Boston, MA -- (ReleaseWire) -- 05/01/2014 -- The US petrochemicals industry continues to expand on the back of growth in ethane availability as a result of shale gas exploitation. However, BMI's latest US Petrochemicals Report warns that the global market may not be able to absorb the level of planned output growth, while the domestic market will quickly become saturated. These factors provide considerable downside in the long-term, with the potential for world-scale projects to be scaled back.
Harsh winter weather wreaked havoc on the logistical side of the petrochemical business, causing downside supply issues. While the north east and Midwest were the hardest hit, the Gulf Coast, where a significant portion of US petrochemicals are produced, was also hit with ice, sleet and freezing temperatures in January and February. The pace of output growth was adversely affected by unusual weather conditions, exacerbating the moderation reported since Q413. The American Chemistry Council's (ACC) monthly Chemical Activity Barometer (CAB) was flat in February, ending nine consecutive monthly gains on a three-month moving average (3MMA) basis. The barometer was up 2.1% year-on-year (y-o-y), also representing a slowdown on a y-o-y basis.
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The potential US chemical industry investment linked to plentiful and affordable natural gas and natural gas liquids from shale formations has topped US$100bn. A total of 148 projects, including new factories, expansions and process changes to increase capacity, could lead to US$81bn per year in new chemical industry output by 2023. More than half of the investment is by firms based outside the US. In a sign that investors are continuing to respond favourably to ethane expansion in the US, in January 2014 Formosa Plastics indicated it is considering building a plant using shale gas in Louisiana with capacity to produce 1.2mn tpa of ethylene. The investment outlay will depend on results of further studies to be conducted to evaluate the project.
Over the last quarter, BMI has revised the following views:
- Construction is picking up and is predicted to be a growth driver in 2014, particularly in PVC and other segments exposed to the building industry supply chain. Construction growth will remain in the 3.0-3.4% range over the medium-term, which should support consumption of construction-related chemicals and drive the market.
- While the US is set to press ahead with a number of cracker projects that should raise total ethylene capacity from 27mn tpa in 2013 to 38mn tpa in 2018, growth in capacity in 2014 will be limited to expansion and debottlenecking of existing plants. These will add in total 945,000tpa in 2014 with additions including expansions at Westlake's Lake Charles, LA and Calvert City, KY crackers as well as LyondellBasell's La Porte, TX.
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