An abundant supply of inexpensive natural gas-based feedstocks coming from the North America’s highly productive shale plays is revitalizing the polyethylene (PE) industry, according to a new IHS Chemical study. As a result, North American PE producers are establishing a competitive advantage in a highly competitive global market and that advantage is expected to continue throughout the 2012 to 2017 study period. “In North America, low-cost feedstock from shale gas is revitalizing the polyethylene business, making PE exports highly competitive globally,” said Nick Vafiadis, senior director, global polyolefins and plastics. “Many of the target export regions are investing in export-oriented plastics converting capacities, which will also help fuel polyethylene demand growth. In more mature markets such as Western Europe, we will see industry consolidation, operations optimization and movement toward production of higher value, performance products, since much of the profitability upside for ethylene producers comes from export of these high-value plastic resins.” The increasing availability of advantaged ethane feedstock from shale gas in the US has prompted almost all major North America polyolefin producers to announce ethylene or PE capacity additions that will come online within the next five years. Shell, Dow, Chevron Phillips, Equistar, Formosa, Oxy, Westlake, Williams, Nova and INEOS are all planning to either expand existing facilities or build new greenfield complexes. In addition, the arrival of large additional volumes from the Middle East is putting increasing pressure on high-cost producers in Europe and Asia. Current estimates project cumulative global additions of more than 47 mln metric tons (MMT) of polyethylene capacity by 2022. Major exporters within the Asia Pacific region, the Middle East and the US will continue to benefit from China’s insatiable appetite for external polyethylene supplies.
As per ICB in ICIS, polyethylene capacity in North America could increase by 5.58 mln tpa in a very short time. The groundbreaking at NOVA Chemicals' new 1 mln lb/year (454,000 tpa) linear low density polyethylene (LLDPE) plant in Alberta, Canada marks the start of a huge wave of polyethylene (PE) capacity set to come online between 2015-2017 in North America. Already 10 companies have announced plans to expand PE capacity in the region, and between the 11 planned projects, 9 have defined capacities amounting to a total of 5.58 mln tpa. This represents a 28.7% boost to the existing North American capacity of 19.4 mln tpa, all potentially in the span of about three years. Polyethylene producers are seeking to capitalise on the US shale gas boom, which is providing cheap ethane feedstock for ethylene, and in turn PE. For ethylene, US capacity could rise by 39.6% by 2020 if all the planned projects are completed. In May, Formosa Plastics revised upwards the capacity of its planned ethane cracker in Point Comfort, Texas, from 800,000 tpa to 1.2 mln tpa. That move brought the tally to 10.5 mln tpa of new ethylene capacity planned.
While some of the PE production will be absorbed by the growing US economy, much will be targeted for export - especially in light of the improved cost position for US producers. For 2012, US export sales of PE accounted for roughly 17-22% of total sales for the year, according to the American Chemistry Council. By 2020, some analysts predict that share could rise to as much as 42%.