Source of picture: ICIS
By John Richardson
LYONDELLBASELL has joined the list of US producers that have disclosed ethylene expansion plans as a result of low-cost ethane and the belief that we are heading towards an up-cycle.
Jim Gallogly, LyondellBasell's CEO, said during an earnings call on Monday that debottleneckings are being considered for crackers at Channelview and La Porte, Texas. This could add at least 500m lb/year (227,000 tonnes/year) of ethane-based ethylene capacity
He also said that the company is conducting a study into a new cracker which could be as a joint venture.
Dow Chemical plans to build a world-scale ethylene plant on the US Gulf coast for start-up in 2017.
Chevron Phillips Chemical is studying the possibility of building a world-scale ethane cracker, and INEOS has undertaken engineering studies to debottleneck its cracker in Chocolate Bayou, Texas.
Westlake Chemical is expanding ethylene capacity at its Lake Charles complex in Louisiana.
LyondellBasell's announcement about its capacity intentions came less than a month after it declined to be drawn on the subject during the BB&T Capital Markets Industrial and Commercial Conference in New York last month.
However, Sergey Vasnetsov, the company's senior vice-president for strategic planning and transactions, laid the groundwork during the conference by predicting that the olefins and polyolefins industry was heading for an up-cycle in approximately 2014-16.
Stronger-than-expected GDP growth and/or major production problems could result in the good times occurring earlier than that, he added.
He presented an upbeat view of emerging-market growth without mentioning what we feel is a major risk: Inflation.
The former Wall Street analyst also made no comment on the threat to the fragile US recovery, if one can call it a recovery, of dealing with the budget deficit.
Interestingly, Vasnetsov said that the US ethane premium over natural-gas prices can be as much as 100%, a situation that will perhaps change as new fractionation capacity comes on-stream. He presented a slide during the event forecasting a 53% growth in fractionation capacity by 2015.
Perhaps the prospect of even more competitively-priced ethane is another reason behind all the recent capacity announcements - along with the consensus view that an upswing is on the way.
Consensus views can be very dangerous when they lead to over-investment.