The US shale gas boom and the resulting low prices of natural gas are spurring a wave of new crackers and expansions in the country. Ultimately, the US ethylene market could see a 29% increase in capacity by 2017 (see our full analysis in the February 13 issue of ICIS Chemical Business.
Three local producers - Dow Chemical, Shell and Chevron Phillips - are proceeding, each with world-scale crackers set to start up in 2016-2017. South Africa-based Sasol, which already has a mid-size cracker in Lake Charles, Louisiana, is considering the construction of a 1.0-1.5m tonne/year cracker at the same site, aiming to complete the study by the second half of 2013.
Plus, many others are expanding or considering new world-scale crackers. Yet more are also moving to convert their plants to crack lighter feeds.
Ultimately, a 29% boost in US ethylene capacity by 2017 will cause a profound disruption in the market. Many things have to go right for this capacity to be absorbed into the local and global market.
Many are counting on naphtha-based crackers in Europe and Asia shutting down. Yet for Europe, integrated polyethylene (PE) margins have equaled or exceeded those of US ethane-based producers in every year from 2008-2011. So far in 2012, US producers have taken the lead as ethane prices have plunged.
While some select crackers may shut down, don't count on a wave of Europe cracker closures. Their integrated PE margins taking into account co-products propylene and butadiene from naphtha cracking have been solid.