CHICAGO — Things are looking up for North American polyethylene, while polypropylene in the region is holding its own and PET…well, there's always next year…or the year after that.
Industry experts with IHS Chemical gave their outlooks on those markets at the 2014 Global Plastics Summit, held Oct. 1-2 in Chicago.
PE is moving into a major growth phase, with billions of pounds of new capacity set to arrive in the next several years because of low-priced natural gas feedstock in the region.
Domestic PE demand in the U.S. should average 3 percent growth from 2004-19, with exports of PE from the region growing at an annual rate of about 8 percent, according to Nick Vafiadis, senior director of global polyolefins and plastics at Houston-based IHS.
More than 20 billion pounds of new PE capacity has been announced for the region through 2020, and although Vafiadis said that most of those projects “look viable,” he added that others “may slip” from their original schedules for a variety of reasons, including availability of skilled labor on the U.S. Gulf Coast.
But even with those delays, advantages for producers in the region — coming from low-priced, natural gas-based ethane being used to make ethylene feedstock — will continue. “Our view is that North America's ethylene cost advantage can be sustained,” Vafiadis said.
On the pricing front, PE's streak of going two years without a price reduction could reach three years, he added. “I've never forecast a flat series of prices like this,” Vafiadis said. “The September price is a good representation of what we can expect polyethylene prices to be.”
The IHS prediction of flat PE pricing for most of 2015 comes after six increases have hit the market since 2013. Production outages for both PE and ethylene have kept inventories tight and placed operating rates for those materials near 100 percent. “Producers are selling every pound they can make,” Vafiadis said.
The North American PP field should continue to see high prices until new capacity is added, according to IHS polyolefins director Joel Morales. But that might not happen for a while, since the industry remains below reinvestment economics.
Less than 2 billion pounds of new PP capacity has been announced for North America through 2018, although almost 2 billion more is expected from various suppliers. Those totals are well below announced expansions for PE.
Production outages have kept supplies tight in 2014, Morales said, although new propylene feedstock from PDH technology could loosen it up a bit starting in 2015. North American PP operating rates are expected to remain around 90 percent through 2017.
IHS expects North American PP demand to grow at a 2.7 percent annual rate from 2014-19. “The market is still growing, in spite of all this craziness,” Morales said.
As for PET, IHS aromatics and fibers senior director was direct in his assessment. “America is getting healthy and it's killing us,” he said. North American sales of PET into its once-dominant carbonated soft drinks market have been in decline for 10 years as consumers choose less sugary beverages. But switching to bottled water doesn't help PET much, since the average water bottle now uses less than half of the PET used in an average carbonated soft drink bottle.
This CSD issue is keeping North American PET demand flat again in 2014, with the resin losing ground to imported and recycled material. As a result, operating rates are under 75 percent and profit margins are “slim to non-existent,” according to Willett.
In spite of this dreary picture, three North American PET makers — M&G Group, Indorama Polymers and Selenis Canada – have announced plans to add capacity. M&G plans to add 2 billion pounds of capacity in Texas, with Indorama adding more than 1 billion pounds in Alabama and Selenis boosting production by more than 200 million pounds near Montreal. Willett said he expects startup dates for all three of those projects to be pushed back.
North American PET pricing also should be relatively flat in the next year, Willett said, adding that some older resin capacity in the region may be shut down because of market conditions.
