United States Petrochemicals Report Q1 2012

US petrochemicals growth has been lacklustre this year amid high unemployment, high oil prices and the
Japanese tsunami, according to BMI’s latest US Petrochemicals Report. In the first nine months of 2011 (9M11), sales and captive use of major plastic resins totalled 56.3bn lbs, down .06% y-o-y. Production of major plastic resins over the same year totaled 56.9bn lbs, an increase of just .01% y-o-y, implying net exports of 600mn lbs.
The most dynamic segment through the first nine months of the year was PS+, with sales growing by
9.2% to 4.16bn lbs, leading to 8.4% growth in output to 4.19bn lbs. Sales of both Linear low density polyethylene ( LLDPE) and Low-density polyethylene (LDPE) were down, with decreases of 0.35% and 0.23% y-o-y to 10.12bn lbs and 5.1bn lbs respectively. Output trends between LLDPE and LDPE, however, diverged, with output growth of 2.5% for LDPE and a decline of 1.3% for LLDPE year-on-year (y-o-y) to 5.17bn lbs and 10.31bn lbs.
The polyvinyl chloride (PVC) has recorded gains over 2010 with 9M11 sales growing 3.8% y-o-y to
10.87bn lbs and output growing 4.5% to nearly 11bn lbs. The high-density polyethylene (HDPE) segment recorded slow growth with sales rising by of 1.2% to 12.8bn lbs, and output, which grew just 0.75% to 12.9bn lbs. This means demand growth largely benefited imports. The worst performing segment was polypropylene (PP), with sales down 6.4% to 12.3bn lbs and production falling 6% to 12.25bn 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 forecast US growth for both 2011 and 2012 of 1.6% as the US continues to struggle.
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.
However, 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 9M11 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 memorandum of understanding (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 an 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.