Recent resurgence in the industrial sector and balanced chemical inventories bodes well for future chemical production. Although polymers continue to see healthy growth due to demand from manufacturers of consumer products and light vehicles, other sectors are less healthy and US exports have suffered as a result of a strong US dollar.
In 2016, the US petrochemicals industry is likely to witness more downside risk. The American Chemistry Council (ACC)'s Chemical Activity Barometer (CAB) three-month moving average (3mma) index expanded 1.0% in May following a 0.8% increase in April and 0.1% increase in March. The CAB was up 2.3% y-o-y, compared to 2.7% growth in the previous May. Lower rates of growth are indicative of the US's move towards full capacity utilisation, as well as the country's near-total self-sufficiency in basic polymers, even at a time of rising demand.
US ethylene production in Q116 grew 10% y-o-y to 6.8mn tonnes, according to the American Fuel and Petrochemical Manufacturers (AFPM). Ethylene inventories totalled about 816,000 tonnes, up 125% y-o-y and 14% q-o-q. Feedstock ethane consumption was also up 10% y-o-y to 6.1mn tonnes. Propane and butane usage also increased compared to the same period last year, while naphtha feeds were down.
Further developments are planned, even though the ethane-naphtha spread has narrowed. Shell Chemical announced in Q216 that it was expecting to start construction of a new plastics and petrochemicals complex in the Pittsburgh area in late 2017 with 1.6mn tpa of polyethylene (PE) capacity by early next decade.
Meanwhile, INEOS is considering adding 113,000-453,000tpa of ethylene production, as well as adding polypropylene and alpha-olefins capacity, at its Chocolate Bayou, Texas site. It is also moving ahead with its 470,000tpa high density polyethylene (HDPE) manufacturing joint venture plant with Sasol in La Porte, which is scheduled to start production in Q416.
In Q116, Total indicated that it was considering a proposed USD2bn steam cracker in Port Arthur, Texas with capacity of around 1mntpa of ethylene. A final investment decision is expected in Q316 and if it goes ahead, it is scheduled for completion in 2019.
US petrochemicals' competitiveness is being challenged as its dominant ethane feedstock faces Asian and European rivals that are benefitting from sustained low naphtha feedstock costs. US production retains a favourable edge in the cost curve, supply chains are well-integrated and feed is sufficient to fulfil the demand of new capacity. However, lower margins could lead to some projects being postponed or reconsidered. In total, 7.34mntpa of new cracker capacity is confirmed within the next five years with proposals for over 10mntpa more cracker capacity, although some of this may not materialise.
The focus in coming months will be the planned USD120bn merger of two US chemical giants, Dow Chemical and DuPont. A stalling point could be the monopoly position in agrochemicals, which could force divestments in the US. Chinese anti-trust regulators are also likely to be a stumbling block. A final decision is expected at end-2016, but BMI believes the merger process is likely to be protracted.
The US's Petrochemicals Risk/Reward Index is 90.3 out of 100 this quarter, unchanged since the previous quarter. There is little to challenge the US's lead over the Americas with regards to the opportunities offered by its petrochemicals markets, and the numerous country rewards. Its capacities are set to grow on the back of shale gas exploration, the domestic market's recovery is well underway and the regulatory structure is conducive to investment.
The United States Petrochemicals Report has been researched at source, and features BMI Research's market assessment and independent forecasts for key petrochemicals sub-sectors. The report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing companies by products and services, sales, market share, investments, projects, partners and expansion strategies.
BMI's United States Petrochemicals Report provides industry professionals and strategists, sector analysts, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the American petrochemicals industry.
- Benchmark BMI's independent petrochemicals industry forecasts to test other views - a key input for successful budgetary and planning in the American petrochemicals market.
- Target business opportunities and risks in the American petrochemicals sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in United States.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering the petrochemicals markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the petrochemicals sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
- Energy: Oil production (‘000 b/d), oil consumption (‘000 b/d), net oil exports (‘000 b/d), gas production (bcm), gas consumption (bcm), net gas exports (bcm), oil refinery capacity (‘000 b/d).
- Petrochemicals: Ethylene capacity (‘000 tpa), ethylene production (‘000 tpa), ethylene consumption (‘000 tpa), polyethylene capacity (‘000 tpa), polypropylene capacity (‘000 tpa), polyvinyl chloride capacity (‘000 tpa), polyolefins consumption (‘000 tpa).
- Oil Products Prices: Price forecasts for all major oil-based products (USD/bbl) at major global energy trading hubs.
- Economic: Nominal GDP (USDbn), real GDP growth (%), GDP per capita (USD), population (mn), unemployment (%), exchange rate (against USD).
BMI’s Petrochemicals Risk Reward Index
BMI’s Risk Reward Indices provide investors (both corporate and financial) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Structure, size and value of the industry sector; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Industry Trends & Developments
Evaluation of company and sector-wide developments, including key projects (as well as expansion plans), latest company financial details and proposed international ventures.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
Global & Regional Market Overview
Analysis of the key trends driving the global industry, including worldwide output/capacity and demand analysis across ethylene, polyethylene, polyvinyl chloride, polystyrene, polyethylene terephthalate and polypropylene. The regional analysis looks at the implications of local and global trends on specific company activity.
Sub-sectors covered by the Petrochemicals Reports include:
Oil & Gas, Oil Refining, Olefins (ethylene, propylene), Polyolefins (polyethylene, polypropylene), Polyvinyl Chloride, Polystyrene
Please note – not all country Reports cover all sub-sectors – see website for details.
The Petrochemicals Market Reports are based on a network of primary sources, such as multilateral organisations (ACC, APLA, Cefi c, ICCA, ICMA), national chambers of commerce and industry, national statistical offi ces, government ministries and central banks, and multinational companies.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.