US petrochemicals growth has been lacklustre this year amid high unemployment, high oil prices and the Japanese tsunami, according to our latest US Petrochemicals Report. In H111 sales and captive use of major plastic resins totalled 36.5bn lbs, up 1.6% y-o-y. Production of major plastic resins totaled 36.9bn lbs, an increase of 1.0% y-o-y, implying net exports of 400mn lbs. The most dynamic segment was PVC, with sales growing by 5.7% to 7.25bn lbs, leading to 4.3% growth in output to 7.25bn lbs. There were divergent LLDPE and LDPE trends in sales, with growth of 1.7% and - 0.9% y-o-y to 6.68bn lbs and 3.36bn lbs respectively, leading to output growth of 0.7% and 3.3% y-o-y to 6.84bn lbs and 3.45bn lbs. LLDPE benefited from the competitiveness of US PE output in Asian markets.
LLDPE output has been highly robust and resilient to the recession due to its increased use in a broader range of packaging applications, largely at the expense of LDPE. The PS segment recovered well after a lacklustre year in 2010 with H111 sales growing 11.6% y-o-y to 2.78bn lbs and output growing 7.5% to 2.74bn lbs. While HDPE sales were robust with growth of 3.8% to 8.49bn lbs, output grew just 1.9% to 8.57bn lbs. This means demand growth largely benefited imports. The worst performing segment was PP, with sales down 5.9% to 8.49bn lbs and production falling 5.2% to 8.09bn lbs.
Polymer resins output growth of about 3.4% in 2010, following significant declines in the previous two years, was below far lower than we had expected and continues to lag behind trends in the overall economy. The rebound will moderate further in 2011 and 2012 and output may not return to pre-recession levels until 2012 at the earliest. We have raised our forecast for real GDP down in 2011 to 2.6% from 2.9%.
After a period of stagnation and decline, the improved cost position of US petrochemicals bolstered by shale gas discoveries has prompted a flurry of interest in new cracker capacity. Growth in ethane availability paves the way for a potential cracker in the northeast, where the Marcellus shale reserves could support a world-scale plant, in addition to those recently announced by CP Chem and Dow Chemical. New crackers based on shale gas are unlikely to add significantly to exports in the medium- to long-term, but should help keep up PE exports and prevent a decline into import dependency. However, the development of petrochemicals facilities based on shale gas are some way off. It will take at least five years for a world-scale cracker to come on stream and plenty of work will need to be done to provide sufficient infrastructure.
Westlake Chemical says it will expand ethane-based ethylene capacity at Lake Charles, LA by 105,000- 110,000tpa by end-2012. A second Lake Charles expansion will be completed by the end of 2014, although the size of the expansion was not disclosed. In H111 several petrochemical producers made moves, or, like Westlake Chemical, expressed interest in the Marcellus/Appalachia area. Brazil-based Braskem says it would consider a greenfield investment in an ethylene cracker and PE plant in the US.
US-based Dow Chemical plans to increase its ethylene and propylene production, and integrate feedstock from the Marcellus shales as well as Eagle Ford shales in Texas. Canada's Nova Chemicals signed an MOU with Norway's Statoil for supply of ethane from the region, as well as an MOU with US-based Caiman Energy, to buy ethane from West Virginia. Shell has indicated it was planning to build a ethylene cracker to take advantage of the Marcellus deposit. It is also likely to add downstream units to any complex. Bayer announced it is considering selling or leasing its property in West Virginia to develop an ethane cracker using ethane feedstock from Marcellus. CP Chem is considering a 1mn tpa cracker at a Gulf Coast site by 2016-17. Formosa Chemical is evaluating plans to boost ethylene capacity at its Point Comfort, TX facility by about 450,000tpa, probably in 2015.
Click for Report details:United States Petrochemicals Report Q4 2011