According to a new IHS Chemical study, an abundant supply of inexpensive natural gas-based feedstocks coming from the continent’s highly productive shale plays is revitalizing the polyethylene (PE) industry. As a result, North American producers of PE resins, which comprise the world’s largest category of plastics, are establishing a competitive advantage in a highly competitive global market and that advantage is expected to continue throughout the 2012 to 2017 study period. PE resins are a relatively low cost, versatile group of polymers used in numerous applications ranging from the packaging of household cleaning agents such as laundry detergent; to milk, juice, and food containers; toys; stretch and shrink films and trash bags.
“In North America, low-cost feedstock from shale gas is revitalizing the polyethylene business, making PE exports highly competitive globally,” said Nick Vafiadis, senior director, global polyolefins and plastics at IHS Chemical and author of the IHS Chemical 2013 Polyethylene World Analysis. “Many of the target export regions are investing in export-oriented plastics converting capacities, which will also help fuel polyethylene demand growth. In more mature markets such as Western Europe, we will see industry consolidation, operations optimization and movement toward production of higher value, performance products, since much of the profitability upside for ethylene producers comes from export of these high-value plastic resins.”
The report, which focuses on polyethylene markets and applications, covers both historical developments and future projections by country and region for supply, demand, capacity, and trade for 2012 to 2017.
IHS noted that global demand for the PE resins in 2012 is 79 million metric tons (MMT) or 38 percent of the 208 MMT currently produced in the global thermoplastic market. Polyethylene demand growth has been moderating since 2010, when global consumption increased by 8.4 percent or nearly 8.6 MMT. Nonetheless, at an estimated 3.4 percent growth rate for 2012, the rate of increase will exceed global GDP growth this year and throughout the forecast period.
According to the IHS report, global demand for PE resins is expected to grow from 79 MMT in 2012 to 99 MMT by 2017, driven largely by increased demand in high population growth Asian countries and the rapid economic development of numerous transition countries in the Asia Pacific region (including China, India and Indonesia), Central Europe, the Middle East and South America. As these countries or regions move toward more consumer based economies, plastics usage in general is forecast to increase.
As in previous years, China is the largest importer of PE, accounting for more than 40 percent of the additional global demand for PE. The country’s average annual consumption of PE resins is projected to grow an average of more than seven percent annually or from 19 MMT to 27 MMT during 2012 to 2017. China imports more than 40 percent of its polyethylene requirements and, despite the start-up of massive capacity projects over the next five years, will continue to import more than 8 million metric tons of polyethylene per year from 2012 to 2017. During the next 25 years, China will add an additional 35 MMT of polyethylene consumption, and by 2035, China’s per-capita consumption will likely match the current levels of developed countries. By comparison, the report notes that Western Europe is projected to advance at an average annual growth rate of only 1.6 percent through the forecast period.
“What this means for the global polyethylene market is that major exporters within the Asia Pacific region, the Middle East and the U.S. will continue to benefit from China’s insatiable appetite for external polyethylene supplies,” added Vafiadis. “The increasing availability of advantaged ethane feedstock from shale gas in the U.S. has prompted almost all major North America polyolefins producers to announce ethylene or PE capacity additions that will come online within the next five years. Shell. Dow, ChevronPhillips, Equistar, Formosa, Oxy, Westlake, Williams, Nova and INEOS are all planning to either expand existing facilities or build new greenfield complexes. In addition, the arrival of large additional volumes from the Middle East is putting increasing pressure on high-cost producers in Europe and Asia. Current estimates project cumulative global additions of more than 47 million metric tons (MMT) of polyethylene capacity by 2022.”
Film and sheet production, which covers a multitude of end-uses including the aforementioned food packages, trash bags and stretch and shrink films, consumes more than 50 percent of PE resins produced, making it by far the largest application for PE plastics. Blow molding and injection molding combined consume 25 percent of PE resins, with their individual shares almost equally divided. High-density PE (HDPE) blow-molded bottles used for milk, juice, motor oil, and laundry detergent are the largest single end-use within the blow-molding category. Pipe and profiles is the only other major demand segment for PE, accounting for seven percent of the global polyethylene consumption, with end-use generally concentrated in the construction industry.
In recent years, environmental groups have targeted the use of various types of polyethylene bags. The rationale has been associated with everything from hydrocarbon consumption to carbon emissions to the protection of marine life. Activism and consumer interest have led to a sufficient number of rules and regulations enacted which, ultimately, have a dampening effect on the consumption growth rates for some mainstay flexible packaging products (and, ultimately, the raw materials going into those applications). While the impact today is relatively small, the IHS report noted that the issue merits close attention, especially if consumer preferences for greener alternatives continue to grow in years to come.
With that in mind, the development of “green” sources for the production of plastics is advancing steadily and is generating the first tangible results. Braskem started operations in September 2010 at a facility in Brazil that produces conventional polyethylene from sugarcane. Customers include major consumer product companies that will use the sugarcane-based polyethylene resins for packaging of cosmetics and container closures. A second project for the production of biopolymer, also in Brazil, was recently announced jointly by Dow and Mitsui and Co., with start-up scheduled for 2016.
In addition to the IHS Chemical 2013 Polyethylene World Analysis, IHS offers world analyses for other key chemicals, plastics and fiber intermediates on a continual basis. The reports provide comprehensive studies of long-term market trends, and most are produced on an annual basis with a five-year historical market review and a five-year supply/demand and price forecast. Other world analyses include: benzene; butadiene; butylenes; chlor-alkali, cumene, phenol and acetone; ethylene oxide and ethylene glycol; light olefins; acetyls; methanol; nylon feedstocks and fibers; petrochemical feedstocks; polycarbonate and ABS (derived from acrylonitrile, butadiene and styrene); polyolefins; polystyrene/expandable polystyrene (EPS); soda ash; styrene; terephthalates and polyester; toluene and mixed xylenes; and vinyls.