US PE exports down 39% despite shale gas

Chemical companies


US PE trade Apr12.pngGlobalisation had a golden age between 1982-2007. Trade barriers fell almost everywhere. Companies focused on achieving a ‘lowest cost’ position, in order to maximise their competitive advantage.

Today, however, the world is starting to look quite different.

The chart above summarises the changes underway. It shows US polyethylene net trade (PE) since 2009, based on GTIS (Global Trade Information Services) data, and updates that shown last November.

It presents a remarkable picture. Over this period, the USA gained major cost advantage, due to the increased extraction of ethane from cheap shale gas. Yet:

• Its net PE exports actually fell 39% from 2.6MT to 1.6MT
• Net exports to China were down 70% from 900KT to 266KT

The blog’s many US friends naturally find this very difficult to understand. They believe China should simply shut down its high cost, naphtha-based production and import cheaper US product.

But China operates on different values. Its petchem industry operates as a utility, providing reliable supplies of raw materials to the factories to keep people employed. If it shutdown plants, then social unrest would increase, threatening the existing Chinese political structure.

Sinopec’s own financial performance proves the point. Between 1998-2010, it invested RMB 166bn ($25bn) in chemicals capital expenditure. Yet its total EBIT (Earnings Before Interest and Taxes) was only half this at Rmb 84bn. No Western company would dream of investing on this basis.

But as the blog noted last week, China is continuing to expand production. And the government is currently expected to raise its stake in Sinopec from 76% to 78% over the next few months. It is paying the bills, not Western-minded investors.

The US thus faces a major dilemma. It has the 2nd cheapest ethylene feedstock in the world (after the Middle East). But its markets for this product are reducing:

Braskem of Brazil is building new capacity in Mexico (with Grupo Idesa)
• It is also planning to build in Brazil
• Both expansions will reduce US exports still further
• Equally, Asian/ME producers are already expanding sales in Latin America, to compensate for lower import demand in China

The US position on ethane thus provides a good example of the changes underway as we transition to the New Normal. New value structures are emerging that focus on social and political factors, rather than economics.


Oil prices near Q2 2008's record level


Finally, and far too late, policy makers are waking up to the damage that today&...

Learn more

Europe's banks turn to bullfight loans


The blog’s IeC Boom/Gloom sentiment indicator (blue column) continues to b...

Learn more
More posts
Polyethylene’s crisis will create Winners and Losers

Polyethylene markets (PE) are moving into a crisis, with margins in NE Asia already negative, as I h...

Day of reckoning approaches for US polyethylene expansions, and the European industry

Planning for future demand in petrochemicals and polymers used to be relatively easy during the Baby...

Stormy weather ahead for chemicals

Four serious challenges are on the horizon for the global petrochemical industry as I describe in my...

Ethane price hikes, China tariffs, hit US PE producers as global market weakens

Sadly, my July forecast that US-China tariffs could lead to a global polyethylene price war seems to...

US ethylene prices near all-time lows as over-capacity arrives

US ethylene spot prices are tumbling as the major new shale gas expansions come on line, as the char...

World Aromatics Conference focuses on key industry challenges

Our 16th World Aromatics and Derivatives conference takes place on Wednesday/Thursday in Amsterdam. ...

Hurricane Harvey will turbocharge move to the circular economy

300,000 homes and half a million cars have been destroyed by Hurricane Harvey.  And in terms of bus...

Plastics demand is peaking as circular economy arrives

The Stone Age didn’t end because we ran out of stones.  Similarly, coal is being left in the ...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more

Uncover exclusive industry upates from ICIS

Interested to uncover more articles related to this topic? Explore additional news, insights and intelligence, tailored to the markets you are interested in by accessing exclusive content from