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75% of total ethylene output in USA forecast to be ethane-based in 2021

75% of total ethylene output in USA forecast to be ethane-based in 2021

In 2013, the USA alone consumed about 25 mln tons of ethylene. Thus, ethylene is by far most important petrochemical feedstock. The importance of ethylene as major feedstock in the petrochemical industry is corroborated by the immense demand volume, as per a market study "Ethylene Value Chain USA" by Ceresana. The value added in downstream sectors is considerable. Besides the three polyethylene varieties HDPE, LLDPE, and LDPE, direct applications of ethylene include chemicals such as ethylene dichloride, ethylene oxide, alpha olefins and ethylbenzene. Further, smaller applications are, among others, vinyl acetate monomer and the elastomer EPDM.
The shale gas boom in the USA resulted in an unprecedented surge of announcements to construct new ethane crackers. In contrast to other feedstocks such as naphtha or propane, the cracking of ethane yields a rather high amount of ethylene. Ceresana forecasts about 75% of total ethylene output being ethane-based in 2021. The notable decline of prices for ethane in recent years has caused a significant change of the cost situation for manufacturers of ethylene. Average feedstock costs per ton of ethylene manufactured fell by about 40% between 2008 and 2013. Manufacturing ethylene from ethane enjoys a notable competitive advantage: In Q4-2013, cash costs (consisting of fixed, variable operational and feedstock costs minus profit generated with by-products) were two thirds lower when using ethane than when using naphtha as feedstock.
The US polyethylene industry is expected to remain the main consumer of ethylene in the USA. Depending on density and rigidity of the product, polyethylene is classified as either HDPE, LDPE or LLDPE. In 2013, about 60% of US demand for ethylene was accounted for by producers of these plastics. Large production sites for HDPE and LLDPE in particular will be constructed in the near future. Given the upturn of the real estate sector and ever increasing consumption expenditure, prospects for domestic demand in USA are good. This will result in growth impulses for polyethylene demand via development in the construction and packaging industries. However, sales volume of polyethylene on foreign markets has to rise notably in the future in order to ensure an acceptable degree of capacity utilization of US facilities. In 2013, production of ethylene oxide was still at levels recorded in 2009, the year the crisis hit, whereas demand in downstream industries, PET in particular, recovered notably. Accounting for about 50% of ethylene oxide demand at the moment, ethylene glycol, used in the production of PET, is the most important sales market. Recently, USA had to increasingly import ethylene glycol. US demand for ethylene oxide in the production of ethylene glycol will rise again in the future. PVC is produced via the intermediates ethylene dichloride and the vinyl chloride manufactured from ethylene. In the past, notably more than 40% of US PVC output had been exported. This was a major support for the PVC that suffers from low domestic demand. The majority of all plastic pipes are made from PVC by now. Thus, the strong need for modernization of the water supply and sewage networks in USA should have a positive effect on the demand for PVC. Compared to other regions, USA consume a rather high amount of alpha olefins. Alpha olefins are mainly used to manufacture polyethylene, conveying a higher rigidity to the final product. The application ethylbenzene can only to a limited extent profit from the shale gas boom. Ethylbenzene is almost exclusively processed into styrene, the largest part of which is, in turn, in converted into polystyrene. After the polystyrene industry suffered a number of blows in the past eight years, impulses from the packaging as well as electrics and electronics sectors are offering the chance for moderate growth. Should all current plans for capacity creation and expansion be realized, production capacity for ethylene will increase by half until 2018, despite the USA offering large capacities already.

