“The reality is the US from a chemical standpoint is a very mature market. We have some demand growth domestically in the US but it’s a % or two – it’s not strong demand growth,” Pryor said, adding that polyethylene hardly grew in the US in a decade. “That is not going to change.
“The domestic market is what is it and therefore, part of these products, I would argue, most of these products will have to be exported,”
That was the view of Stephen Pryor, then President of ExxonMobil Chemical, just 2 years ago. Latest data for US ethylene production in 2015 confirms his analysis, as the chart shows:
- It has finally reached a new high, 11 years after the previous high in 2004 – but only by 2.9%
- PE also reached a new high, versus the previous high in 2007, by 7.2%
- But the other derivatives – PVC, styrene and ethylene glycol – were still below their 2004 highs
- PVC was 11.3% lower, styrene was 14.8% lower, and MEG lower by 42.1%
Now, of course, things are about to change quite dramatically, as the massive US expansions come online and start to export their product. The competition they provide will likely be extremely tough, as we discuss in our new Study with ICIS, Demand – the New Direction for Profit,
Everyone knows what happens to margins when a major battle for market share takes place. It is almost certain, for example, that the US will need to start selling some or all of its new capacity on the basis of roll-through margins back to the well-head.
And at the same time, polymer producers will also face increasing inter-polymer competition from polypropylene. Propylene’s recent price collapse is just a warning sign of what is to come, as China moves towards its target of achieving 93% self-sufficiency in the C3 value chain.
We are therefore heading towards a world where there will be Winners and Losers.
Companies urgently need to develop new outlets for their product, as we describe in the Demand Study. Such outlets do exist, in potentially large volumes in the water and food industries. But “potentially” means just that – the volume of new demand required means companies now have little time left to plan and implement the business development activity now urgently required.
Our aim in the Study is to help you go up the learning curve as quickly as possible,. If you don’t start to develop new markets today, it may well be too late tomorrow.