North America PE market ready to ride a wave of shale gas

By Frank Esposito
Senior Staff Reporter

Published: November 6, 2012 6:00 am ET

Related to this story

Topics Materials Suppliers
Companies & Associations

CHICAGO (Nov. 6, 1:25 p.m. ET) — North American polyethylene makers are getting ready to ride a wave of shale gas.

Natural gas from shale rock formations is making the U.S. and Canada among the lowest-cost producers of ethylene feedstock in the world - and that status could lead to almost 15 billion pounds of new cost-advantaged PE capacity being added in the region between 2012 and 2017, according to market veteran Nick Vafiadis.

Vafiadis is global director of plastics for the IHS Chemical consulting firm in Houston. He analyzed the PE market at a Plastics Processors Conference hosted by his firm, Oct. 24-25 in Chicago.

“In the short-term global PE demand may be slowing as China demand weakens and Europe contracts,” Vafiadis said. “Long-term, the low-cost regions will be North America and the Middle East, which are set to compete for global demand growth. The market has never had two cost-advantaged regions before.”

New PE capacity will be fed by massive planned expansions for ethylene feedstock. More than 200 million pounds of new ethylene capacity will come online this year, with more than 2.5 billion pounds scheduled for 2013 and almost 3.9 billion pounds set for 2014. In spite of the new capacity, Vafiadis said that U.S. ethylene operating rates will be above 95 percent in 2013, which will give producers some leverage in pricing.

“Every one of these new ethylene projects seems to have a strong payback,” he said. “On paper, they’re viable, and we think most of them will occur.”

Global PE demand growth is set to average 4.7 percent from 2012-17, according to IHS. Growth for the material in Northeast Asia will average 6.2 percent, with North America a bit lower at 2.7 percent, not much above Europe at 2.4 percent.

During that 2012-17 period, global low density PE demand should grow 2.3 percent, with global LDPE capacity increasing almost 18 percent. Demand for high density PE should average five percent growth, with capacity climbing more than 27 percent. Linear low density PE will be stronger still, with annual growth of 5.4 percent and a capacity increase of more than 34 percent.

By comparison, global GDP growth is expected to average 3.6 percent in that five-year period, according to IHS. Among major PE end uses, demand from film/sheet and injection molding is expected to average five percent growth in that time frame.

In the U.S., PE demand growth should average 2.5 percent from 2012-17, slightly less than the IHS expectation of 2.9 percent GDP growth in that period. That’s still an improvement from the 2007-12 period, when U.S. PE demand actually averaged a demand loss of more than one percent per year.

Most of the new PE planned for North America will be targeted into the export market, Vafiadis said. “There’s no way [producers] can move this much into the domestic market,” he added.

Another U.S. market change, according to Vafiadis, could be the erosion of a domestic premium in pricing in favor of a global price.

In 2012 and 2013, regional PE supplies should be “relatively tight,” he added, with low producer inventory levels helping to drive prices. But beyond that point, Vafiaidis said that he sees PE’s supply/demand balance improving, making it more difficult for producers to raise prices.


Comments

North America PE market ready to ride a wave of shale gas

By Frank Esposito
Senior Staff Reporter

Published: November 6, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

Dow Chemical to merge chlorine operations with Olin

March 27, 2015 12:43 pm ET

Dow Chemical Co. is combining a large part of its chlorine value chain with specialty chemicals and ammunition maker Olin Corp. to create a global...    More

Image

Eastman Chemical expanding Tritan co-polyester capacity

March 27, 2015 10:00 am ET

Eastman Chemical Co.'s Tritan-brand co-polyester business continues to grow, with 35 million pounds of capacity added late last year and a second...    More

Image

PolyOne's Patterson focused on keeping the momentum going

March 27, 2015 9:30 am ET

New PolyOne CEO Robert Patterson sees a lot of good things when he looks at his company, which ranks as North America's largest compounder and...    More

Image

Improvements to Radici's nylon line takes it into more applications

March 27, 2015 9:00 am ET

Radici Group, the Italian-headquartered materials firm, outlined the benefits of its Radilon and Radistrong nylon products at NPE 2015.    More

Sun Plastech, Plastics Color Corp. note major milestones at NPE

March 27, 2015 9:00 am ET

Sun Plastech Inc. and Plastics Color Corp. — two well-known materials firms — are marking anniversaries at NPE 2015.    More

Market Reports

Flexible Packaging Trends in North America

North America represents about 30 percent of the global consumption of flexible packaging. Annual growth in this region is forecast at 4 percent during the next 5 years.

For more insight on growth opportunities, drivers of growth and the outlook for 2015, download this report.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 billion plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our analysts provide insight on business trends, foreign investment, top end markets and plastics processing activity. The report also provides important data on exports, production, employment and value of plastics products manufactured.

Learn more

Upcoming Plastics News Events

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events