US PE exports up just 11% versus 2011, as focus shifts to Latin America

US PE trade Aug13H1 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.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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