An avalanche of petrochemical and polymer capacity is on its way in the US, with construction starting in 2014. As per ICIS, the US shale gas boom has brought a renewed competitive advantage to the sector, spurring plans for additional new crackers. Plans have been announced for a total of 10 new ethane crackers in the US – eight on the US Gulf Coast, and two in the northeast US. This represents around 12.5 mln tpa of ethylene capacity. Seven projects are beyond the feasibility stage and six companies have announced capacity figures for seven crackers. The latest three of the 10 planned new crackers have been announced across the span of three months in late 2013 to early 2014. In addition to the 10 planned greenfield projects, there are also 10 expansions planned at existing crackers amounting to 1.5 mln tons of ethylene capacity. If all 10 crackers are built and the expansions go through as planned, the US is looking at a massive 52% increase in existing ethylene capacity to over 41 mln tpa, according to an analysis by ICIS. For those crackers where capacity figures have not been announced – Shell, Odebrecht, Axiall – ICIS has assumed an average size of 1.25 mln tpa. If only the six cracker projects on the US Gulf Coast are considered, where both capacities have been outlined and the projects have advanced beyond the feasibility stage (Chevron Phillips, ExxonMobil, Dow, Sasol, Formosa Plastics - Louisiana, and Occidental/Mexichem), plus the announced expansions of existing facilities, this amounts to a 33% increase in US ethylene capacity.
Among the US cracker projects where derivatives have been announced, the bulk of the output will go into polyethylene (PE). Chevron Phillips Chemical, Dow Chemical, ExxonMobil, Sasol, Formosa, Shell and Odebrecht have all announced PE plants downstream of their new crackers. Additional PE capacity will be built by LyondellBasell and Sasol/INEOS. In total, US PE capacity stands to jump by 7.1 mln tons (47%), to around 22.4 mln tpa if all the crackers and downstream plants, and stand-alone expansions take place, according to an analysis by ICIS. This figure is poised to rise further as downstream plans are announced. This includes assumptions that half of the output of Dow and Shell’s crackers go into PE (750,000 tons and 625,000 tons, respectively), and all of Odebrecht’s cracker output (1.25 mln tons), as it has specified three PE units. Dow, Shell and Odebrecht have stated that PE would be produced, but have not announced capacities. ICIS has assumed zero PE capacity for PVC producer Axiall, although this remains a possibility for its planned partner. ICIS has excluded Formosa’s second planned cracker in Louisiana in the PE analysis as downstream intentions have not been confirmed. Excluding Shell and Odebrecht, as they have not specified any project capacities, the market is looking at a 34% increase in US PE capacity. The huge projected PE capacity numbers have already given some producers pause.
NOVA Chemicals had planned to build another 470,000 tpa PE plant in Sarnia, Ontario, Canada for start-up by the end of this decade, but put the project on hold in December 2013, citing an oncoming glut of US PE capacity. NOVA is now considering Ontario, the US Gulf Coast or elsewhere in the world. An investment decision is now expected to be made before the end of 2020.
The company is already building a 454,000 tpa linear low density PE (LLDPE) plant in Joffre, Alberta, Canada, for start-up in 2016. In Moore, Ontario, Canada, NOVA is debottlenecking its low density PE (LDPE) plant while also retrofitting its high density PE (HDPE) unit.

US PLANNED ETHYLENE EXPANSIONS BASED ON SHALE GAS

Company C2 Capacity Downstream Location Start-up Status
NEW CRACKERS
Chevron Phillips Chemical 1.5 mln tons HDPE, LLDPE Cedar Bayou, Texas mid-late 2017 Construction early 2014
ExxonMobil Chemical 1.5 mln tons PE Baytown, Texas Late 2016 Permitting expected to be complete early 2014
Dow Chemical 1.5 mln tons LDPE, other PE, EPDM, elastomers, LAO (JV) Freeport, Texas 2017 EPC stage; permitting process
Sasol 1.5 mln tons LDPE, LLDPE, EO, MEG, detergent alcohols Lake Charles, Louisiana 2017 FEED, EPC stage; permitting; FID to come in 2014
Formosa Plastics 1 mln tons LDPE, MEG Point Comfort, Texas Q1 2017 Permitting process
Formosa Plastics 1.2 mln tons NA Louisiana NA Feasibility stage
Occidental Chemical/Mexichem 544,000 tons EDC, VCM Ingleside, Texas 2017 Construction mid-2014; permits complete
Axiall/Partner World-scale NA Louisiana 2018 FEED work, permitting
Shell World-scale PE, MEG Monaca, Pennsylvania 2019-2020* Feasibility stage
Odebrecht World-scale PE Wood County, West Virginia NA Feasibility stage
EXPANSIONS
INEOS 115,000 tons NA Chocolate Bayou, Texas 2014  
Williams 273000 NA Geismar, Louisiana Apr 2014  
Westlake Chemical 82,000 tons NA Calvert City, Kentucky Q2 2014  
LyondellBasell 363,000 tons NA La Porte, Texas mid-2014  
Chevron Phillips Chemical 91,000 tons NA Sweeny. Texas 2014  
Westlake Chemical 113,000 tons NA Lake Charles, Louisiana 2014  
LyondellBasell 113,000 tons NA Channelview, Texas 2015  
LyondellBasell 363,000 tons NA Corpus Christi, Texas Late 2015  
Huntsman 19,300 tons EO Port Neches, Texas NA  
BASF Fina Petrochemicals NA NA Port Athur, Texas 2014  
* ICIS estimate
Source: Companies, ICIS analysis

 

US POLYETHYLENE PROJECTS

Company

Project

Capacity

Grades

Location

Start-up

Sasol/INEOS

New unit

470,000 tons

HDPE

US

End 2015

Sasol

New unit

450,000 tons

LLDPE

Lake Charles, Louisiana

2016

Sasol

New unit

420,000 tons

LDPE

Lake Charles, Louisiana

NA

ExxonMobil

New units (2)

1.3m tons

PE (premium)

Mont Belvieu, Texas

Late 2016

Chevron Phillips

New units (2)

1m tons

HDPE, LLDPE, other

Sweeny, Texas

2017

Dow Chemical

New units

NA

PE (high-value), LDPE

Freeport, Texas

2017

Formosa Plastics

New unit

300,000 tons

LDPE

Point Comfort, Texas

2016

Shell

New units

NA

Unspec

Monaca, Pennsylvania

2019-2020*

Odebrecht

New units (3)

NA

Unspec

West Virginia

NA

LyondellBasell

Debottleneck

100,000 tons

Unspec

US

Early 2014

LyondellBasell

New unit

454,000 tons

Unspec

US

Late 2016

* ICIS estimate
Source: Companies, ICIS analysis
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