Boston, MA -- (ReleaseWire) -- 02/10/2014 -- Over the medium term, the United States will see capacity growth led by new ethane-fed crackers that exploit growing shale gas output, much of it coming on stream in 2017, according to BMI's latest US Petrochemicals Report. In total, 7.34mn tpa of new cracker capacity is confirmed within the next five years with proposals for over 10mn tpa more cracker capacity, although some of this may not materialise.
In Q413, gains continued to be seen in the output of fertilizers, the polyvinyl chloride (PVC) chain, synthetic rubber and consumer products were offset by lower production of some inorganic chemicals, manmade fibres and plastic resins. Comparing the first 11 months of 2013 to that in 2012, chemical production was up 1.3% nationally, with six of the seven regions posting gains.
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Recent resurgence in the industrial sector and balanced chemical inventories bodes well for future chemical production. However, BMI notes that the rate of growth, both in m-o-m and y-o-y terms, has slowed. This is likely to change as 2014 progresses and more petrochemicals capacity is added.
Nevertheless, the overall outlook for 2014 is positive. The European market has bottomed out and China is gaining traction while the US industrial cycle is improving. US manufacturing is strengthening on higher light vehicle sales and the housing market is improving, although at a slower pace. Overall US chemical inventories are well balanced and the global economic improvement will help the industry's export situation.
Over the last quarter, BMI has revised the following views:
- Debottlenecking operations should be completed in Q114, together adding a total of around 387,000tpa. Other capacity additions expected in 2014 will help secure an overall increase in ethylene production capacity of 945,000tpa in 2014, which is the equivalent of a world-scale cracker. A further 476,000tpa of capacity expansion is due on stream in 2015 at two sites owned by LyondellBasell.
- Over the medium term, the country will see capacity growth led by new ethane-fed crackers that exploit growing shale gas output, much of it coming on stream in 2017. In total, 7.34mn tpa of new cracker capacity is confirmed within the next five years with proposals for over 10mn tpa more cracker capacity, although some of this may not materialise. The proposed pace of growth in US ethylene capacity could lead to a bust after 2018, when ethylene capacity will total at least 38mntpa and could potentially top 40mntpa.
- The proposed pace of growth in US ethylene capacity could lead to a bust after 2018, when ethylene capacity will total at least 38mntpa and could potentially top 40mntpa. Oversupply and slow domestic demand growth are the main risks to investment and, as such, additional capacity will be reliant on export markets. The problem is not simply one of ethylene over-supply, but also massive expansion of PE and monoethylene glycol.
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