Industrial Organic Chemicals, NEC

SIC 2869

Industry report:

This industry includes companies primarily engaged in the production of organic chemicals used by other manufacturing industries. It encompasses the majority of U.S. organic chemical output and represents the single largest segment of the overall chemical industry. Materials created using these chemicals, such as plastic and fiber, are classified in their respective industries.

Industry Snapshot

Scientists began producing synthetic organic chemicals in the 1850s. However, production did not surpass inorganic output until the 1900s. Rapid expansion during the twentieth century made the overall chemical industry one of the largest businesses in the United States and one of the largest exporting sectors of the U.S. economy.

According to industry statistics, there were 2,536 companies engaged in the production of organic chemicals used by other manufacturing industries. Total products were valued at $102.8 billion in 2008 with industry-wide employment of 76,948 workers. Industrial organic chemicals, not elsewhere classified, accounted for 43.4 percent in market share with shipments totaling $57.1 billion. Texas, California, Ohio, Connecticut, and Illinois were home to the majority of chemical companies.

The United States processed approximately 70,000 chemicals in 2003, which accounted for 26 percent of the world chemical supply. The health of the industry has followed the direction of the U.S. economy in general. In 2001, the industry suffered with the rest of the United States as terrorism, unrest in the Middle East, and a stagnant domestic economy affected productivity and profitability. Shipments of basic chemicals fell 3.4 percent in 2000 and 9.4 percent in 2001 before rebounding 8 percent in 2002. Despite a better year in 2002, the economy was slow to recover, and the chemicals industry continued to suffer from weak consumer confidence and volatile natural gas and oil prices in 2003.

After three stagnant years, the chemical industry experienced gradual to moderate growth in most business sectors during 2004. During the first half of the year, the growth rate was slow, rising 1.1 percent. However, in August of 2004, there was a 6.6 percent surge of shipments. Toward the end of 2004, there was a slight downturn from higher oil prices. Overall, global chemical production climbed to 4.4 percent from 3.2 percent in 2003. Shipments of basic chemicals rose 4.9 percent. The recovery resulted in the shipping of products valued at $501 billion in 2004, despite the high cost of raw materials, as well as higher energy costs that still overshadowed the industry. In 2005, the U.S. industrial organic chemicals industry shipped products valued at $141.65 billion, a significant increase over $85.72 billion in 2002. U.S. shipments of all chemicals were valued at $501 billion in 2004.

By the final years of the decade, production decreased. For example, chemical production fell 11.8 percent in February 2009 compared to February 2007. Gulf Coast states responsible for the bulk of petrochemicals, inorganics, and synthetic materials fell further, to 20.7 percent compared to a year earlier. "As demand for nearly all goods and services fell sharply...so did demand for chemicals," according to the American Chemistry Council (ACC) in March 2009.

Organization and Structure

The chemical industry is divided into organic and inorganic substances. Inorganic chemicals, which are derived from the inanimate material of the earth's crust, include compounds such as sulfuric acid, sulfur, phosphoric acid, and hydrogen peroxide. Organic chemicals are so named because in the industry's early days they were obtained from living organisms. In the twenty-first century, they are derived from substances that contain carbon, such as petroleum, coal, and natural gas. Petroleum-based chemicals, or petrochemicals, account for about 80 percent of industry output by weight and 50 percent of production by value.

Organic chemicals, particularly petrochemicals, play an indispensable role in modern society. They are essential ingredients in plastics, synthetic fibers, rubber, fertilizers, and chemical intermediates, which are converted into a plethora of consumer and industrial products. They are the primary building blocks of important materials supporting the health, food, transportation, and communication industries. Organic substances also have made possible many important specialty items, such as protective clothing and materials used for space exploration.

