Expert predicts 'Share Wars' over polymers

Author: Lane Kelley

2015/10/20

With so much PE to export, North America will become the battleground for what Polymer Consulting chief Robert Baumann calls the “Share Wars.” (WestEnd61/REX Shutterstock)HOUSTON (ICIS)--The coming ethylene and polyethylene (PE) boom could bring on a polymers war among producers and between regions, a consultant said on Tuesday.

“Make no mistake about it, we will be going to war,” said Robert Baumann, head of Polymer Consulting in Houston, speaking at the FlexPo Houston/2015 conference.

The battles will be over the production from new North American ethylene and PE plants that are scheduled to be built in the next three to four years. Baumann estimates that 12.3m tonnes of new ethylene will come online by 2018-2019.

Nearly every ethylene producer with plans to build a new cracker wants to build an adjoining PE plant, largely because that derivative is the world’s most popular grade of plastic.

Baumann said 9.3m tonnes of new PE capacity will come online in the next three to four years. PE will account for 73% of the new ethylene capacity, he added.

“We will be swimming in polyethylene,” Baumann said.

Baumann said it has been a decade since any new ethylene capacity has been built, but the advent of cheap shale gas will most likely bring overbuilding, with way too much feedstock capacity being added.

“We never had this much ethylene capacity coming online in this short a time period,” Baumann said.

On the PE side, 40% of the new capacity will have to be exported, Baumann said.

Two other speakers at the conference on Tuesday agreed with Baumann’s analysis that the PE boom will necessitate more exports.

Martha Moore, senior director of policy analysis and economics at the American Chemistry Council, said the PE boom could initially incite some trade wars between regions as well as producers.

“We’re going to be taking some market share away from our global competition,” Moore said. “In the short-term, there may be some rough waters to navigate, but in the long term it will be a positive story.”

Paul Bjacek, lead consultant in chemicals and natural resources research at Accenture, said the strongest and most integrated PE producers will have a decided edge on gaining domestic market share.

“The domestic buyers will be discriminating, forcing those with less product performance, service and innovation to export,” Bjacek said.

With so much PE to export, North America will become the battleground for what Baumann called the “Share Wars.” Producers and countries will fight for domestic and export PE share, with China and southeast Asia the major focus of US exports, Baumann said.

“It’s going to be a bloodbath,” Baumann said. He said US producers will have to cut prices in their battles over both domestic and export share.

“How low do you have to go to force government plant shutdowns in Asia?” Baumann asked.

As for who will win the battle, Baumann said, it will be those who buy anything made from polymers.

“The customers will be the winners,” Baumann said.

US polyethylene 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

N Dakota

NA

* ICIS estimate

Source: Companies, ICIS analysis

Image above: With so much PE to export, North America will become the battleground for what Polymer Consulting chief Robert Baumann calls the “Share Wars.” (WestEnd61/REX Shutterstock)