US chem exports post solid gains in Jan-July, imports slip

Author: Lane Kelley

2019/09/12

HOUSTON (ICIS)--US exports from a basket of 15 major chemicals continued to rack up solid double-digit gains in the first seven months of 2019, even amid a trade dispute with China.

EXPORTS

Source: ICIS Supply & Demand Database

In total, the exports of major chemicals increased by 28% in the first seven months of 2019, roughly the same year-to-date figure as a month earlier.

James Ray, ICIS vice president of Americas Consulting, said increased US export volumes are particularly interesting in light of the strongest US dollar values in roughly 16 years.

“This means that other countries are buying not only more tons of US products, but also paying more in their local currency,” Ray said. “With the shifting trade flow patterns driven by the China – US tariffs, most would expect US exports to be down, but that is obviously not the case.”

The biggest export gainers this year by total volume include linear low density polyethylene (LLDPE) and high density PE (HDPE) as well as methanol, styrene and ethylene glycol (EG).

Most of those chemicals have seen new US capacity start up in the past year or two, with the expectation that the new material would go to China.

Then came the trade war, which raised questions about where the new supply would go.

Since the tariff battle began in mid-2018, PE exports for the three major grades have increased by solid double-digit percentages.

This year’s big export gainers also share another common trait. All of the chemicals - PE, methanol, styrene and EG - were the targets of Chinese tariffs.

The increasing export volumes for those chemicals show that producers have found a way around the high tariffs, at least for the time being.

PE shipments to China this year have dropped sharply, with HDPE from the US down 56% through July. But so far, US PE producers have managed to move the material elsewhere. PE exports to Vietnam skyrocketed 13-fold in the first seven months this year; shipments to Malaysia almost tripled; and those to Belgium more than tripled.

US methanol shipments exports showed the largest export percentage gain of the listed chemicals so far this year - up 86% - mainly because the new plants in Texas and Louisiana found other destinations.

Two years ago China was the third most popular destination, but that country has virtually disappeared as a stop for US methanol. Among the top three destinations now are South Korea, Mexico and a newcomer, the Netherlands.

US styrene exports have seen a similar mix-up. China used to be the second largest destination for styrene. Now it ranks sixth, behind Colombia.

China also used to be the top destination for US EG exports. The tariffs have prompted domestic EG producers to make Mexico their top destination, followed by Belgium. China now ranks third, taking less than half of the EG shipments sent to Mexico.

IMPORTS

Source: ICIS Supply & Demand Database

US imports from the basket of chemicals declined 2% year on year, largely because of big drops in five products: methyl tertiary butyl ether (MTBE), EG, benzene, acetone and butadiene (BD).

China was not a significant source of these products, so the tariffs did not have an effect on US imports.

The US is considering tariffs on acetone from countries other than China, such as Belgium and South Korea. There is an ongoing antidumping duty (ADD) investigation, but low domestic prices and demand also contributed to the fall-off.

The biggest drop in import volume came from MTBE. The US has historically turned its MTBE imports into exports to Mexico and elsewhere. US MTBE imports in the first seven months of 2019 were at the lowest level in six years.

A big reason for that could be changes in Mexico’s gasoline oxygenate market, with ethanol producers waging a fight to get their product into the fuel pool.

EG imports also showed a big decline in year-to-date volume, marking the smallest total in five years. The decline comes amid new capacity in the US. EG imports from the second largest source, Saudi Arabia, dropped 65%. Shipments from the largest source, Canada, edged up about 3%.

The reduction in benzene imports stems from US production rising for the spring and summer gasoline seasons. Refineries produce benzene as a by-product of gasoline and account for around 60% of US benzene production.

The decline in benzene imports also stems from a logistics issue. Many US benzene imports arrive at Houston area terminals. That was difficult earlier this year because of bad weather and a fire at a terminal in March.

BD imports declined in the first seven months on ample supply and sluggish downstream demand from styrene butadiene rubber (SBR) and acrylonitrile-butadiene-styrene (ABS).

Imports of polypropylene (PP), roughly a third the size of exports, rose in late 2018 because of volatility in upstream domestic propylene prices. As US propylene prices moderated, PP import levels declined in early 2019. However the drop did not bring monthly import totals entirely back to early 2018 levels.

Imports of paraxylene (PX) rose on poor economics for domestic on-purpose production. Operating rates for processes that use toluene as a feedstock were often limited as toluene costs were above PX prices during the second quarter.

This may also have prompted the increase in imports for purified terephthalic acid (PTA). PX is used to make PTA, which is a feedstock for polyethylene terephthalate (PET).

Focus article by Lane Kelley and Jessie Waldheim

Additional reporting by Zachary Moore, Steven McGinn, Alex Snodgrass and Lucas Hall

Image above shows a container ship in the Houston Ship Channel. Photo by Al Greenwood