Because organic chemicals are used to make so many products within the overall chemical and related products divisions, the industry is difficult to define. In fact, most industrial organic chemicals are used by chemical-related businesses. For instance, companies that produce cyclic crudes and intermediates, such as aromatics and dyes (see SIC 2865: Cyclic Organic Crudes and Intermediates, and Organic Dyes and Pigments), purchased about 20 percent of industry output in the 1990s. Plastic resin manufacturers (see SIC 2821: Plastics Materials, Synthetic Resins, and Nonvulcanizable Elastomers) used 13 percent of production. Synthetic fiber producers (see SIC 2824: Man-made Organic Fibers, Except Cellulosic) accounted for about 6 percent of industry revenue, and elastomer companies (see SIC 2822: Synthetic Rubber--Vulcanized Elastomers) accounted for 3 percent of production. Another 13 percent of organic chemical sales were garnered from exports.
The remaining 45 percent of organic output was used by numerous manufacturing sectors. Steel and aluminum mills, paper mills, semiconductor manufacturers, drug companies, carpet mills, and battery producers were relatively large consumers. Other chemical uses included the production of items such as pipe, photographic equipment, electrical insulation, and food containers.

Production.
The organic chemical industry serves one primary purpose of taking a relatively few fundamental raw chemicals that contain carbon to combine and transform them into new substances with desirable physical properties. Using carbon as a basic building block, chemists are able to unite other elements, such as nitrogen, hydrogen, oxygen, sulfur, and chlorine, to generate a multitude of different compounds. Furthermore, each resulting compound can be manipulated with heat or additives to produce an infinite variety of characteristics and grades.

The most common category of organic chemicals are aliphatics, or olefins, which are straight-chain hydrocarbons. Olefins can be made using petroleum or natural gas, although most U.S. manufacturers use the latter. To produce olefins, natural gas is separated into ethane, propane, and butane. From these gases, smaller percentages of marketable ethylene, propylene, and butadiene are extracted. These three substances are the basic building blocks for most organic chemicals and synthetic materials. Major producers of aliphatics include Dow Chemical, Union Carbide, Occidental Petroleum, and Quantum Chemical.

Ethylene is the largest-volume organic chemical produced in the United States. Approximately 75 percent of all ethylene is utilized to produce plastics such as polyethylene, polyvinyl chloride, and polystyrene. It also is widely used to make antifreeze, synthetic fibers, rubber, solvents, and detergents. Derivatives of ethylene also represent a significant share of total industry output. The second-largest olefin by production volume is propylene. Forty percent of propylene is used to make polypropylene, which in turn is utilized to manufacture film, packaging, foams and coatings, solvents, gasoline, and fibers. In addition, propylene is used to make other popular chemicals, such as acrylonitrile, propylene oxide, isopropanol, and cumene. Butadiene, the third most popular olefin, is employed primarily in the manufacture of synthetic rubber. The remaining one-third of butadiene production is consumed by makers of latex, resins, and nylon fibers.

Aside from olefins and their chemical family, synthetic methanol accounts for a large share of industry output. Important derivatives of methanol include formaldehyde, acetic acid, methyl methacrylate, and various solvents. About 50 percent of all methanol is used in the production of adhesives, fibers, and plastics. In addition, it is an important ingredient in antifreeze and gasoline additives. Methyl tert-butyl ether (MTBE), a methanol derivative, is used as an oxygenate in automobile gasoline.

Environmental Impact.
Laws and initiatives regarding hazardous emissions generated during organic chemical production and use are important dynamics that shape the industry. The chemical business is the largest source of pollution in the United States, generating at least three times more pollution than the second-greatest offending industry.

As late as 1991, chemical producers released more than 1.5 billion pounds of toxins as defined by the Environmental Protection Agency's (EPA's) Toxics Release Inventory (TRI). This figure represented 46 percent of all U.S. industrial toxic emissions, of which 40 was dumped into the air, 40 percent into underground wells, and the remaining 20 percent into water and land.

To minimize the detrimental effects of chemical industry pollutants, multiple local, state, and federal laws govern producers. For example, the federal Emergency Planning and Community Right-to-Know Act requires many manufacturers to submit detailed emissions data to the EPA. Similarly, the Pollution Prevention Act (1990) requires those same companies to report their waste management and pollution reduction activities.

Other federal regulations that impact producers include the Safe Drinking Water Act, the Clean Air Act Amendments of 1990, and other laws that restrict hazardous wastes. In addition to legal restrictions, the EPA and the Chemical Manufacturers Association (CMA) sponsor successful voluntary pollution reduction programs that encourage environmental sensitivity. The EPA continues to monitor the industry, and in the political climate of the early twenty-first century, which places strong emphasis on chemical safety and pollution controls, it is likely that regulations will be added and modified.

