EPCA ’13: US gas-based cracker advantage here to stay: consultant

06 October 2013 12:52  [Source: ICIS news]

Shale gas workerBERLIN (ICIS)--The current highly competitive cost position of US players in olefins and polyolefins is unlikely to change over the next seven years, with the underlying marginal economics of the business remaining intact, an industry consultant said on Sunday.

US integrated polyolefins producers cracking shale gas advantaged ethane feedstock will be among the world’s lowest cost producers, although they will be challenged to successfully sell into global markets, said Paul Ray, head of ICIS Consulting & Analytics.

Ray was speaking at a seminar held at the 47th annual European Petrochemical Association (EPCA) meeting.

The rapid development of shale gas and oil production in the US has changed the cost position for North American producers of ethylene, giving those producers a clear competitive advantage.

In its current 2020 forecasts, ICIS Consulting & Analytics expects little change.

“The cost structure [for integrated polyolefins producers] will be broadly similar in 2020 from that seen in 2012,” Ray said. 

Polyolefins demand will continue to grow, he suggested, with ICIS Consulting & Analytics forecasting a growth rate of just over 3% a year, a GDP multiplier of one.

That leaves the 2020 market structure for polyolefins broadly similar to that in 2012.

It is not going to change the marginal economics in this business, he added.

This theory implies that the highest cost producer in a market ultimately sets a product price, yielding economic advantage to lower cost players.

Ray warned, however, that successfully achieving market access for the polymers likely to be made from the additional volumes of ethylene planned for the US would be critical.

“If the US is building so much value, it has to find its way into export markets,” he added.

The EPCA meeting runs from 5-9 October.

Cracker cost curve

Source: ICIS Consulting & Analytics

By: Nigel Davis
+44 20 8652 3214

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