Naples, Fla. — Polyolefins remain a tale of two markets in 2018, with polyethylene expanding and polypropylene looking to retain its market share.
North American PE supply had been balanced in the 10 years before 2016, but that could be changing with so much new capacity being added, market consultant Esteban Sagel said at the Plastics News Executive Forum, March 6-7 in Naples.
Four regional PE expansions came online last year, with three more scheduled for 2018 and an astounding 10 more expected between 2019 and 2022. These projects will add more than 26 billion pounds of annual production capacity, according to Sagel, principal of the Chemical & Polymer Market Consultants consulting firm in Houston.
"There are healthy expectations for growth in the North American market, but we also see a lot of material that's not needed and will have to be exported," he said. "The share of exports could grow from 25 percent to 40 percent by 2022."
"That will change the way producers look at the export market. The domestic market is not coming to the rescue."
This excess capacity also could impact PE pricing, especially if producers aren't able to export as much material as they would like. "It only takes 20 percent of that material to back up into the market and cause problems for producers," Sagel said. "If that happens, it might impact the premium that [North American PE] suppliers currently get over global prices."
Unlike the PE sector, the PP market is seeing limited investment, partly due to a lack of propylene monomer feedstock. Sagel said that some propylene expansion projects using propane dehydrogenation (PDH) technology have been canceled because of lower profit expectations.
Higher propylene prices also have resulted in higher North American prices for PP resin, resulting in the material seeing some competition from high density PE as well as polystyrene, he added.
Higher prices and China becoming self-sufficient in PP production also have affected PP exports from North America, further reducing justification for investment.
On March 20, ExxonMobil Chemical Co. announced that it is studying a project that could add almost 1 billion pounds of annual capacity for PP resin on the U.S. Gulf Coast. A final decision on whether to go ahead with the project is expected later this year.