The Responsible Care Initiative was launched by CMA in 1988 and joined by the Society of Organic Chemical Manufacturers Association in 1990. It is a voluntary program whose member companies address issues such as chemical safety by soliciting information from the public about its concerns and reporting progress back to the public.

Background and Development

Ancient Egyptians and Chinese were the first to experiment with chemical processes for dyeing, leather tanning, and glassmaking. It was not until 1790, however, that the Frenchman Nicolas Leblanc gave birth to the chemical industry. He is credited with being the first person to successfully carry out a deliberate plan to convert one or more chemical products into one completely different substance, keeping in mind not only the end product but also the economics of the process. Leblanc was inspired by a reward of 12,000 francs offered by the French Academy of Sciences to anyone who could devise a method for making inexpensive alkali.

While Leblanc's discovery was neglected in France, it became extremely important in England in the soap and textile industries. As British alkali producers advanced the inorganic chemical industry during the 1800s, they laid the foundation for organic chemistry. Although organic compounds had been known for centuries, it was not discovered until early in the nineteenth century that they all contain carbon. Once scientists realized that they could unite carbon with other common elements, they quickly began to create their own substances. At first chemists sought to create elements that imitated natural, known substances. Later on, they learned how to create a vast variety of previously unknown compounds.

The first chemist to synthesize an organic chemical for commercial use was the Englishman William Henry Perkin, the father of the organic chemical industry. At 18 years old, Perkin, working in his father's house in 1856, accidentally created a synthetic dye using a piece of coal tar. Although he received knighthood for his efforts, the chemical structure of Perkin's dye was not understood until 1865. In that year, Friedreich von Kekule announced his breakthrough theory of the benzene ring. Using Kekule's theory, chemists were able to build millions of new organic chemicals during the nineteenth and early twentieth centuries, many of which displaced natural materials and dyes.

Chemists did not begin synthesizing petroleum and natural gas to create petrochemicals on a commercial scale until the 1920s. A huge demand for gasoline, rubber products, textiles, detergents, and plastics that could be created with petrochemicals in the 1920s and early 1930s boosted industry growth. However, during World War II the organic chemical industry came to national prominence. During this period, a shortage of natural and man-made materials that had previously been supplied by other sources resulted in rapid industry expansion. For example, production of synthetic rubber jumped from just 72,000 tons in 1939 to more than 800,000 tons in 1945.

Organic chemical sales continued to expand after World War II as the U.S. economy expanded. The dramatic growth in automobile production during the 1950s, 1960s, and 1970s, for example, created a massive demand for chemicals utilized in the production of rubber, paint, and gasoline. Of importance were the commercial and residential construction booms that generated a huge need for paneling, roofing, insulation, carpet, draperies, upholstery, varnishes, and other chemical-based building materials. Likewise, the call for clothing created from organic chemicals swelled as the growing population sought viable alternatives to costly natural fibers. Defense and consumer products markets grew as well. The United States not only met demand in domestic markets, but also became a major chemical supplier to European countries that had been devastated by war.

As organic chemical revenues flourished between the 1950s and 1970s, overall chemical industry sales, including inorganics, reached approximately $50 billion. The production volume of ethylene and propylene, combined, topped 30 billion pounds, while total organic output climbed past 120 billion pounds. Heading into the 1980s, industrial organic chemical producers employed more than 120,000 workers and shipped more than $5 billion in exports.

In the early 1980s, organic producers were battered by high petroleum prices and a deep U.S. economic recession. As sales stalled throughout the early years of the decade, inventories swelled and profit margins collapsed. However, demand started recovering in 1983, pushed by a revival in housing starts and automobile markets. The demand for organics used to create plastics and textiles was especially strong, and consumption by paperboard and furniture markets recuperated. Sales climbed 9 percent in 1983, from $30.4 billion to $33.3 billion, and about 8 percent in 1984, to $35.8 billion.

