OUTLOOK ’15: PE producers to break ground on new US plants in 2015

Lane Kelley

22-Dec-2014

HOUSTON (ICIS)–In the world of US polyethylene (PE), 2015 looks to be a groundbreaking year for new plant projects, but it could also become the year of the new-plant shakeout, judging from recent moves in the energy market.

Because of the ethylene derivative’s extraordinary cost advantage, there are 17 planned new PE units in the US, including multiple projects at some sites, for a total of 8.1m tonnes/year of capacity. Some will break ground in 2015, for scheduled start-ups in 2016-17.

This represents a hypothetical 53% increase in the existing US capacity base, according to an ICIS analysis, but of course some of the projects will never get beyond the planning stage, as LyondellBasell’s outgoing chairman Jim Gallogly said in a conference call.

“Some of those people who are out there announcing new plants are really trying to negotiate different supply contracts,” Gallogly said. “Not all of that is going to come on.”

PE’s extraordinary cost advantage has made it the top-ranked ethylene derivative for integrated producers, the plastic with the greatest benefit from cheap ethane derived from shale gas.

Small wonder that many new US cracker projects in coming years also call for an adjoining new PE plant. An industry executive said this year that 80-90% of CP Chem’s earnings came from PE.

One big advantage PE producers have is that they often make their own ethylene, while propylene producers are not as integrated and tend not to make their own propylene.

What could undercut PE’s huge margins next year may already be happening because of a major decline in crude oil, which plunged more than 40% in the last half of 2014.

US petrochemical and polymer prices track oil, rather than their primary raw material natural gas.

The outlook for the first month or two of 2015 according to PE sources is lower contract prices, following two consecutive monthly price cuts in November and December. A trader predicted price cuts of 12-15 cents/lb in the first quarter next year.

Multiple ethylene and PE projects have been announced in the US, most expected to come online within the next three years. The following lists some of the projects.

Company

Capacity

Grades

Location

Start-up

Sasol

450,000 tonnes

LLDPE

Lake Charles, Louisiana

2016

Sasol

420,000 tonnes

LDPE

Lake Charles, Louisiana

NA

Sasol/INEOS

470,000 tonnes

HDPE

La Porte, Texas

2016

Braskem

NA

UHMWPE

La Porte, Texas

H1 2016

ExxonMobil

1.3m tonnes

PE (premium)

Mont Belvieu, Texas

Late 2016

Chevron Phillips

1m tonnes

HDPE, LLDPE, other

Sweeny, Texas

2017

Dow Chemical

NA

PE (high-value), LDPE

Freeport, Texas

2017

Formosa Plastics

625,500 short tons

LDPE

Point Comfort, Texas

2017

Shell

1.6m tonnes

HDPE, LLDPE

Monaca, Pennsylvania

2018

Odebrecht

NA

Unspec

West Virginia

NA

LyondellBasell

454,000 tonnes

Unspec

US

Mid 2017

Badlands NGL

1.5m tonnes

Unspec

North Dakota

NA


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