Organic Commodity Chemicals USITC Publication 3590 March 2003 OFFICE OF INDUSTRIES U.S. International Trade Commission Washington, DC 20436 UNITED STATES INTERNATIONALTRADE COMMISSION This report was prepared principally by Gary F. Stolz Organic and Inorganic Chemicals Branch Energy, Chemicals, and Textiles Division Additional input provided by Elizabeth R. Nesbitt Chief, Organic and Inorganic Chemicals Branch Vern Simpson Robert A. Rogowsky Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 Director of Operations Director of Industries COMMISSIONERS Marcia E. Miller Deanna Tanner Okun, Chairman JenniferA. Hillman, Vice Chairman Stephen Koplan Under the direction of John J. Gersic Chief, Energy, Chemicals and Textiles Division 1 The information and analysis provided in this report are for the purposes of this report only. Nothing in this report should be construed to indicate how the Commission would find in an investigation conducted under statutory authority covering the same or similar subject matter. i PREFACE In 1991 the United States International Trade Commission initiated its current Industry and Trade Summary series of informational reports on the thousands of products imported into and exported from the United States. Each summary addresses a different commodity/industry area and contains information on product uses, U.S. and foreign producers, and customs treatment. Also included is an analysis of the basic factors affecting trends in consumption, production, and trade of the commodity, as well as those bearing on the competitiveness of U.S. industries in domestic and foreign markets. 1 This report on organic commodity chemicals covers the period 1997-2001. iii CONTENTS Page Preface i Abstract 1 Introduction 3 U.S. industry profile 7 U.S. market 11 Consumer characteristics and factors affecting demand 11 Consumption 11 Production 12 U.S. trade 15 Overview 15 U.S. imports 17 Principal suppliers and import levels 17 Tariff and nontariff measures 17 U.S. government trade-related investigations 20 U.S. exports 20 Principal markets and export levels 21 Foreign trade measures 21 Foreign industry profile 22 North America 22 Asia 23 Europe 25 Middle East 26 Others 26 iv CONTENTS-Continued Page Appendixes A. Tariff and trade agreement terms A-1 B. Statistical tables B-1 Figures 1. Benzene chain 4 2. Xylene chain 5 3. Chemical mergers and acquisitions worldwide, 1997-2001 8 Tables 1. Organic commodity chemicals: Harmonized Tariff Schedule classification, 2001 7 2. Organic commodity chemicals: import-to-consumption ratio, 1997-2001 12 3. Organic commodity chemicals: U.S. production, exports of domestic merchandise, imports for consumption, and apparent consumption, 1997-2001 13 4. Organic commodity chemicals: productivity and unit labor costs, 1997-2001 15 5. Relative price history of crude petroleum and natural gas, 1987-2001 15 6. Trade balance of certain commodity chemicals, 1997-2001 16 7. Organic commodity chemicals: Harmonized Tariff Schedule subheading; description; U.S. column 1, Special, and column 2 rates of duty as of Jan. 1, 2002; U.S. imports, 2001; and U.S. exports, 2001 18 B-1. Organic commodity chemicals: U.S. imports for consumption, by principal sources, 1997-2001 B-2 B-2. Organic commodity chemicals: U.S. exports of domestic merchandise, by principal markets, 1997-2001 B-7 OMB No.: 3117 0188 03/03 ITC READER SATISFACTION SURVEY Industry and Trade Summary: Organic Commodity Chemicals The U.S. International Trade Commission (USITC) is interested in your voluntary com- ments (burden less than 10 minutes) to help assess the value and quality of our reports, and to assist in improving future products. Please return survey by facsimile (202-205-3161) or by mail to the USITC, or visit the USITC Internet home page (http://reportweb.usitc.gov/reader_survey/readersurvey.html) to electronically submit a Web version of the survey. (Please print; responses below not for attribution): Your name and title: Organization (if applicable): Which format is most useful to you? - CD-ROM - Hardcopy - USITC Internet site Circle your assessment of each factor below: SA = strongly agree, A = agree, N =noopinion, D = disagree, or SD = strongly disagree. 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WASHINGTON, DC 20277 2840 ATTN: OFFICE OF INDUSTRIES ITS: Organic Commodity Chemicals 1 ABSTRACT This report addresses trade and industry conditions for the organic commodity chemicals, also known as petrochemicals, a category of chemicals derived from crude petroleum. These chemicals are used primarily as intermediates in the production of a wide variety of downstream goods, including plastics and apparel. The period of study is from 1997 through 2001. • The U.S. organic commodity chemicals industry produced an average $18.9 billion of these goods each year during 1997-2001. The average annual trade surplus during this period was $600 million. • The largest U.S. export markets of these products were Mexico and Canada, which accounted for approximately 41 percent of all exports by value (or $3.17 billion) in 2001. Major U.S. import sources included Canada, Venezuela, and Nigeria, which together accounted for approximately 53 percent of these imports by value (or $2.49 billion) in 2001. • Consumers of these chemicals typically use them as intermediates in numerous products, including plastics, adhesives, and nylon fibers. There is little or no quality differentiation between domestically-produced commodity chemicals and U.S. imports. The global market is highly competitive and large fluctuations in domestic production, imports, and exports regularly occur. These fluctuations are caused by a variety of factors that include demand for downstream goods, cost of feedstocks, transportation costs, and producer efficiency. In particular, the general economic decline in 2001 contributed to the decline in U.S. production levels for that year. [...]