Despite a temporary downturn in 1985 and 1986, industry expansion accelerated during the late 1980s. Sales rose to $42 billion in 1987 before jumping 16 percent to $49.1 billion in 1988. Prices and profits also improved following stagnation throughout most of the decade. For example, overall chemical industry profits rose to $4 billion in 1987, from just over $2 billion a year between 1982 and 1985. Profit margins climbed from 4 percent in 1985 to a peak of almost 10 percent in 1988, boosting overall earnings past an annual rate of $7 billion in early 1989.

Production volume of many organics mushroomed during the 1980s. For example, propylene output rocketed from 12.5 billion pounds in 1982 to 21.8 billion by 1990, representing annual growth of over 6 percent. Consumption of butadiene rose similarly, to about 3 billion pounds by 1990. Ethylene production climbed at an annual rate of more than 5 percent, from 24.5 billion pounds in 1982 to 36.5 by 1990. More importantly, however, many derivatives of the three major olefins realized average annual growth rates in excess of 10 percent throughout the decade. In anticipation of continued growth, producers responded in the late 1980s by making heavy capital investments to increase their production capacity.

Despite a surge in the late 1980s, chemical market growth during the decade was modest in comparison to the expansion enjoyed during the previous three decades. Indeed, many organic chemical producers realized that the industry was entering a new stage of maturity. The massive growth opportunities of the mid-twentieth century, propelled by economic expansion and uncontested global dominance, had diminished significantly as early as the late 1970s.

Especially disconcerting to producers of commodity-like organics was the steep rise of foreign competition that occurred in the early 1980s. U.S. producers were challenged not only with output by Japan and the European Community, but also by low-cost producers in Korea and Singapore. Despite overall export growth by domestic chemical manufacturers in the mid-1980s, the U.S. share of the world chemical export market plummeted from about 17 percent in 1984 to below 14 percent in 1987. Although inorganic commodity chemicals represented much of this decline, the share of U.S. exports represented by organic chemicals slipped from more than 30 percent in the mid-1980s to about 25 percent by the early 1990s. The U.S. global chemical export market share recovered slightly in 1989, to about 15 percent.

To combat long-term downward profit pressures exerted by relatively flat market growth and increased competition, many producers in the early 1980s began to cut costs, consolidate operations, increase research and development spending, and implement cost-saving automation and information systems. Most producers who were slow to implement such initiatives climbed aboard the bandwagon by the late 1980s, as evidenced by a decline in employment. Even as organic manufacturers scrambled to boost their productivity during the 1980s, employment fell from 111,000 in 1982 to about 100,000 by 1990. This occurred despite steady growth in production volume.

After steady growth through 1989, industrial organic chemical manufacturers suffered serious setbacks in the early 1990s. A U.S. and global economic recession stumped profit growth, as the value of petrochemical and related products sales dropped 1.5 percent in 1990 to $54.1 billion. Sales rose just 1 percent in both 1991 and 1992, and overall organic chemical output rose only slightly between 1990 and 1992. Moreover, this tepid growth was offset by stagnant prices and declining profits. From its peak of nearly 10 percent in 1988, chemical industry profit margins sank to about 5 percent in 1992.

Excess production capacity, the result of expansion in the previous half decade, compounded industry woes in the early 1990s. Oversupply continued to depress organic prices into the mid-1990s, eliminating profit growth. Despite successful ongoing efforts to increase productivity and improve products, U.S. competitors were unable to overcome the effects of the latest downturn. Even a slow but steady increase in organic exports did little to alleviate the impact of sluggish domestic markets. U.S. imports rose at a rate about 15 times greater than U.S. exports in 1992, augmenting downward price pressures.

In an effort to buoy earnings, domestic competitors continued restructuring in the 1990s. Companies cut costs out of every phase of the production process, often leading to massive layoffs. For example, DuPont announced a workforce reduction of as many as 4,500 people in late 1993, adding to about 5,500 layoffs made by that company since 1991. Similarly, Dow Chemical eliminated 4,700 jobs in 1993, and Air Products reduced its workforce by 1,300. Many companies also restructured by selling unprofitable operations and focusing on their core competencies.

