Increasing availability of natural gas in North America has the potential to make a big difference in the plastics industry in the next decade. But how exactly will it change? North American processors may be salivating over the prospects for plentiful, inexpensive polyethylene. But will that perception of shale feedstocks become reality? Speakers at the IHS World Petrochemical Conference in Houston touched on the topic this week, and Alex Tullo, senior editor for Chemical & Engineering News, wrote about it in his "The Chemical Notebook" blog. The post, "Petrochemicals, Front And Center," notes that "petrochemical executives may be exuberant about the prospects of feedstocks from shale, but they are also realistic." Plastics News has reported on expansion plans related to shale gas from Formosa Plastics Corp. USA, Nova Chemicals Corp., Chevron Phillips, Dow Chemical Co., Shell Oil Co. and Westlake Chemical Corp. But announced projects don't always get built. That's typical in the boom-and-bust cycle of the chemical industry. Tullo quotes two executives at the conference who say that not all of the crackers that are currently on the drawing board will get built -- at least not on their current schedule. That makes sense. The location of some of the new capacity also has the potential to change the North American plastics industry. Shell Chemicals, for example, is looking at Monaca, Pa., for its new capacity. Tullo cites comments on the topic by Ben van Beurden, executive vice president of Shell Chemicals Ltd. Tullo writes that there is "a big advantage being close to the converters -- customers would enjoy quicker delivery and less working capital tied up in inventory." That seems likely. I asked Frank Esposito, Plastics News' senior reporter who covers materials suppliers, and he pointed out that there is a large number of packaging and rotational molding firms in the Midwest that could benefit from lower PE shipping costs from western Pennsylvania, compared to current suppliers in the U.S. Gulf Coast. And even if new capacity doesn't necessarily result in lower resin prices, Esposito said the new North American PE capacity would mean more reliability of supply. Consider the short-term impact on pricing of Gulf Coast hurricanes, for example -- wouldn't new capacity in the Midwest temper those fluctuations? I expect to hear more comments from the materials sector on shale feedstocks next week at NPE2012 in Orlando, Fla. Probably not any new capacity announcements, but certainly more talk about what the future holds for plastics processors.
What will new crackers mean to plastics processors?
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