Global polyethylene demand poised for growth

By Frank Esposito
Senior Staff Reporter

Published: March 29, 2013 2:11 pm ET
Updated: March 29, 2013 5:40 pm ET

Image By: IHS Chemical Nick Vafiadis

Related to this story

Topics Materials, Materials Suppliers

HOUSTON — Global polyethylene demand growth is expected to ramp up fairly soon, averaging almost 5 percent annually between 2012 and 2017.

That's the outlook of market veteran Nick Vafiadis, who spoke at the IHS World Petrochemical Conference, held March 20-21 in Houston. Vafiadis serves as senior director of global polyolefins and plastics for Houston-based IHS Chemical.

Annual growth of 4.6 percent in that five-year span will have global demand sitting at just over 216 billion pounds by 2017. "That growth exceeds the current level of North American demand," Vafiadis said. "That's like growing another North America in the next five years. The market has mass and momentum."

In North America, that momentum is coming from newfound supplies of natural gas, mainly from shale rock formations. These new supplies can be used to make ethane and then ethylene feedstock. The discoveries have led to a wave of expansion announcements, including around 11 billion pounds of new PE capacity that's set to hit North America toward the end of that five-year forecast period.

Vafiadis pointed out that those projections don't even include new capacity from Ineos Group and Dow Chemical Co. that just were announced in late March. "Strong margins are leading to capacity increases," he said.

Much of the new North American PE capacity will be targeted at export markets, which are expected to grow by 5 percent over the forecast period. Domestic demand also is expected to improve toward the end of that period.

One positive impact of the new North American PE capacity should be a resurgence for the region's PE processors, especially makers of film and bags, Vafiadis explained.

"As North America gets new production capacity, there will be an increase in processor capacity in the U.S.," he said. "The domestic market will become more competitive. Some big U.S. processors will expand to take advantage of the new [PE] capacity in North America.

"We're starting to hear about repatriating processor capacity. We're going to see increased exports of [PE] finished goods."

On the pricing front, PE prices in North America and elsewhere are expected to move to global parity, Vafiadis said, because of new capacity and increased competition. "New capacity is fighting for limited demand growth," he said.

There could be some challenges to North America's PE growth spurt. "Everyone can't build," Vafiadis said. "That would strain resources too much. But the early bird gets the worm. You need your capacity to start up first to reap the greatest reward."

North American PE makers also need "a new channel into the export market to move their product," he said. In addition, PE processors need to market their finished goods into international markets.

Globally, PE capacity additions in that span are expected to exceed 57 billion pounds. But some regions will benefit more than others. Growth in the Middle East, Vafiadis said, will continue to move forward as countries there invest in infrastructure and a growing population drives consumer markets.

Europe's PE market, however, is expected to struggle, he added, with demand down and imports on the rise. More than 2 billion pounds — about 7.5 percent of Europe's PE capacity — is expected to be shut down by 2017, Vafiadis said.

In China, PE capacity and demand are headed up, but operating rates are expected to remain low. The challenge for that country's PE market, Vafiadis said, is to rationalize higher-cost plants and to move away from commodity products.

No new PE capacity is slated for Latin America through 2017, which will improve that region's operating rates. Globally, new PE capacity should lower global operating rates almost 1 percent, from 84.2 percent in 2007-12 to 83.4 percent in 2012-17, according to Vafiadis. North America's PE operating rates will be the highest in the world in that 2012-17 period, ranging from 85-90 percent.

"U.S. producers [from 2012-17] will have the luxury of being able to export and get healthy returns to every region in world," he said. "That will keep operating rates high.

"Post-2015, U.S. producers will have to rely on export sales outside of South America. China's influence will leverage down export prices and the domestic price as we move to global price parity."

When the new PE capacity arrives in North America, some producers "will put an emphasis on domestic supply," Vafiadis added. "So we could see North American prices drop lower for a short period until global operating rates improve."


Comments

Global polyethylene demand poised for growth

By Frank Esposito
Senior Staff Reporter

Published: March 29, 2013 2:11 pm ET
Updated: March 29, 2013 5:40 pm ET

Post Your Comments


Back to story


More stories

Image

Compounding products and services

November 24, 2014 9:47 am ET

   More

Image

Dow reaches agreement with Third Point

November 21, 2014 9:11 am ET

Dow Chemical Co. has reached an agreement with the investment firm that has been trying to force the company to sell off some assets.More

Image

Ineos making its UK shale play

November 21, 2014 9:29 am ET

Chemical giant Ineos Group AG is planning to be the biggest player in the United Kingdom's shale gas industry.    More

Image

Total to buy majority stake in Polyblend

November 20, 2014 10:04 am ET

French oil and gas giant Total SA will buy a 68 percent stake in Germany's Polyblend GmbH, a subsidiary of Polymer-Chemie GmbH.    More

Image

Silica can replace plastic microbeads

November 19, 2014 6:00 am ET

As cosmetics and soap makers face pressure to remove plastic microbeads from their products, Evonik Industries touts its new silica-based microbeads a...    More

Market Reports

Plastics in Brazil - State of the Industry Report

This in-depth report examines the Brazilian plastics industry from a historical and geographical context. Our analysts provide insight on economic trends and forecasts, growing manufacturing sectors that utilize plastics, private investment opportunities, market environment challenges, and innovations in R&D.

Data tables and charts on producer prices, trade, plastics production and end market indicators is also included.

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

Injection Molders Market Report & Ranking 2014

This special package contains our 132-page 2014 Market Report on the Injection Molding segment and our exclusive 2014 RANKINGS database of 500+ Injection Molders for a discounted package price.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

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

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

October 27, 2015 - October 29, 2015Plastics Financial Summit - New York - 2015

More Events