While revenue improved and prices gained slightly in 1993, overcapacity and weak markets persisted into 1994. Industry shipments grew between 1 and 2 percent in 1993 and were expected to increase similarly. However, this growth was expected to reduce overcapacity eventually, allowing manufacturers to raise prices slightly. The effects of a reduction in oversupply was projected to be offset by the diminished stature of U.S. producers in the global market. U.S. firms were anticipated to be increasingly forced to shift production from high-volume, commodity-like organics to low-volume specialty and high-tech compounds that demand higher prices.

Shipment growth rates of ethylene were expected to be between 3 and 4 percent through 2000. As ethylene demand continued to grow, the industry will be forced to add new facilities at the estimated rate of one per year. Production of propylene rose 7.3 percent in 1995, and at year's end, inventories of propylene were twice those of 1994 and above average historical levels, causing prices to drop nearly 30 percent. Demand for propylene grew moderately after that.

Although the United States produces more than 3 billion pounds of butadiene per year, it historically has imported most of its butadiene from Europe. As with propylene, higher inventory in the mid-1990s caused prices to drop. As for methanol, the price almost tripled in 1994, reaching $1.55 per gallon, but by the end of 1994 it was back down to 42 cents. Since then, prices decreased even more. However, there is ongoing interest in the use of methanol as an alternative to gasoline, and new methanol plants were being constructed in such countries as Chile, Saudi Arabia, Trinidad, Equatorial Guinea, and Iran.

Methyl tert-butyl ether production topped 10.5 billion pounds in the early 1990s as prices were driven up by the Clean Air Act Amendments of 1990, which required the use of gasolines containing oxygenates such as MTBE. Beginning in 1992, the sale of oxygenated fuels was required during the winter months in 37 U.S. metropolitan areas that did not meet the federal air standards for carbon monoxide. In January 1995, year-round use began in nine regions as dictated by the Clean Air Act. However, the demand for MTBE was not as high as expected in 1995, as some states were able to get out of the program. In 1999, the National Research Council of the National Academy of Sciences released a report claiming that gasoline enhanced with MTBE could create ozone violations. Early in 2000, organizations such as Northeast States for Coordinated Air Use Management, the American Lung Association, and the American Petroleum Institute announced their support for a pending law eliminating the 1995 Clean Air Act regulations. These actions were vigorously fought by the Oxygenated Fuels Association, which claimed that oxygenated fuel actually led to a 22 percent reduction in air toxins.

Regulatory Impacts.
While increasing federal and state regulations posed an ongoing challenge to chemical industry participants, signs indicated that the industry was successfully clearing these hurdles and was even benefiting from some laws. The overall chemical industry reduced its emissions of Toxic Release Inventory (TRI) wastes, even as industry production increased. Nonetheless, regulatory issues are an ongoing major concern to the industry.

Despite industry gains, chemical pollutants remained a major concern for regulators, who increased efforts to reduce toxic emissions. However, some regulations were expected to boost industry profits. For example, the Clean Air Act Amendments of 1990 required automobile carbon-monoxide emissions to fall below certain levels by 1995. As a result, the demand for organic gasoline additives that allow such reductions grew rapidly.

Manufacturers were also burdened with increased costs related to new safety initiatives from both the EPA and the Occupational Health and Safety Administration (OSHA) law, passed by Congress in 1992, which were aimed at preventing accidents in the workplace. Costs associated with the EPA and OSHA rules were not small, but they were expected to more than make up for this in cost savings from reduced environmental damage and response costs. Moreover, corporate commitment to environmental and safety concerns is invaluable to companies from a public relations standpoint; good consumer and community relations are critically important for companies that wish to remain competitive.

Information submitted to the EPA showed that emissions of toxic chemicals decreased considerably in the 1990s. The Toxic Release Inventory showed that chemical manufacturing accounted for 48.9 percent of TRI total production-related waste management in 1997. The industry managed 11.3 billion pounds of production-related waste.

The EPA considered underground injection wells "safer than virtually all other waste disposal practices." To dispose of highly diluted wastes, they were injected into EPA-permitted wells which were drilled deep into special geologic formations that contained, and in some cases neutralized, the waste.

