US ethylene output rise warns of market share battles ahead

Chemical companies

SHARE THIS STORY

US C2 Mar16

“The reality is the US from a chemical standpoint is a very mature market. We have some demand growth domestically in the US but it’s a % or two – it’s not strong demand growth,” Pryor said, adding that polyethylene hardly grew in the US in a decade. “That is not going to change.

“The domestic market is what is it and therefore, part of these products, I would argue, most of these products will have to be exported,”

That was the view of Stephen Pryor, then President of ExxonMobil Chemical, just 2 years ago.  Latest data for US ethylene production in 2015 confirms his analysis, as the chart shows:

  • It has finally reached a new high, 11 years after the previous high in 2004 – but only by 2.9%
  • PE also reached a new high, versus the previous high in 2007, by 7.2%
  • But the other derivatives – PVC, styrene and ethylene glycol – were still below their 2004 highs
  • PVC was 11.3% lower, styrene was 14.8% lower, and MEG lower by 42.1%

Now, of course, things are about to change quite dramatically, as the massive US expansions come online and start to export their product.  The competition they provide will likely be extremely tough, as we discuss in our new Study with ICIS, Demand – the New Direction for Profit,

Everyone knows what happens to margins when a major battle for market share takes place.  It is almost certain, for example, that the US will need to start selling some or all of its new capacity on the basis of roll-through margins back to the well-head.

And at the same time, polymer producers will also face increasing inter-polymer competition from polypropylene. Propylene’s recent price collapse is just a warning sign of what is to come, as China moves towards its target of achieving 93% self-sufficiency in the C3 value chain.

We are therefore heading towards a world where there will be Winners and Losers.

Companies urgently need to develop new outlets for their product, as we describe in the Demand Study.  Such outlets do exist, in potentially large volumes in the water and food industries.  But “potentially” means just that – the volume of new demand required means companies now have little time left to plan and implement the business development activity now urgently required.

Our aim in the Study is to help you go up the learning curve as quickly as possible,.  If you don’t start to develop new markets today, it  may well be too late tomorrow.

PREVIOUS POST

Global stock markets weaken as Great Unwinding of stimulus continues

14/03/2016

It is 7 years since global stock markets bottomed after the 2008 financial crash...

Learn more
NEXT POST

China’s rising exports: less about growth, more about exporting deflation

18/03/2016

China’s move towards self-sufficiency is radically changing global oil and...

Learn more
More posts
Polyethylene’s crisis will create Winners and Losers
08/12/2019

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

Read
Day of reckoning approaches for US polyethylene expansions, and the European industry
08/09/2019

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

Read
Stormy weather ahead for chemicals
24/03/2019

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

Read
Ethane price hikes, China tariffs, hit US PE producers as global market weakens
23/09/2018

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

Read
US ethylene prices near all-time lows as over-capacity arrives
13/05/2018

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

Read
World Aromatics Conference focuses on key industry challenges
04/11/2017

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

Read
Hurricane Harvey will turbocharge move to the circular economy
25/09/2017

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

Read
Plastics demand is peaking as circular economy arrives
24/07/2017

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

Read

Market Intelligence

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

Learn more

Analytics

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