The impact of new North American polyethylene resin capacity began to be felt in sales totals for the first half of 2018, with both high and linear low density PE posting big gains.
U.S./Canadian sales of HDPE jumped 8.8 percent in that six-month period, according to the American Chemistry Council, with LLDPE sales booming 16.3 percent. Exports played a big role in this growth, with LLDPE exports up an astonishing 60.2 percent and HDPE exports leaping 18.9 percent.
Domestic market growth for those materials also exceeded that of U.S. GDP. HDPE sales into the domestic market were up 6.5 percent in the first half, with domestic LLDPE sales up 4 percent.
Among major HDPE markets, sales into gas pipe were up 23 percent, with water pipe up 16 percent for the half. In end markets for LLDPE, sales of the material into shipping sacks were up 10 percent.
North America has added more than 6 billion pounds of annual PE production capacity since mid-2016 through major expansions from Nova Chemicals Corp., Dow Chemical Co., ExxonMobil Chemical Co. and Chevron Phillips Chemical. In total, North American PE production capacity is expected to add 26 billion pounds between 2017 and 2022.
The discovery of newfound supplies of shale-based natural gas in the region in the last decade have made these expansions possible. Most of this new capacity has been in the form of HDPE and LLDPE.
U.S. PE exports "can ramp up very quickly when world crude oil prices rise as they did in the first half of 2018 compared to the same months in 2017," said Phil Karig, managing director of the Mathelin Bay Associates LLC consulting firm in St. Louis.
"Crude oil prices were up over 30 percent year over year, while U.S. natural gas prices were mostly down during the same time period," he added. "As a result, many foreign PE buyers found U.S. PE prices attractive, while U.S. PE producers had less reason to lower domestic prices, even in the face of new production capacity."
Esteban Sagel, principal of the Chemical & Polymer Market Consultants consulting firm in Houston, said that "looking at PE, the domestic growth rates would be reflective of a strong domestic market, which I believe is the case."
"The economy is improving, employment is up and confidence is high," he added. "Growth in pipe in HDPE is understandable, as we work in a lot of shale-related infrastructure."