...INTRODUCTION The organic commodity chemicals are a group of petroleum-derivative chemicals (also known as petrochemicals) used as intermediates to produce other chemicals, which, in turn, are used to manufacture a wide variety of end-use products, including construction materials, apparel, adhesives, plastics, and tires (figures 1 and 2) The majority of the organic commodity chemicals are derived... of organic commodity chemicals increased irregularly during 1997-2001, from $923 million in 1997 to $1.2 billion in 2000, before declining to $1.0 billion in 2001 The principal organic commodity chemicals imported into the United States during this period, based on value, were styrene, cumene, and para-xylene Together, these three products accounted for 72 percent of the imported organic commodity chemicals. .. as of January 1, 2002, for imports of the organic commodity chemicals under the Harmonized Tariff Schedule (HTS) of the United States The United States currently has zero tariffs on eight of the organic commodity chemicals imported from countries with normal trade relations status; these eight products accounted for 87 percent of imports of organic commodity chemicals in 2001 Eligible imports from Canada,... the organic commodity chemicals worldwide are low or free Under NAFTA, qualifying U.S exports enter Canada and Mexico free of duty The European Union (EU) has no tariffs for cyclohexane, styrene, xylene isomers, cumene, or ethylbenzene The remainder of the organic commodity chemicals entering the EU are dutiable at rates ranging from 3.0 to 8.5 percent Japan’s duty rates for the major organic commodity. .. Netherlands (6 percent) From 1997 through 2001, these four countries accounted for 63 to 70 percent of U.S exports of organic commodity chemicals The two largest organic commodity chemical exports were styrene and paraxylene, which together accounted for 55 percent of all exports of commodity chemicals in the period 1997-2001 Mexico accounted for 42 percent of U.S styrene exports in 2001 Although the country... Chemical LP (2000) and Equistar Chemicals LP (1997)).10 Because of economies of scale and the highly competitive marketplace, midlevel companies are often unable to compete effectively in the petrochemicals markets.11 Small companies (corporations with sales under $200 million) often do not produce organic commodity chemicals but instead produce specialty chemicals These specialty chemicals are marketed on... chemicals in 2000,74 and a predicted GNP growth rate of 7.6 percent in 2002,75 organic commodity chemicals producers worldwide are reportedly examining the Chinese market closely for opportunities One estimate by the American Chemical Council shows an increase in U.S exports to China of more than $300 million in the initial years following China’s accession to the WTO.76 The U.S organic commodity chemicals. .. has built several organic commodity chemicals production facilities in recent years As these plants have come online, U.S exports of these goods to Taiwan have decreased In 1999, U.S exports of organic commodity chemicals to Taiwan were $239 million, 16 percent of total U.S exports of these goods In 2001, exports were $135 million, accounting for 9 percent of exports In 2000, Formosa Chemicals and Fibre... percent reduction in NOX emissions.30 U.S MARKET Consumer Characteristics and Factors Affecting Demand Consumers of the organic commodity chemicals are producers of downstream chemical derivatives Most of the commodity chemicals are available on the merchant market, although some of the these chemicals, such as ethylbenzene, are consumed almost entirely on a captive basis The markets utilize a combination... Investigations During the period 1997 through 2001, there were no trade investigations conducted by the Commission on any of the organic commodity chemicals addressed in this report U.S Exports Because of the establishment of specific grade and purity levels, the organic commodity chemicals are of uniform quality and move in a global market As a result, export levels can fluctuate because of a variety of . INDUSTRIES ITS: Organic Commodity Chemicals 1 ABSTRACT This report addresses trade and industry conditions for the organic commodity chemicals, also known as petrochemicals,. worldwide, 1997-2001 8 Tables 1. Organic commodity chemicals: Harmonized Tariff Schedule classification, 2001 7 2. Organic commodity chemicals: import-to-consumption