Recently published research from Business Monitor International, "United States Petrochemicals Report Q2 2013", is now available at Fast Market Research

Boston, MA -- (SBWire) -- 06/25/2013 --Performance in the US chemicals sector surprised to the upside in H212 and at the beginning of Q113, but BMI retains its doubts about the sustainability of growth due to downward pressure on consumption, which will offset positive trends in the automotive and construction sectors. The global economic outlook for US producers in 2013 continues to be poor, with the European market remaining in a slump and its effects constraining global economic activity. However, BMI believes US producers' advantage in ethane feedstock will continue to help pull them through.

In the long term, the proposed pace of growth in US ethylene capacity could lead to a bust after 2017, when ethylene capacity will total at least 32.8mn tonnes per annum (tpa) and could potentially top 40mn tpa. An increase in cracker capacity by a third in 2016-2017 and 50% by 2020, based on currently confirmed plans, will cause regional and global shock-waves, particularly if it coincides with a downturn in the economic cycle. 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 oversupply, but also massive expansion in polyethylene (PE) and mono-ethylene glycol (MEG).

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Over the last quarter BMI has revised the following views:

- The American Chemistry Council (ACC) reported that its Chemical Activity Barometer (CAB) threemonth moving average index showed growth of 2.9% year-on-year (y-o-y) and 0.6% month-on-month (m-o-m) in February 2013, with a clear upward trend since mid-2012. The federal budget deal has also averted a crisis that BMI believed would have led to a significant reversal in the growth seen throughout 2012.
- Petrochemicals companies have acknowledged that the global economic recovery will be slow, but are continuing to press ahead with at least six world-scale crackers in the US by 2016-17. However, the prospect of a surge in export-oriented US ethylene and derivatives capacities in a slow-growth environment is raising concerns about a market glut. In December 2012, Sasol outlined its plans for a 1.5mn tpa cracker in Lake Charles, Louisiana, with investment of US$5-7bn; it is expected to come onstream in 2017. Over the forecast period, BMI expects 7.6mn tpa of extra ethylene capacity, an increase of over 28% on 2012 levels.

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