Norwalk, Calif. — New polyethylene production plants coming online will bring North American PE prices more in line with global prices, says industry analyst Robin Waters.
Waters discussed PE and polypropylene market adjustments in a Jan. 12 presentation to the Western Plastics Association. About 100 people attended the meeting in Norwalk.
Processors buying PE in North America have faced higher prices that those on other continents, said Waters, director of plastics planning and analysis in Houston for the consulting firm IHS Inc.
"We expect to see PE prices in North America becoming more aligned with other parts of the world," he said. "It won't happen tomorrow, but we see the beginning with three new plants" soon providing near-term capacity additions.
He was referring to projects in Nanchital, Mexico; La Porte, Texas; and Joffre, Alberta, including two joint ventures. Initially, the new capacities will be directed to the export markets.
JV partners Braskem SA of São Paulo and Grupo Idesa SA de CV of Mexico City have started PE and ethylene feedstock operations at the Nanchital site near Coatzacoalcos in the Mexican state of Veracruz.
JV partners Ineos Group AG of Rolle, Switzerland, and Sasol Ltd. of Johannesburg, South Africa, are establishing a high density PE plant in La Porte using the Innovene-brand S process under license from the Ineos Technology business unit.
Nova Chemicals Corp. is adding to its substantial capabilities in the hamlet of Joffre near Calgary in Canada with a 1-billion-pound per year linear low density PE line.
Waters observed that Braskem and Sasol are "new participants" in the North American market and "must establish their positions" versus the entrenched competition.
Regarding PP, Waters said he anticipates continuing tight domestic market conditions.
Sellers' PP market conditions have prevailed with maximum domestic operating rates of 91.3 percent for the 11 months through November 2015 versus 87.2 percent for all of 2014.
During 2016, "I expect news of debottlenecks [and] new plant announcements for 2019 targeted start ups," he said.
While 2015 PP production was the best since 2010, the market's structural constraints will persist until new capacity is added. That will include the new line of Formosa Plastics Corp. USA in Texas.
"2016 will be the year of the import" for PP, Waters noted.
Ongoing "high operating rates are likely to lead to regular unplanned outages" as PP producers push the limits of existing equipment.
Regarding the mercurial roll of crude oil, Waters said prices would not "start to solidify until the last half of 2016."