First wave of PE boom rolls into Canada

The NOVA Chemicals unit in Alberta province is the second of three big projects expected. Braskem Idesa’s Ethylene XXI complex in Mexico led the way, with INEOS/Sasol working on a plant in Texas. (Source: NOVA)

Focus article by Lane Kelley

HOUSTON (ICIS)–The first wave of the North American polyethylene (PE) boom rolled into Canada this week as NOVA Chemicals completed an expansion project in Alberta province.

That project, adding 470,000 tonnes of linear low density (LLDPE) capacity at the producer’s site in Joffre, is one of three new plants scheduled to be finished this year that were expected to act as a preview of what the future of the North American PE market might look like.

But new PE plants rarely start on schedule, a buyer said on Thursday.

“Startup on these things always tends to get pushed back,” the buyer said.

The first new PE project to come online this year, Braskem Idesa’s Ethylene XXI plant in Mexico, started a few months late when it was inaugurated in May.

NOVA’s LLDPE unit is the second one finished, though the company does not expect production to start until the fourth quarter, according to a release.

The third PE unit scheduled for finish this year, the INEOS/Sasol high density (HDPE) project in La Porte, Texas, would add another 470,000 tonnes of capacity to the market.

A company spokesman this week refused to comment on an INEOS/Sasol startup date. A top executive said in June that the joint venture would get started by the end of this year, but market sources say early 2017 is the more realistic date.

Source: Companies, ICIS analysis 

Cheap natural gas in the US and Canada is fueling such a boom in new ethylene and derivative plants that analysts have come to speak of the first and second waves of projects.

First-wave new PE plants scheduled to be finished in 2016-2018 could add as much as 11m tonnes of new supply, provided they all get built. One analyst estimated the expected new capacity as equal to eight new PE plants.

While the new plants have not arrived on schedule, neither have the lower prices that were expected to follow additional capacity this year.

Monthly US contracts dropped 3 cents/lb in January and then proceeded to go up or roll over during the next seven months. Prices could rise again soon, with most producers separately nominating 5 cents/lb increases for September, and three producers separately seeking hikes of 4 cents/lb in October.

A longtime PE watcher said the fall hikes appear to be a last-chance effort by producers to get higher prices before additional capacity comes online.

“It’s like they’re raising prices because they know prices are going to go down,” the source said.