unfair trading practices and lax intellectual property protections, initial action on washing machines and solar cells in February 2018
• Tit-for-tat escalation now includes all of imports from China with tariffs of up to 30% on $250 billion of imports
• By December, additional tariffs on 10% to 15% tariffs on the remaining$300 billion of imports, including consumer goods (mobile phones, toys, computers, etc.)
• More than $24.8 billion of chemicals/plastics imports affected
• In addition, the Administration has requested that U.S. companies stop doing business with China
• Lost in the noise: importers of components/supplies not easily sourced elsewhere and consumers (~$1,000/year according to JP Morgan)
Section 301 Tariffs
List,
Effective Date
Date
ImposedU.S. SECTION 301 TARIFFS
ON IMPORTS FROM CHINA
CHINESE RETALIATORY TARIFFS
ON IMPORTS FROM THE U.S.
$50B Tariff
Action
(Lists 1 & 2)
7/6/18,
8/23/1825% tariffs, increase to 30%
10/15/19$1.8B Chemicals/Plastics
25% tariffs on $50B imposed$2.0B Chemicals/Plastics
$200B Tariff
Action (List 3)
9/24/18,
5/10/19,
10/15/19
10% tariffs initially, increased to
25% tariffs May 2019, increase to30% 10/15/19$12.9B Chemicals/Plastics
5%, 10%, 20% and 25% initially,
now 20% and 25% tariffs on $60B imposed
as of 6/1/19$9.0B Chemicals/Plastics
Proposed
$300B Tariff
Action (List 4)
9/1/19
List 4a15% tariffs$5.1B Chemicals/Plastics
5% and 10% tariffs$0.1B newly listed Chemicals/Plastics
12/15/19
List 4b15% tariffs$5.1B Chemicals/Plastics
5% and 10% tariffs$0.7B newly listed Chemicals/Plastics
Cumulative $488B$24.8B Chemicals/Plastics
$110B$11.8B Chemicals/Plastics
U.S. SECTION 301 ANDRETALIATORY TARIFFSON US-CHINA TRADE
SUMMARY
Sec. 301 Tariffs on Pine Chemicals
HTS Code HTS DescriptionChinese Tariff
List
Chinese rate
on U.S. ExportsUS Tariff List
U.S. Rate on Chinese
ImportsDate Imposed
3803 Tall oil, whether or not refined List 3, Annex 4 5% List 3 10% initially, raised to
25% May 2019, (proposed
increase to 30% on
10/15/19)
9/24/2018
3804 Residual lyes from the
manufacture of wood pulp,
whether or not concentrated,
desugared etc., including lignin
sulfonates, but excluding tall oil
List 3, Annex 4 10% List 3 10% initially, raised to
25% May 2019, (proposed
increase to 30% on
10/15/19)
9/24/2018
3805 Gum, wood or sulfate turpentine
etc. from coniferous woods;
crude dipentene; sulfite
turpentine etc; pine oil with
alpha-terpineol predominating
List 3, Annex 4 25% List 3 10% initially, raised to
25% May 2019, (proposed
increase to 30% on
10/15/19)
9/24/2018
3806 Rosin and resin acids and
derivatives therof; rosin spirit
and rosin oils; run gums
List 3, Annex 4
List 4, Annex 2
5%-25% List 3 10% initially, raised to
25% May 2019, (proposed
increase to 30% on
10/15/19)
9/24/2018 &
12/15/2019
3823.13 Tall oil fatty acids List 3, Annex 4 5% List 4a 15% 9/24/2018
(China)
9/1/2019 (U.S.)
Summary
• Uncertainty remains a key theme in 2019
• While there no clear signs of impending global recession, the global economy is experiencing slow growth and low inflation
• Trade tensions are disruptive and harmful to just about all involved
• Outlook is for modest recovery in 2020 and 2021
• Longer-term, economic center of gravity will continue to shift anddifferent patterns of growth to underlying demographic trends andevolution of economic structure
• Many challenges and opportunities ahead for pine chemical producers
For Further Information
Please feel free to address questions to:
Martha Gilchrist Moore
Senior Director – Policy Analysis and Economics
American Chemistry Council
martha_moore@americanchemistry.com
(202) 249-6182
top related