In 1994, the EPA added 286 chemicals to its inventory list, nearly doubling its size to 643 reportable chemicals. The CMA contended that some of these were innocuous and that the EPA risked confusing the public about what was hazardous and what was not.

Shipment values for the industrial organic chemicals segment rose from $85.72 billion in 2002 to $141.65 billion in 2005. The overall chemical industry started off 2002 strong but faded during the third and fourth quarters as the anticipated recovery in the manufacturing sector stalled. Despite the year-end slowdown, chemical shipments managed to show a 2 percent gain in 2003 over 2002, reaching $463.5 billion. The first two quarters of 2003 were marked by a relatively stagnant economy and the U.S. war with Iraq, which caused severe volatility in natural gas and petroleum prices.

The U.S. chemical industry became the country's largest export sector in the mid-2000s. However, at the end of 2002, U.S. chemical producers found themselves with a negative 4.9 percent in import/export ratio. Although the United States continued to be a major producer and exporter of chemicals, imports increased at a rate greater than exports. Several factors caused the reversal of trade balance, including a strong U.S. dollar, global overcapacity, and higher natural gas and petroleum costs.

Unfortunately, the trade deficit increased to $7.7 billion by the close of 2006. According to the U.S. Census Bureau and Purchasing magazine, the value of chemical and plastic exports from China stood at $1.7 billion, while the value of imported products from China stood at $84.2 billion. Because the U.S. chemical market could not produce its products at globally competitive prices in the mid-2000s, it was less expensive for chemical companies to purchase some of their products abroad rather than produce them domestically.

Although the chemical companies continued to experience excessive energy costs in the mid-2000s, new product development dominated the direction of the industry. A survey conducted in late 2004 by the American Chemistry Council concluded that chemical companies planned to increase research and development spending by 3 percent of their annual receipts in the coming years, and another 10 to 11 percent annually on plant and equipment spending.

Despite the turnaround for the industrial organic chemical companies, some had to contend with some overpricing legal issues. Bayer and DuPont Dow Elastomers pleaded guilty to price-fixing, and each was fined heavily by the Justice Department. Goodyear Tire & Rubber filed claims against various ethylene propylene rubber producers as well. Chemical & Engineering News commented on the issue of price-fixing and reported that "companies will be less tempted to enter into cartel arrangements" if the chemical market remains strong. Still, the investigation was expected to continue with additional companies being held accountable for overpricing.

Current Conditions

According to industry watchers, the petrochemical industry was on the threshold of overcapacity as customers went through their built up inventory as a means to combat rising prices. Although demand for chief petrochemicals was affected by the downturn, volatility in the market was expected to be short lived. Volatile energy prices were among the chief concerns affecting the petrochemicals market.

Other significant chemical producers within this industry classification based on shipment values in 2008 were olefins producers with shipments totaling $13 billion. Silicones producers shipped $7.7 billion, aldehydes and ketones producers shipped $6.0 billion, flavors or flavoring materials (synthetic) manufacturers shipped $2.4 billion, butadiene (industrial organic chemical) shipped $2 billion, and fuels shipped $1.1 billion.

Worldwide ethylene demand was roughly 113 million metric tons in 2008, projected to contract slightly to 112.8 million tons in 2009. Propylene demand fell a mere three percent to 68 million metric tons in 2008. The top performing companies did not expect market conditions to improve until late 2010. Until then, the industry worries that any addition of new capacity in the already sluggish economy would likely intensify the overcapacity in the long run.

In January 2009, the Census Department reported the chemical industry exports fell 30 percent, as did imports by 14.6 percent in 2008. T. Kevin Swift, chief economist at the American Chemistry Council, blamed lower prices and lack of demand, reflecting a collapse in international trade due to a "synchronized global recession."

Between 2005 and 2015, Asia will be responsible for more than 60 percent of the global petrochemical demand, making it the largest consumer, whereas China accounted for more than 25 percent of global demand. So, ExxonMobil strategically invested in several petrochemical projects, including Fujian Refining & Petrochemical, a joint venture with Sinopec and Saudi Aramco to start up at Fujian, China, in late 2009, and the construction of a second ethylene plant at its Jurong Island, Singapore, site, scheduled to start up in 2011, thus taking advantage of Asia's growth.

