U.S. chemical companies increase future-oriented spending

Project Investment Growth 8.6% R&D Expense Rise 6% Increase in Overseas Investment

For many American chemical companies in 2007, it can be described as a good year. Although energy and raw material prices have continued to rise and hit record highs, these companies have succeeded in "passing" the increased cost of most products to customers, and they have still obtained considerable profits. In addition, although the speed of development of housing construction and automobile industry in the United States has slowed down, the demand for US chemicals in overseas markets has been strong and has become a major factor supporting its growth.
Analysts believe that the good years of American chemical companies will continue this year. Although most companies believe that the U.S. economic development may encounter greater resistance in 2008, the demand for chemical products in the Asian market will continue to grow at a fast rate. Many companies have formulated plans based on this analysis including project construction investment and research and development expenses. Future-oriented 2008 spending plans.
Project investment increased by an average of 8.6%
Not long ago, 17 chemical companies in the United States accepted the annual survey of Chemical Engineering and News. According to statistics, in 2008 these companies spent an average of 8.6% on new projects and new equipment. The total amount will reach US$8.8 billion.
Some US chemical companies surveyed said that in 2008, they will substantially increase investment in project construction to strengthen their global competitive position. Among them, Cabot’s capital budget has the largest increase. It is said that the company’s capital expenditure this year will increase by 54.1% to US$225 million in order to expand its carbon black and specialty chemical production capacity in China. In addition, the company also intends to launch a series of new projects in other regions in order to increase the energy efficiency of its production plants.
The Austrian chemical company headquartered in Connecticut, the United States, has also seen a significant increase in capital expenditures for new projects this year, with a specific rate of 26.2% and a total value of US$53 million. Its most important project is to build a production base in Suzhou, China - a factory that mainly produces zinc-based anti-dandruff compounds, and plans to put it into production this year. Other actions include the expansion of the production capacity of water treatment chemicals in Brazil.
There are also some companies that constantly expand their projects to meet the needs of users. For example, Cytec Industrial Co., Ltd. last year expanded its carbon fiber plant because of strong demand for carbon fiber used in the manufacture of lightweight composite materials. This year the company will also continue to expand and transform carbon fiber. In addition, some companies have increased the production capacity of waterborne coatings and radiation-cured coatings last year, but since the market for these two types of coatings is expected to grow substantially this year, they will continue to expand their production facilities.
R&D spending increased by an average of 6%
14 of the 17 companies also received an annual R&D budget survey. The growth rate of these companies' R&D budgets this year is smaller than that of project investments. On the basis of last year, the average growth rate is 6%. The total R&D budget will reach US$2.8 billion. Over the past few years, the cost of R&D for American chemical companies has fluctuate little. When the prospects for the industry are good, the proportion of the company's R&D expenditures is correspondingly lower, because everyone has invested more funds in the projects that are actually under construction. This year, companies spent 28.5% of their expenses on research and development as a percentage of future-oriented expenditures, up from 35.3% in 2004, the highest in 10 years. Of the 14 companies surveyed under the R&D spending plan, nine companies said that they will increase spending further in 2008, and five said that this year has not changed much compared to last year.
WR Grace said that in order to enhance the company’s core competitiveness, the R&D budget for 2008 will increase by 18.9% to US$88 million. Rohm and Haas Company stated that its R&D budget has increased by 13.2% to US$335 million. It is said that R&D investment is increasing to provide more support for high-growth economic regions in order to introduce more innovative product solutions.
The proportion of overseas investment has risen sharply. In the long run, American chemical companies are accelerating their investment in overseas projects. The purpose of doing so is, on the one hand, in order to meet the needs of customers in a timely manner, on the other hand, overseas construction projects are often less expensive than the raw materials used in the United States to build factories.
The American Chemical Industry Council (ACC) recently stated that its members expect that the proportion of project construction spending in the United States in total capital expenditure will decrease from 62% in 2006 to 48% in 2011. In sharp contrast, the proportion of its investment in Africa and the Middle East has increased significantly, from 2% in 2006 to 15% in 2011. The ACC also expects that in 2009, American Chemicals' R&D expenditure will increase by 4.9%.
Greening of products and production processes Many chemical companies now have such a trend in their development: to make products and their production processes green. Relevant experts believe that the greening of a product and its production process is not always the only way. The most important thing is to reduce or eliminate “three wastes” and use energy more effectively.
Experts suggest that chemical companies must pay attention to the latest green policies issued by various governments, such as the EU's REACH regulation and some NGOs’ initiatives like Greenpeace, and consider them For an opportunity, not an obstacle. Chemical companies should actively carry out R&D activities and develop more innovative products and solutions to maintain their competitiveness in a growing number of regulations.

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