North American resin markets entered 2022 looking for post-COVID calm, but by the end of the year they were still looking.
Through October, polyethylene prices in the region were down a net of 2 cents for the year. That's as calm as it gets for regional resin markets. Other commodities were far more volatile.
PET bottle resin prices surged 22 cents since January, with polystyrene up 18 cents since February. Regional prices for polypropylene and PVC went in the other direction, with PP down 36 cents and PVC down 19 cents.
The PE market largely followed trends in the U.S. economy, with PET and PS boosted by feedstock trends. PP conversely was lowered by a feedstock trend and PVC was affected by a drop in construction demand.
Most recently, PE makers have been able to hold prices flat by reducing production and increasing the amount exported from North America. These moves were able to counteract drops in domestic demand caused by an economic slowdown.
PE giant Dow Inc. in late August announced plans to temporarily reduce global nameplate capacity for PE by approximately 15 percent. Other PE makers unofficially reduced production as well.
In a letter to customers, Dow Packaging and Specialty Plastics President Diego Donoso said the cutback was tied to "continued global logistics constraints," including port and rail congestions in the U.S. Gulf Coast and "dynamic conditions" in Europe. Dow operates about 17 billion pounds of global PE capacity, including about 7 billion pounds in the U.S. Taking out 15 percent of capacity removed about 2.6 billion pounds from production, roughly the equivalent of one world-scale PE unit.
Even with recent PE prices flat, the industry has been active. In November, Shell Chemical announced the start of production at its massive 3.5 billion-pound-capacity PE unit in Monaca, Pa., near Pittsburgh. It's the first major PE manufacturing complex in the Northeastern U.S. and the first U.S. plant built outside of the Gulf Coast in at least 40 years.
The complex is located within a 700-mile radius of 70 percent of the U.S. PE market. The 384-acre site has contracted most of its natural gas feedstock from the nearby Utica and Marcellus basins. The complex is expected to reach full production rates in the second half of 2023.
High and linear low density PE resins made at the site will serve customers that make commodity and specialty films, pipe, blow molded containers and injection molded parts.
Around the same time the Shell plant came online, Chevron Phillips Chemical Co. and QatarEnergy announced the formation of Golden Triangle Polymers Co. LLC, a JV that will spend $8.5 billion to build a petrochemicals complex in Orange, Texas. Construction will begin immediately on the project, with operations expected to begin in 2026. The complex will have two HDPE lines, each with annual capacity of 2.2 billion pounds, and an ethane cracker with annual capacity more than 4.5 billion pounds.
The Golden Triangle plant will produce HDPE resins for durable goods like pipe for natural gas and water delivery, recreational products and packaging to protect and preserve food.
Access to low-priced natural gas has allowed North American PE makers to add billions of pounds of capacity in the last decade. Large amounts of this new capacity is being exported, since the amount being added far exceeds what's needed to meet North American PE demand growth.
Market veteran Howard Rappaport, a senior adviser with StoneX Financial, said that although large amounts of PE continue to be added in North America, it's "quite likely" that the economic climate in the U.S. will have improved sufficiently by the time the CP Chem JV capacity comes on to sustain a level of PE consumption more in line with historical norms.
Esteban Sagel, principal at Chemical and Polymer Consultants in Houston, said the industry "needs to look at this announcement from a countercyclical point of view. … By 2026, it's likely that we'll be in the upswing side of the cycle, which is exactly when you want to start a new plant."