Outlook favorable for increased US polyethylene exports

Robert J. Bauman
Polymer Consulting International

Bob Bauman, President, Polymer Consulting International, Inc., provided an overview of the U.S. petrochemical industry and looked at future possibilities at the March 8 Commerce Club luncheon. Bauman has worked in the polymers/petrochemicals business for over 50 years.

In January 2008 industry experts agreed the U.S. petrochemical industry had peaked. Bauer described the present “rebirth of North American petrochemical industry” as driven by technology in drilling and fracking that was originally developed for shale oil and used for shale gas. He predicted the U.S. will become the largest oil producing country, surpassing Russia and Saudi Arabia, because of two development waves.

The First Wave (2017-2019)

The development of shale oil and gas has produced a structural change of the North American (NA) oil, gas, petrochemical and plastics industries:

  • 317 new chemical projects are in development as of 12/17.
  • 8 new ethylene cracker start-ups and 9 expansions, equaling 13 million tons per year.
  • Middle East companies are investing in NA.
  • U.S. increased export quantities of natural gas, ethane, ethylene, propane and propylene to Asia, Europe, and South America.

The Second Wave (Post 2019)

Six companies have announced intentions to build or expand ethylene crackers. Companies are setting up export channels throughout the country. Bauer said, “Oil prices are forecasted to increase more than gas prices, increasing ethylene derivative competitiveness in the export market”.

Of the 12.7 million tons per year of ethylene, estimates indicate 61% will be used to produce polyethylene, 12% to produce PVC, and 27% will be used to produce products such as alpha-olefins, elastomer, and ethylene glycol. Plastics will account for 85% of ethylene production. New PVC production starts up in 2019. New polyethylene capacity is projected to be at 8.4 million tons per year from 2017-2019.

Forecasted U.S. Polyethylene Export Destinations

NA Competitive Advantage

U.S. polyethylene represented about 20% of production in 2016 and 2017, creating more supply than domestic demand. This oversupply will have to be exported and dramatically increased to Europe, South America and other countries. However, Bauer predicts that there will be strong competition from lower cost countries (Middle East) and higher cost (Thailand/India) countries competing for the same markets as the U.S. There is also a “window of opportunity” for the U.S. with China since China banned all post-consumer recycled plastics at the beginning of 2018 and will need to import polyethylene to meet their demand for non-recycled plastics.

The Good News: Houston will be a good place to live.

Bauer predicts North American companies will be well-positioned in the polyethylene export market in the long-term. The Texas Gulf Coast accounts for 62% of the new capacity. Houston will be the main export center because of an established global market, existing facilities, and infrastructure already in place. (Note: Port of Houston region is the 2nd largest petrochemical complex globally). “Yes,” said Bauer. “We will need to continue to expand, adding more docks, storage, more container availability, and supporting infrastructure, etc., here. Working in the port of Houston will provide job security for you, your children, and your grandchildren”.

  • Date April 25, 2018
  • Tags 2018 April