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November 12, 2015 01:00 AM

US remains strong spot in global outlook

Frank Esposito
Senior Staff Reporter
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    Global Plastics Summit 2015
    IHS chief economist Nariman Behravesh said that while the global market is struggling, the U.S. continues steady growth.

    Chicago —The U.S. remains an economic bright spot globally, but low oil prices have brought chaos to markets for energy and plastic feedstocks.

    “The risk is that the global market is stuck,” IHS chief economist Nariman Behravesh said at Global Plastics Summit 2015, held Oct. 29-30 in Chicago. “We've seen slowdowns in labor force growth and productivity.”

    Global economic growth of 2.5-2.8 percent annually since 2011 is “well below” the average of the previous two decades, he added, saying that austerity and debt have been “major headwinds” to economic growth.

    The picture has been more positive in the United States, where strong domestic demand “will buffer [the country] from the rest of the world,” according to Behravesh. He listed the United Kingdom, Germany and India as other economic bright spots around the world.

    Short-term U.S. economic growth should be 2.5-3 percent, with growth of 2-2.5 percent foreseen for the long-term.

    In global energy markets, oil oversupply has led to the end of price stability, according to IHS oil markets and downstream director Paul Tossetti. Oil prices have plunged from more than $100 per barrel in mid-2014 to less than $50 per barrel as of Nov. 3.

    “We saw a lot of new supply because of high prices, but Saudi Arabia and OPEC didn't cut production,” Tossetti explained. “U.S. shale oil production will be key to balancing the market.”

    He added that a majority of new oil production will need to see prices in the range of $80-$100 per barrel to be economical.

    The U.S. also should continue to reap the benefits of shale-based natural gas, which can be used as a petrochemical feedstock. Marcellus Shale, which covers a good portion of Pennsylvania as well as several nearby states, “is an absolute monster — and producers are learning how to attack these fields,” Tossetti said.

    For plastic feedstock ethylene, lower prices and profit margins have forced producers to reassess capital spending, according to IHS global chemical vice president Mark Eramo. And fewer capital projects could lead to tight markets in the future, he added.

    “Natural gas remains advantaged,” he explained. “That brought North America back into the field.”

    Even with almost 26 billion pounds of new ethylene capacity set for the region from 2014-20, Eramo said that ethylene capacities are on pace with demand growth, and that no oversupplies are forecast.

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