H1 trade date from leading provider Global Trade Information Services highlights a surprisingly weak overall export performance by US polyethylene (PE) producers. As the chart shows:
- Net export volumes (blue column) have recovered from the 2012 slowdown (green), but are still only up 11% versus 2011 (red)
- Volume is currently heavily reliant on sales into Latin America, which was 80% of total exports in H1 at 700KT
- Brazil was the the largest market at 180KT, with domestic demand strong ahead of next year’s soccer World Cup and the 2016 Olympics
- Yet growth is unlikely to continue at current levels after these events, whilst local producer Braskem already has major plans for expanding its own production. Its 75% owned Ethylene XXI joint venture complex in Mexico is due on stream in 2015, for example. This will provide 1.05Mt of ethane-based ethylene capacity – and a similar volume of PE.
The only other major export markets currently are the Middle East and China. Exports to SEA have plunged 81% since new capacity opened there. And neither region seems likely to provide much opportunity to increase sales in the future. The Middle East is already a major and growing exporter, with its own cheap ethane feedstock, whilst China is busy building new capacity to achieve self-suufficiency as quickly as possible.
Yet US producers are currently planning to dramatically expand US production of ethylene and major derivatives such as PE. Undoubtedly shale gas provides a very competitive cost base for this expansion. But in the New Normal – where demand is the key factor, not supply – the critical issue is whether this new production can be sold? The blog will investigate this critical issue in more detail next week.