AFPM ’19: US PE industry seeking outlets for rising production

HOUSTON (ICIS)–The US polyethylene (PE) industry is seeking outlets for its new production capacities heading into this year’s International Petrochemical Conference (IPC).

Supply has been lengthening since the second half of 2018 as new plants which came online in 2017 started ramping up to normal production rates.

This has pushed inventories to multi-year highs and created some downward pressure on pricing.

With more new capacity set to come online in 2019 and into the next decade, the industry is now searching for outlets for its expanded production.

US PE demand is considered mature and is not expected to grow beyond the expansion of GDP in the coming years. Accordingly, the industry has always anticipated that most of the new PE being produced in the country would need to be exported.

According to ICIS data, the US is set to increase its PE capacity by a total of 6.5m tonnes/year by the end of 2019 while capacity additions may reach 12m tonnes/year by 2022 assuming all announced projects start-up on time into the beginning of the next decade.

Recent trade tensions between the US and China as well as the renegotiation of the North American Free Trade Agreement (NAFTA) and other protectionist moves by the Trump administration have resulted in shifts in trade flows for US material.

Product that would most likely have been targeted to China is now being moved towards Southeast Asia and Europe while US producers are also looking to expand their already strong presence in Latin American markets.

US producers succeeded in raising export volumes throughout 2018, with most grades of PE seeing exports up by at least 30% and exports nearly doubling for some grades, according to data from the American Chemistry Council (ACC) and Vault Consulting.

There is some concern that some of the countries currently receiving significant new volumes of US material might implement tariffs of their own if US exports begin to threaten the health of the domestic industries in the affected countries.

The industry will therefore be closely following trade talks between the US and China in hopes that China, with its large PE deficit, will be able to soak up some of the expanded production from US plants.

Major US producers of PE include Chevron Phillips Chemical (CP Chem), DowDuPont, LyondellBasell, ExxonMobil, Formosa, INEOS, Total Petrochemicals and Westlake.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by Zachary Moore