Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
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Glenn Hegar
Texas Comptroller of Public Accounts
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Supply Chains Chemical Manufacturing Supply Chain

Chemical Manufacturing Snapshot | Print Snapshot (PDF)


The United States is the second-largest chemical manufacturer in the world behind China, supplying the materials for consumer goods and intermediate products for virtually every industry. The basic ingredients originate in oil and gas fields and travel through an immense worldwide supply chain that eventually yields plastics, packaging, fertilizers, pesticides, synthetic fibers, cleaners, lubricants, paint and a seemingly endless list of other materials.

But the strength of those long supply chains has been tested by significant crises in the past few years. In February 2021, Winter Storm Uri tore through Texas and temporarily cut the state’s production of natural gas by nearly half and of olefins – essential chemical building blocks – by 80 percent.[1] The Gulf Coast’s chemical manufacturing industry was disrupted for months.

The COVID-19 pandemic continues to expose other weaknesses in the chemical supply chain, from its foundations in the volatile oil and natural gas sector to its dependence on reliable global shipping. Other recent issues included an oil price skirmish between OPEC and Russia in early 2020 and a trade dispute between the United States and China, a vital trading partner for the industry.

While demand for chemicals has recovered this year, supply chain delays are lingering – largely due to shipping congestion and supply backlogs – and could last into 2022, according to some experts.[2] A June 2021 survey by the National Association of Chemical Distributors found that 85 percent of participating U.S. chemical industry distributors reported at least one imported item out of stock, up from 47 percent in March 2021.[3]

After a decade-long boom, the chemical industry now seems to be assessing how to recover from these disruptions and prepare for the future.

Chemical Manufacturing Supply Chain – U.S. and Texas

In 2020, excluding pharmaceuticals, the chemical industry contributed $486 billion to U.S. gross domestic product (GDP) and $125 billion in exports, supplying 13 percent of the world’s chemicals and giving the United States a chemicals trade surplus of $28 billion. The sector supports 529,000 workers in the United States.[4]

Facilities in Texas and Louisiana produce 80 percent of the nation’s primary petrochemical supply, and Texas chemical production tops the nation by far, with chemical shipments valued at $117.5 billion.[5] Thanks largely to the shale oil and gas boom in the Permian Basin, the state’s vast reserves of oil and gas – around 40 percent of U.S. crude oil and one-fourth of U.S. natural gas – serve as accessible raw material (“feedstock”) for refineries and chemical production facilities across the Gulf Coast.

Plants along the Gulf predominantly focus on the production of basic chemicals, in which oil and gas hydrocarbons are initially processed into liquids such as ethane and propane, with some then converted to more complex “primary outputs” such as benzene or ethylene. After that, they may be shipped to other states or countries to be further processed into other manufactured goods. Many of the major international trade partners for these basic chemicals are in Asia (predominantly China, India, Japan and South Korea), along with Canada, Mexico and Europe.[6]

Chemical Manufacturing Supply Chain Risks

The chemical industry, made up largely of multinational businesses with suppliers of all sizes around the world, faces an array of local and global risks. Even before the pandemic, a variety of other crises had begun to slow the industry’s decade-long period of growth and high capital expenditures[7] – around $30 billion per year in the United States alone.[8]

In a 2020 report, McKinsey & Company found the chemical supply chain to be most vulnerable to geophysical events, cyberattacks and trade disputes. Industry insiders cite various other risks as well, including chemical supply chains’ volatility, interdependence and complex regulation.


Large chemical plants are increasingly symbiotic, where outputs of some chemical processes can be used as inputs to produce other chemicals. Companies must keep in mind, however, that rapid changes in supply or demand of certain substances can threaten these delicate production chains and lead to unexpected consequences.[9] Lockdowns early in the pandemic led to plummeting fuel production, for instance – which in turn slashed the production of propylene and polypropylene, materials used for facemasks and other personal protective equipment (PPE).

Because the chemical industry is fundamentally linked with oil and gas, the risks of those two sectors are linked as well. Volatile feedstock supply can threaten the chemical industry’s raw materials and cause havoc downstream if ports are crowded or trade is blocked.

Geophysical Events

Hurricanes and other occasional severe storms are an unavoidable fact of life on the Gulf Coast, and industry representatives say it can normally take up to three months for chemical plants to recover from a direct hit.[10] Less than a year before Uri, Hurricane Laura briefly reduced U.S. polyethylene and polypropylene production by an estimated 10 to 15 percent.[11] Then there was Hurricane Harvey in 2017, which caused an explosion and fire at one facility and reduced ethylene production in the affected area by 54 percent.[12] It took businesses several weeks to fully restore chemical production and transportation.


