Chemicals

Following one of the worst years in its history, the global chemical industry is expected to resume growth this year, led by the specialty chemical sector. The American Chemistry Council forecasts global chemical production to rise 4.6% this year, compared to a 4.6% decline in 2009. Production in emerging nations is estimated to rise 6.9%. US production of chemicals is expected to grow 3.0% in 2010, excluding pharmaceuticals. Last year, US chemical production fell 9.4%. For Europe, the European Chemical Industry Council predicts 4.7% growth in 2010, excluding pharmaceuticals, following a 12.4% decline in 2009. Oxford Economics estimates that chemical production in Brazil, Russia, India and China rose 12.3% on average last year and will grow an average of 13.4% this year. Cost controls are largely expected to remain in place, with further restructuring forecasted. Moody’s Investor Service has maintained the sector’s negative outlook, citing overcapacity.

Energy

The International Energy Agency forecasts that world oil demand will increase 1.7% in 2010, following a 2.2% decline last year. Wood Mackenzie forecasted in October that investments in upstream markets (exploration and production) for gas and oil will be stagnant in 2010 at $325 billion. In contrast, Barclays Capital forecasts spending on oil and gas exploration and production to rise 11% to $439 million this year, compared to a 15% decline in 2009. By region, US investments are expected to increase 12%, Canadian investments to increase 23%, Russian investments to rise 20%, spending in the Middle East and Africa to grow 15%, and Latin American spending to grow 9%. State-owned oil companies are expected to increase investments 15%.

Downstream capital spending is forecast to be cautious as refineries’ margins remain tight due to excess capacity, according to analysts from JP Morgan and Société Générale. However, Morgan Stanley and Credit Suisse analysts expect refining margins to rise in 2010 as a result of the economic recovery. Morgan Stanley forecasts 1.6 million barrels per day of new refining capacity will be added this year.

Bloomberg New Energy Finance reports new investments in clean energy fell 6.5% last year to $145 billion. Investments from asset financing, public markets, venture capital and private equity funds declined 8.7% to $111.6 billion. The remainder of the investments came from governments, corporations and property owners. A December 2009 survey by the National Venture Capital Association of 325 US venture capitalists found that 54% of respondents forecast increased investments in clean technology this year and 26% expect decreases. The Economist forecasts 2009 demand for liquid biofuels to grow in double digits.

Pharmaceutical and Biotech

Loss of patent protection remains the dominant theme for the pharmaceutical industry in 2010. This year, patents will expire for drugs with sales of $133 billion, according to EvaluatePharma. Actions taken by companies in 2009 to combat the loss of sales, including restructuring, mergers and acquisitions, and diversification are expected to continue this year. IMS Health forecasts 2010 worldwide pharmaceutical sales to grow 4%–6% to more than $825 billion, led by China’s growth of more than 20%. Including China, drug sales in the seven “pharmerging countries” are forecast to grow 12%–14%. Global drug sales in 2009 rose an estimated 5.5%–6.5% to $775–$785 billion. According to IMS, for the year ended June 2009, sales of specialty drugs rose 7.3% to $289 billion and generic drug sales increased 8.2% to $80 billion. The Economist reports that sales of generic drugs are expected to grow 5.1% in 2010.

IMS reports that sales of biologic drugs for the year ended June 2009 increased 7.5% to $120 billion. According to Burrill & Company, US biotech companies raised $55.8 billion last year, an 85% increase. Funding consisted of $36.9 billion from partnering activities and $18.9 billion in financing. However, companies with early-stage products faced a harder time raising money, leading to reduced spending. Nature Biotechnology reports that as of September 2009, 22 public US biotech companies had less than one year’s cash available, down from 39% in the first half of 2009. According to the National Venture Capital Association survey, 36% of respondents expect biotech investments to remain unchanged this year, 34% expect them to decrease and 30% expect them to increase.

Metals

After a dismal start to 2009, metals prices showed some recovery in the second half, driven by China. Iron ore and steel prices are expected to continue to increase in 2010. However for base metals besides iron, analysts are divided as to the sustainability of recent price gains. Overcapacity and raw material costs are expected to limit metal producers’ investments. World steel production is estimated to rise 11.2% this year, according to the Financial Times. In 2009, steel production declined 10.3%. In 2010, Chinese steel production is expected to grow 7%, compared to growth of 15% for all other countries. The Wall Street Journal reports that China is forecast to produce 600 million metric tons (mmt) of steel this year. World Steel Associates estimates that apparent steel demand will grow 9.2% this year, after declining 8.6% last year to 1,104 mmt (see IBO 10/15/09). China’s apparent steel use grew 19% last year to make up 47.7% of demand.

Chart: Industry Growth Expectations for Instrument Sales for 2010

2009-10

Polymers 0.4%

Chemicals 0.6%

Metals 1.0%

Semicon/Elect. 1.6%

Oil/Petrochem. 3.7%

Indep. Test 5.3%

Pharma. 5.7%

Academia 6.1%

Government 6.5%

Biotech 8.3%

Food and Bev. 9.0%