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More PE, PP capacity should mean lower prices, more competition

By: Frank Esposito

March 27, 2014

HOUSTON — New North American polyethylene capacity eventually will mean lower selling prices for that material. While in polypropylene, new supplies of propylene monomer will lead to some new resin capacity as well, making the material more competitive vs. HDPE.

Those were among the primary messages from market analysts Nick Vafiadis and Joel Morales at the 2014 IHS World Petrochemical Conference in Houston. Both Vafiadis and Morales spoke at the event March 27.

At least 14 billion pounds of new PE capacity are anticipated for North America by 2018, as producers look to capitalize on growing supplies of low-cost natural gas feedstock in the region.

That amount is more than the domestic market will be able to absorb, so part of that new capacity will need to be exported. As North American exports move beyond traditional South American markets, Vafiadis said PE prices are likely to decline.

“There’s no way that [export expansion] will not have an effect on North American prices,” he explained.

The new PE also should lead to expansion among the ranks of North American processors, according to Vafiadis, with some work returning to the region from overseas. IHS expects PE demand from the pipe and profile market to average annual growth of more than 5 percent from 2013-18. Annual PE growth in rotomolding, injection molding and film and sheet is expected to be at least 4.5 percent in that period.

In PP, new supplies of propylene monomer from PDH technology will change that market’s dynamics, Morales said. “North American prices will become more competitive for the North American converter,” he added.

And although only one PP expansion project has been announced for the region, IHS expects that about 3 billion pounds of new capacity eventually will be added in the next several years.

This change also will lead to increased PP exports from North America. The region’s PP trade surplus was only about 600 million pounds in 2013, but that total is expected to be near 2 billion pounds by 2018.