US PE exports to reach 42% of production in next decade – analyst

06 November 2012 21:23  [Source: ICIS news]

HOUSTON (ICIS)--The share of US polyethylene (PE) production going into exports could rise to 42% by the end of the decade, up from currently 22%, an analyst said on Tuesday.

Laurence Alexander from banking group Jefferies said that such a large increase in US PE exports could lead to more industry volatility and pressure on smaller US compounders and processors. 

“[The rise in US PE exports] could put more pressure on the US processors later in the decade - an environment that could exacerbate economies of scale and favour the larger compounders,” Alexander said in a research note to clients.

The vast majority of the new capacity planned on the back of the US shale gas boom will target export markets, he said. 

Assuming that nine worldscale ethylene units are built by 2020, with about two-thirds of the ethylene being polymerised into PE, implies that exports could come to 42% of US domestic PE production, the analyst said.

Alexander also predicted that olefins and PE markets in the EU could come under increased pressure by the end of the decade as Middle Eastern producers are shifting production to higher-grade performance products and specialty derivatives.

He pointed in particular to production from Dow Chemical’s planned Sadara petrochemicals joint venture in Saudi Arabia.

By: Stefan Baumgarten
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