US chems must pursue exports to avoid over capacity – consultant

27 June 2012 19:58  [Source: ICIS news]

HOUSTON (ICIS)--US chemical producers must focus their business on exports to new growth markets in order to benefit from highly competitive feedstocks in the wake of the country’s shale gas boom, consultant and auditor KPMG said on Wednesday.

If US producers, who traditionally rely on the domestic market, fail to shift to an export-led business model, the nation's chemical industry “is destined to fall back into the historic cycle of oversupply followed by rationalisation”, KPMG warned in a report titled “The Future of the US Chemical Industry”.

KMPG said that shale gas made US-based chemicals production highly competitive, marking a "dramatic change" in outlook for US-based producers. 

However, the industry faces the risk of “exponential addition of new capacity”, leading to an oversupply that outstrips demand on the mature US market, “returning the industry to the cyclicality that was such a problem in the past”,  the report said.

"The opening up of many emerging markets to import growth can be a slow and complex process, and US chemical companies need to take actions today that will guarantee markets for products to be produced in four or five years time," said Mike Shannon, global and US leader of KPMG's chemicals practice.

According to ICIS, US-based producers - prompted by shale gas - are planning or considering new cracker projects that could, if realised, add 8.89m tonnes/year of ethylene capacity, or 33.4% of existing US capacity, by 2017.

Additional reporting by Joe Chang

By: Stefan Baumgarten
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