Global resins oversupply seen by 2015
Buyers may not see huge cost benefits, though
By Peter Taffe of ICIS.com and Tom Stundza, Purchasing.com -- Purchasing, 9/17/2008 3:17:00 PM
Global commodity plastics markets are heading for oversupply, fed by 50.8 million tons of annual ethylene capacity that will be operating by 2015, say Andrew Swanson, vice president of chemicals of the Nexant management consultant firm in San Francisco. That should be good news for U.S. buyers, he says, except that North America, historically a net exporter, will have shifted into being a net importer by then.
And, if the dollar remains weak at that time, domestic buyers won’t be able to take advantage of the new supply of polyethylene and polypropylene capacity that is under construction in the Middle East and Asia, he also tells the audience at the Chemical Purchasing Summit organized by ICIS Chemical Business and Purchasing magazines.
There are and will continue to be ample supplies of polymer in the so-called “feedstock-favored” regions, he says. But, the domestic market “has a formidable non-tariff barrier to these resins entering the region” because the nation’s bulk-delivery system is based on using hopper cars. In the Middle East, for example, resins are delivered in plastic bags loaded onto pallets.
More bad news ahead for buyers, he says, is that the development of such unconventional natural gas resources as coal bed methane, fractured shale gas, and tight gas sands won’t generate the important and inexpensive chemical feedstocks of ethane, propane and butane extracted from traditional natural gas.
So, petrochemical producers may have to pay high premiums for natural gas liquids, suggests Swanson. He explains that coal beds, shale and tight sands are poor sources of natural gas liquids because they produce a sweet (i.e., no sulphur) but dry gas. Still, cracking of NGLs in the U.S. may remain attractive financially when compared to liquids, he says. That’s because cash costs of a cracker here is 40¢/lb for ethane compared to 80¢ for gas oil.
Other news from the Chemical Purchasing Summit:
Conference review: Economy, energy and uncertainty in the air at Chemical Summit
Deloitte economist: Link risk management and purchasing
POET gives update on cellulosic ethanol plants
SOCMA chief tells buyers: Be prepared
Credit crisis and economy are bound to worsen
Organic chemical buyers need to be vigilant on quality
Strong long-term polyethylene demand expected
Tough times foreseen for petrochemical suppliers
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