Elsewhere, U.S. industrial gases demand was expected to grow 4.9 annually, reaching $23.5 billion, or 7.5 trillion cubic feet, in 2013, fueled by new technologies and product introductions, as well as the increased use of nitrogen and carbon dioxide.

Industry Leaders

About 700 companies participated in the industrial organic chemical industry in the late 1990s. More than 30 had sales of more than $1 billion from various businesses, and many of them employed several thousand workers. However, most of the top 75 firms in the industry had fewer than 500 workers and generated revenues under $200 million per year. The industry was highly consolidated in relation to most other U.S. manufacturing sectors. High startup costs, technical expertise, and entrenched segment leaders discouraged new competition.

Large-scale consolidation affected the industry. The 1999 merger of Exxon and Mobil created a monolith with sales of $187 billion. However, its organic chemical production was handled with the merger of two subsidiaries--Exxon Chemical Co. and Mobil Chemical Co. In 2006, ExxonMobil reported sales of $365.5 billion. The company's chemical operations had revenue of $4.38 billion.

Chevron Texaco partnered with ConocoPhillips to create Chevron Phillips Chemical Company LLC. The company reported sales of $12.9 billion in 2007. Other leading companies in the industry were Ashland Inc., with 2008 sales of $8.3 billion and 11,900 employees; Solutia Inc., a spin-off of Monsanto, with 2008 sales of $2.1 billion and 3,700 employees; and Dow Corning, with 2007 sales of $4.9 billion and 10,000 employees.

An estimated 134,952 workers served the industrial organic chemical industry in 2005, including an estimated 77,895 production workers who earned an average hourly wage of $29.23. In 2002, the industry had 158,261 employees, and, except for a few spikes, the number continued to drop steadily through the mid-2000s. Productivity increases by manufacturers were largely to blame for cutbacks in both white- and blue-collar jobs. Industry-wide employment continued to decline with a reported 76,948 workers in 2008.

Employment growth in the organic chemical industry was expected to remain weak, and future employment prospects were bleak. Blue-collar workers were expected to suffer the most from long-term trends. Chemical equipment controller positions, which account for a full 9 percent of the organic chemical industry workforce, are expected to fall steadily through the 2000s, according to the Bureau of Labor Statistics.

A primary factor driving workforce cutbacks in the 1980s and early 1990s was high wages. Workers in the organic chemical industry were among the highest-paid manufacturing employees in the United States. The average organic chemical production worker earned $17.23 per hour in 1992, compared to an average of $10.49 for all U.S. manufacturing laborers. By 2001, that figure was an estimated $25.26, and in 2005 it was $29.23.

The best-paying jobs in the industry go to highly educated chemists involved in research or management. Chemists with doctoral degrees can earn much more than chemists who hold only master's degrees. However, the job market is very competitive.

America and the World

The U.S. organic chemical industry remains the largest and most technologically advanced in the world. However, its supremacy has waned considerably since the 1950s when U.S. organic producers supplied more than 50 percent of global output.

Despite the strength of the industry, foreign competition continued to erode its comparative might. Economic stagnation in key export markets, such as Japan and the European Community, and recovering U.S. demand helped importers to increase their share of the U.S. market in the early 1990s. However, long-term structural changes in global chemical markets also were at work. Importantly, producers in emerging economies were increasingly challenging U.S. suppliers for both domestic and export sales.

In the long term, growing foreign organic chemical production is predicted to result in fierce competition and reduced opportunities for U.S. manufacturers. The United States, Europe, and Japan are anticipated to remain the key producers, but much of the market for high-volume, commodity-like organics is expected to be surrendered to emerging powers. To sustain profitability, U.S. competitors will likely be forced to boost their production of high-tech compounds that can outperform existing chemicals and open new markets.

Research and Technology

The organic chemical industry continued to invest a major share of its revenues in research and development. Most expenditures were used to increase productivity and to meet stringent environmental regulations. As the industry continued to consolidate, and as environmental issues continued to command center stage, research and development was projected to become increasingly prominent in the industry.

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