Like many other large, critical industries, chemical manufacturing is an emerging target for cyberattacks. The vast amount of data used and produced by the industry is inherently difficult to manage and secure. While the chemical industry itself has not yet suffered a highly visible attack, the Colonial Pipeline ransomware attack in April 2021 was costly and sobering: The affected pipeline, disrupted for several days, provides 45 percent of the fuel to the U.S. East Coast. Several other recent cyberattacks have focused on IT security providers with huge, multinational client lists.

Trade Disputes

China is a big customer for chemicals, taking in about 9 percent of all U.S. chemical exports.[13] In 2018, a number of plastics and chemicals were caught up in the trade battle between the United States and China, with many substances getting hit with 25 percent tariffs for several months. At the height of the skirmish, the U.S. was imposing tariffs on $15.4 billion of imported chemicals and plastics, while China applied tariffs on about $11 billion worth of U.S. chemical exports.[14] While a truce eventually was called, the industry experienced firsthand the importance of alternate sources for its imports and exports.


The environmental impact of the chemical industry is under greater scrutiny than ever before. As developed nations attempt to move toward more sustainable economies, oil and gas and the chemical industry will face new supply, shipping and quality control constraints as they keep up with evolving regulations around the world.

Efforts to Mitigate Risks

Technology and Digitization

Before the pandemic, the industry was looking to further improve supply chain efficiency through technology. Now, such changes are considered necessary to build resilience as well.

Industry insiders say that agility, facilitated by technology, is key to responding to material volatility and other supply chain threats.[15] One Accenture study found that 85 percent of surveyed chemical executives believe their supply chains must more quickly respond to pricing and supplier changes.[16]

Agility can be helpful on the downstream side as well. Early in the pandemic, for instance, chemical producers including Dow Inc. and BASF Corp. shifted production at several plants across the globe to respond to the sudden demand for sanitizer, isopropyl alcohol and disinfectant.[17]

Digitization can raise cybersecurity vulnerabilities, which must be addressed. But many prominent industry consultants recommend leveraging internet-connected sensors and other devices, big data and artificial intelligence to reduce costs and energy use, improve production yields and better track the location and movement of supply chain materials.

Circularity: Reuse and Recycling

The industry also is looking to reduce its exposure to price and supply volatility by the increasing use of circularity, or the more frequent reuse of chemicals within the supply chain.[18] This minimizes waste and helps protect against disruptions to the supply of feedstocks and other raw materials. Circularity topped the list of investment opportunities seen by chemical CEOs in a 2020 PricewaterhouseCoopers survey.[19]

A move toward greater circularity also would complement the growing sensitivity of the industry to global concerns about climate and plastic pollution. Chemicals will see lower demand throughout the economy as materials are reduced, reused and recycled.

In September 2021, in advance of the February 2022 United Nations Environment Assembly, the CEOs of Dow and LyondellBasell Industries N.V. publicly urged adoption of a global agreement to reduce plastic waste.[20] And in the 2022 Mission Innovation summit, 24 countries and the European Commission will specifically focus on reducing carbon emissions in the manufacturing of industrial products, including chemicals.[21]

Chemical Manufacturing Industry in Texas

As the nation’s top chemical producer, Texas also is its top exporter. Chemicals represented the third-largest export from Texas in 2020, with a value of around $40 billion, or 14.3 percent of the state’s total exports.[22] The industry fared better than most during the pandemic, with exports down only about 10 percent between 2019 and 2020.

The chemical manufacturing sector produces a host of chemicals including petrochemicals, pharmaceuticals, paints, fertilizers, cleaners and more. The Gulf Coast specializes in “basic chemical manufacturing,” a subset of that sector, which produces basic building blocks such as ethane, ethylene, methanol and benzene. For comparison, the exhibits below include U.S. and Texas economic data for the manufacturing of basic chemicals and of all chemicals.

The state’s location quotient (LQ) indicates that basic chemical production is 2.66 times more concentrated in Texas than in the total United States, with high employment and high average wages (Exhibit 1). In the basic chemical industry, Texas contributes over a third of the national GDP and about the same proportion of its exports.

