by Chris Schwinden, on Jul 12, 2024 9:00:00 AM
Chemical projects can be big – really big. Upstream chemical processing plants and petrochemical operations on the Gulf Coast can easily require tens of billions of dollars of capital investment and extreme levels of utility inputs. But at the same time, some chemical projects can be much smaller, processing smaller amounts of critical inputs for industries like food, life sciences, automotive, batteries and other forms of alternative energy. In short, perhaps more than any other industry, the chemical industry is broad. Site Selection Group sees disparate project requirements for companies actively looking for a new location.
This blog highlights some key data points and trends that Site Selection Group monitors in this industry, knowing it is diverse.
States with strong chemical growth and presence
The table below represents job growth and overall presence in the chemical industry by state over the past five years. We measure growth in terms of absolute job count change and percentage change because looking at either of these figures on their own does not tell the full story. We also give weight to the results to states with a strong existing presence in the industry, as states with a small existing presence can show abnormally large percentage increases based on adding a small number of jobs. As a result, the data in the table below reflects an index score that blends those data points. One data-nuance of the chemical industry is that its broad NAICS code includes companies in the pharmaceutical industry. Because those biotech-focused projects tend to have very unique requirements, we removed that sub-sector from the data here.
The table shows some key trends in regions that have stronger presence and growth profiles in the chemical industry:
- Heavy Presence and Growth Along the Gulf Coast
It’s no surprise that states like Texas, Louisiana, Alabama and even Florida have a strong presence and high growth in this broad sector. Many heavy petrochemical projects consider this region to take advantage of major port and water access, heavy infrastructure (including unique assets in terms of industrial gas lines and infrastructure), and a workforce that is very aligned with the needs of this industry.
- Further Growth and Concentration in the Southeast
States like Georgia and North Carolina have seen significant growth in this industry, taking advantage of assets like major ports and utility infrastructure. Of note, South Carolina also shares many of those advantages and has a robust chemical industry but has seen some slight decline. - Inland Options along Major River Corridors
Further inland, states like Tennessee, Ohio, West Virginia and Indiana have also seen significant growth in this industry. Many chemical companies can take advantage of river access for logistics and utility needs (e.g. water and wastewater). Further, these states are at the heart of the U.S. auto corridor and, as electrification of vehicles continues, chemical-related suppliers continue to locate in this region to serve those customers. - Growth in the West – Arizona
Finally, we highlight strong recent industrial growth in Arizona, which is not typically a magnet for the chemical industry. However, the semiconductor, battery and other alternative energies have likely driven the expansion of chemical-related suppliers.
Top recent projects and incentive packages
In addition to state-level trends, Site Selection Group carefully monitors major project and incentive announcements in the chemical sector. The map below represents the count of incentivized chemical projects by state for 2023-2024, with darker blue states indicating higher counts of project announcements. Please note, this only includes projects that received publicly reported economic incentives.
Key projects of interest include:
- Lake Charles Menthol
Lake Charles, Louisiana – This is a classic example of a mega-chemical project along the U.S. Gulf Coast. The company plans to invest over $3.2 billion and create 123 jobs for a low-carbon menthol plant. The project was supported by a $5 million grant from the state, among other support. - Eastman Chemical
Longview, Texas – This major chemical company announced a $1.2 billion, 200-job project in East Texas to construct a molecular recycling facility. The project was supported by a $20.4 million award from the Texas Enterprise Fund and additional state and local support. - Topsoe
Roanoke, Virginia – This is an example of a chemical project outside of more traditional chemical clusters. This Danish company announced a $400 million, 150-job electrolyzer plant in western Virginia to serve the green hydrogen industry. The project received support from federal, state and local grants.
SSG’s 2024 outlook and site selection strategy for the chemical industry
SSG continues to see project activity in this space. But we think some key trends will continue and new ones will start to emerge:
- Utilities and Infrastructure Really Matter, so Clearly Set Requirements
Site selection for capital and utility-intensive chemical projects in some sense is straightforward: Find the best sites that can (or potentially can) meet the enormous utility requirements. However, as more industrial announcements pressure utility systems and site availability, this can get more challenging by the day. Now more than ever, it’s critical for locationally active companies to define their utility requirements as specifically as possible early in the process to avoid backtracking during the site selection process. Site Selection Group has seen many chemical projects risk losing months on timelines because of big changes to utility requirements that impact the process. - Existing and Potential Customers will Shift
Site Selection Group sees considerable chemical projects with long-term customers across many industries, so it’s easy to map out key outbound logistics considerations and home in on target regions for a new plant. But, we also see many companies anticipating new customers, especially in alternative energies and automotive. As those types of projects ebb and flow, it’s critical to test outbound sensitivities in your customer base to see if that impacts location strategy. - Workforce Matters, but Specialization can Change the Analysis
Like any industrial site selection engagement, finding a community with the right site and workforce is the goal. Workforce numbers for large-scale chemical projects can be much smaller than other advanced manufacturing requirements. However, the skills required, and wage/salary levels can be much higher. As a result, while traditional workforce evaluation is important, Site Selection Group emphasizes the potential to relocate skilled chemical workers to a community to serve new plants, along with workforce training efforts. It may sound a little unusual for what is often a very heavy industry but, the quality of life of the community and education systems can play an outsized role in final site comparisons.
