While sharp declines in crude oil prices cloud the forecast for pricing and margins, demand for chemicals should grow solidly in 2015.

That’s the assessment of IHS Chemical Week, which published its annual market outlook in a cover story on January 12. (Read the full market outlook here.)

Chemical demand is expected to strengthen in 2015, with growth expected to exceed 3.0% in both the United States and overall global market for the first time in four years.

Pricing, however, remains highly volatile, and inventory destocking could impact early 2015 demand as consumers wait for prices to settle.

The IHS Materials Price Index (MPI) fell 13% in the four weeks ended Dec. 26, 2014, bringing the cumulative decline since mid-July to 28%. Excluding oil, the index is down 24% since mid-July, highlighting the broad, deep nature of the correction. Every component of the MPI declined in 2014. While the 46% plunge in oil prices captured headlines, other categories also declined sharply: dry bulk freight rates fell 55%, both rubber and chemical prices declined 34%, steel scrap prices decreased 19% and fiber prices dropped 18%.

World real GDP growth is expected to increase to 3.0% in 2015 from 2.7% in 2014. Growth should continue to accelerate, hitting 3.4% in 2016. IHS expects the price of benchmark Brent crude oil to average $64/bbl in 2015 and $75 /bbl in 2016 compared with the average of $99/bbl in 2014.

“The last three years up until the summer of 2014 were ones of relative price stability,” says Mike Smith, vice president for Europe, Mideast and Africa for IHS Chemical. “It is unlikely that anything will be stable in 2015. With the United States the current new swing oil producer and OPEC still not desperate enough to reach an agreement on cutting production quotas, crude prices could be quite volatile going forward.”

In Canada, meanwhile, producers of industrial chemicals are projecting sales volumes and profits to slightly decline in 2015, according to a survey of members by the Chemistry Industry Association of Canada (CIAC).

CIAC’s members expect overall sales to drop 7.0% in 2015, to C$23.7 billion ($20.1 billion), mainly on lower global commodity prices. They also forecast small declines in exports, profits, and employment. Profitability will remain strong by historical terms, however, with operating profits expected to reach C$3.86 billion, roughly flat with 2014 levels, while capital investment will increase 30%, to C$3.40 billion, in 2015.

Question or comment on this article? Contact an editor: engineering360editors@ihs.com