Exhibit 1: Chemical Manufacturing Industry Economic Data, Texas and U.S.
Exhibit 1: Chemical Manufacturing Industry Economic Data, Texas and U.S.
Metric Basic Chemical Manufacturing, Texas All Chemical Manufacturing, Texas Basic Chemical Manufacturing, U.S. All Chemical Manufacturing, U.S.
Employment 34,853 83,534 149,091 854,719
Employment change, 2019-2020 -2.3% -1.3% -1.9% -0.6%
Average wages $132,612 $113,372 $105,648 $102,059
Total wages (billions) $4.7 $9.6 $15.8 $87.7
Location quotient 2.66 1.11 1.00 1.00
Establishments 515 1,808 3,387 20,288
Gross domestic product (billions) $26.0 $52.7 $70.7 $391.6
Exports (billions) $18.8 $39.8 $57.2 $197.8
Imports (billions) $5.0 $13.5 $50.9 $271.5

Sources: JobsEQ; U.S. Census Bureau, USA Trade Online

Notes: Data are for North American Industry Classification System Code (NAICS) 325 (Chemical Manufacturing) and a subset, 3251 (Basic Chemical Manufacturing).

The location quotient represents an industry’s proportionate concentration in a region; an LQ greater than 1.0 means that industry employment is more concentrated in the region than nationally. A high LQ can identify industries that have a regional competitive advantage, such as the ability to produce higher quality goods more efficiently.

The top locations for Texas chemical manufacturing jobs are Harris County (29.7 percent) and Brazoria County (9.0 percent). Basic chemical manufacturing is especially concentrated in Brazoria County, as shown by its very high LQ (Exhibit 2).

Exhibit 2: Top Texas Counties by Chemical Manufacturing Employment
Exhibit 2: Top Texas Counties by Chemical Manufacturing Employment
County Number of Employees, Basic Chemical Manufacturing LQ, Basic Chemical Manufacturing Number of Employees, All Chemical Manufacturing LQ, All Chemical Manufacturing
Harris 12,129 5.13 24,832 1.82
Brazoria 6,780 55.72 7,481 10.64
Dallas 1,383 0.79 6,901 0.68
Tarrant 269 0.28 5,601 1.01
Jefferson 2,286 19.16 3,747 5.44

Source: JobsEQ

Notes: Data are for North American Industry Classification System Code (NAICS) 325 (Chemical Manufacturing) and a subset, 3251 (Basic Chemical Manufacturing).

Looking Ahead

As the effects from the pandemic and other crises continue, many industries are facing these same issues: shipping unpredictability, shaky supplies, shifting demand and cybersecurity concerns. The chemical manufacturing industry, like others, is using this opportunity to make its operations more robust. Digitization and more advanced production and logistics can give manufacturers greater insight into their supply chains, help them strike a new balance between efficiency and redundancy, and better prepare them for the future.


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  1. U.S. Energy Information Administration, Texas State Energy Profile and “Hurricane Ida slams the US Gulf Coast,” Chemical & Engineering News, Sept. 2, 2021.
  2. “Stockouts worsen for the chemical industry as shipping delays exacerbate inventory woes,” Supply Chain Dive, July 13, 2021.
  3. “Stockouts worsen for the chemical industry as shipping delays exacerbate inventory woes,” Supply Chain Dive, July 13, 2021
  4. American Chemistry Council, 2021 Guide to the Business of Chemistry.
  5. American Chemistry Council, 2021 Guide to the Business of Chemistry.
  6. U.S. Census Bureau, USA Trade Online.
  7. McKinsey & Company, “The state of the chemical industry—it is getting more complex,” Nov. 10, 2020.
  8. American Chemistry Council, 2021 Guide to the Business of Chemistry.
  9. “Chemicals: Industry in Transformation,” Energy Capital: The Magazine, July 6, 2021.
  10. “Texas petrochemical production is still thawing,” Chemical & Engineering News, Mar. 24, 2021.
  11. “The Latest Supply Chain Disruption: Plastics,” Harvard Business Review, Mar. 26, 2021.
  12. “Houston’s chemical industry rebounds from Harvey,” Chemical & Engineering News, Sept. 7, 2017.
  13. U.S. Census Bureau, USA Trade Online.
  14. “Amid trade war, US finds alternative export destinations for First Wave chemicals,” Reuters, Sept. 16, 2019.
  15. “A Chat on the Trends Facing the World’s Chemical Supply Chain,” Tradelens, Dec. 9, 2020.
  16. Accenture, “Chemical supply chain of the future: Ever present yet invisible,” Sept. 18, 2019.
  17. “Rebuild and rethink,” Chemistry World, Dec. 23, 2020.
  18. “Chemicals: Industry in Transformation,” Energy Capital: The Magazine, July 6, 2021.
  19. PricewaterhouseCoopers, “Chemicals trends 2020: Winning strategies for an era of sustainable value chains”.
  20. American Chemistry Council, “Plastic Makers Call for Global Agreement to Eliminate Plastic Waste,” Aug. 31, 2021.
  21. IHS Markit, “Climate summit leads to new, expanded international collaborations,” Apr. 23, 2021.
  22. IHS Markit, “State Analysis – Texas,” Sept. 21, 2021.


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