More polyethylene and polypropylene resin capacity is heading into the North American market in 2020, and that new capacity will have an impact on processors in the region.
Another 1.8 billion pounds of PE capacity is set to come on line next year from Formosa Plastics Corp. USA. That's on top of almost 4.5 billion pounds added from three suppliers this year and a total of more than 8 billion pounds added from four suppliers in 2017-18.
Looking past 2020, additions of more than 2 billion pounds total are slated for 2021-22. And that's not even counting 3.5 billion pounds of capacity from Shell Chemical's massive project outside of Pittsburgh. Company officials have listed "early 2020s" as the start date for commercial production there.
This avalanche of PE is the result of the development of shale oil and gas throughout the region. Those materials can be used to make PE feedstocks. PP markets haven't benefited as much from the boom, but Braskem will bring on more than a billion pounds of new capacity for that material in the second quarter in La Porte, Texas.
North American PE "will be a buyer's market for the next few years," according to Robert Bauman, president of consulting firm Polymer Consulting International Inc. in Ardsley, N.Y.
He added that regional PP "could have a brief period of tightness" until Braskem starts up its new capacity and if other capacity debottlenecks find a home.
Propane dehyrdrogenation (PDH) projects are on tap from at least two suppliers, increasing the region's output of propylene monomer and clearing the way for more PP capacity if needed.
Most of the new PE — with the exception of the Shell project — is slated for overseas markets. But the tariff war between the U.S. and China is creating a challenge for PE exporters. They've weathered the storm so far, but new PE capacity in Asia is making that region more self-sufficient, potentially threatening demand for material from outside of the region.
"The PE and PP markets have been polar opposites on the supply and demand cycle, but PP is turning the corner," market analyst James Ray of Houston-based consulting firm ICIS said in a recent email. "PE is amply supplied and will be even more so in 2020 with new capacity coming on line. But U.S. demand growth has spiked, driving record U.S. consumption, as a result of Chinese tariffs and lower PE prices."