Special Feature: US cracker wave runs downstream

The US shale gas-driven petrochemical boom is nearly upon us. Plans for new crackers and derivative units, fertilizer plants and methanol facilities are well under way and capacities slated to come onstream in a period commencing 2016.

US ethylene capacity could increase by more than 50% by 2020 to over 41m tonnes/year, if all the planned new crackers are built.

Rex Features Supply chains will need to be reinforced as new capacities come onstream

The impact on the domestic and export market is going to be huge – not only in terms of supply but also in the way companies organise their operations, sales, marketing and distribution efforts. They are going to have to reorient and develop their supply chains to cope with largely export-focused production.

But the North American shale-gas advantage is also going to prompt global chemical producers of downstream products to analyse whether they need to refocus investment strategies and locate in the region, either to take advantage of the burgeoning market or to defend their market share at home, from exports from new competitors, says Paul Bjacek, head of chemicals research at consultancy Accenture.

In many petrochemical producers in the US right now, “the export effort is a very small operation, maybe a handful of persons for the most part shipping surplus material overseas through traders and distributors at a lower than domestic price.”

When the new plants come onstream, this will have to change in a big way and producers will have to beef up their export sales team and develop robust and flexible routes to ship product to market. Even in the US domestic market, says Bjacek, “the supply chain infrastructure will have to receive investment, as more material is shipped, sometimes from novel production locations.”

“Investment going into the sector as whole is much larger than the headline figures associated with the cracker and downstream production units” Paul Bjacek Head of chemicals research – Accenture

Another important change in the market, says Bjacek, will be the influx of new players, attracted to the shale gas advantage either to invest alone or with US companies. Overseas companies involved in cracker projects for instance, include Odebrecht, Formosa, Sasol, Lotte and Mexichem. “These new producers and other joint venture structures will have to develop new supply chain systems.”

Thus, says Bjacek, “the investment going into the sector as a whole is much larger than the headline figures associated with the cracker and downstream production units alone”. This is especially so in the US Gulf area, where port infrastructure, for instance, is being expanded. But, he believes, there is going to be a lot of “investment inefficiency” as some companies invest in the same old supply chain solutions without considering better ways of doing things, for instance, by blending and packaging polymers on site.

Following the theory outlined in the recent book, Big Bang Disruption, by Larry Downes and Paul Nunes (the latter of Accenture) and to understand how companies view the opportunities and issues in the supply chain for the “post-big bang” period, ICIS is this week launching an online survey among its readers and subscribers, in association with Accenture.

The poll will touch on the issues outlined above, but also assess whether the industry is expecting a “big crunch” after the big bang. How will the new large capacities play out in the market; how will they affect margins and freight costs, and do companies expect to see export-based activity much more as the norm, with contract replacing spot business?

• To give your input, go to the online survey
• More information on Accenture’s expertise in chemicals