By: Bill Bregar
October 12, 2012
PITTSBURGH (Oct. 12, 1:35 p.m. ET) — Western Pennsylvania is a center of the shale gas boom that could usher in years, or even decades, of stable polyethylene prices — and that fact created a buzz at the SPE Blow Molding Conference.
This is an enormous advantage to the U.S. economy,” said Srivatsan Iyer, an executive of Braskem America. “This is an advantage not just for us resin producers. It’s an advantage for all of those who work in the plastics value chain, including the converters.”
About 280 blow molding officials gathered in Pittsburgh Oct. 9-10 for the Society of Plastics Engineers annual blow molding event. On the way from the airport, one speaker said, his cab driver chatted about the crisp fall weather, and hydraulic fracturing.
Not the Steelers.
And in between sessions on barrier layers, recycling and process controls, shale gas was the topic of conversation.
In a speech Oct. 9 at the conference, Iyer said lower energy prices will help the entire economy, from petrochemicals to generating electricity and making steel. “In general, the U.S. having the lowest energy portfolio in the world gives us a huge advantage,” said Iyer, Braskem America’s vice president of finance, planning, strategy and innovation and technology.
Blow molding is the largest consumer of high density PE in the United States and Canada, according to the American Chemistry Council. Through July, one-third of all HDPE—some 2.6 billion pounds of resin—got blow molded into finished goods. That’s a lot of bottles to hold motor oil, laundry detergent and household cleaners, milk jugs, automotive fuel tanks, industrial drums, storage sheds and custom-molded products.
Horizontal drilling and fracking to extract huge amounts of natural gas from the Marcellus and Utica Shale region holds the promise of industrial rejuvenation for Appalachia, and energy independence for the United States.
In March, officials of Shell Chemical LP shook things up by announcing Shell will convert a zinc factory to a new ethylene cracker in Monaca, Pa., about 35 miles northwest of Pittsburgh on the Ohio River.
“It’s a fantastic time to be in ethylene,” Iyer said.
And what he called “light, tight oil” held in rock formations could transform the United States into an oil and natural gas powerhouse and net exporter in the next decade, turning around the idea that America is destined to be an importer of energy.
“This has huge economic repercussions, huge geopolitical repercussions,” Iyer said. “For us as an industry, it’s got huge implications.”
Blow molders in Pittsburgh gushed like a Marcellus wellhead.
Dale Klaus, owner of Quality Custom Molding LLC in Linn. Mo., agreed that lower energy prices should help the United States. “This country has too much debt. There’s got to be a boom to get us out of this. It’s a light at the end of a dark tunnel.”
Daniel Clayton, president of Polymer Products Group Inc. in Owosso, Mich., said that, depending on the end market, resin can account for up to 70 percent of the cost to manufacture a blow molded product. “Price volatility will go down,” he said.
“Absolutely it will help the industry. Not only that, it’s the best news that I’ve heard in the plastics industry in 10 years,” Clayton said.
In his speech, Iyer said the energy industry is only at the “early stages” of shale gas development. “We keep revising our estimates. It’s only because we’re just scratching the surface,” he said.
Brazil-based Braskem is a major polyolefin producer. “For those of us that are making long-term investments based on shale gas, we’re looking at a period of, I would say, at least the next 10, 15, 20 years of prolonged low gas prices,” Iyer said.
“What we need is stable pricing,” said Mike Hall, sales manager of Kyodo America Industries Co.’s plastics molding plant in Lawrenceville, Ga. “That’s what we need right now. The prices just keep going up.”
“From everything you hear, you think it’s gonna be huge,” said Robert Julien, director technical marketing and product support at industrial drum molder Mauser USA LLC’s plant in Chicago. “It has the promise of stable resin prices. That’s what you’re hoping for.”
Braskem America’s Iyer said the shale gas wave seemed to come out of nowhere. “Back in 2007-2008, nobody knew what shale gas was,” Iyer said.
“So in a brief five years, we’ve gone from saying the stuff doesn’t exist to saying this is the best thing since sliced bread,” he said.
The Marcellus and Utica boom could even lure plastic processors to the region, which Iyer said would generate many more jobs than the drilling and petrochemical operations.
He pointed out that other parts of the world also have huge shale gas reserves. Also, exploration could be hindered by collapsing natural gas prices. “There are no permanent good times. The only question is how long the good times are going to last,” Iryer said.
”But we have an advantage today. We could have an advantage for a decade.”