Dallas, TX -- (SBWIRE) -- 01/14/2013 -- The US petrochemicals report examines the short-term trends in domestic consumption and production growth going into 2013, when the local market will feel the effects of the continued global economic slowdown and the eurozone debt crisis. This report analyses the long-term impact of the opportunities provided by ethane from the Marcellus shale gas reserves and the potential threat of over-capacity. The report also assesses the growth and risk management strategies that are being employed by the leading players in the US petrochemicals industry as they seek to maximise the tremendous growth opportunities in the local market and leverage their competitive advantages over European and Latin American producers.
The performance of the US chemicals sector surprised to the upside in H212, but BMI doubts the sustainability of such growth due to downward pressure on consumption, which will offset positive trends in the automotive and construction sectors. Strong growth was driven by rising activity in construction related resins, coatings, pigments and other chemicals. In terms of ethylene production, output in Q312 totalled 6.2mn tonnes, down 0.6% year-on-year (y-o-y) but up 10.7% quarter-on-quarter (q-o-q). Ethylene margins gained towards end-2012 due to a fall in ethane feedstock prices caused by longer supply, although this was partly undermined by weaker spot prices and lower cracker co-product values for chemicals such as propylene, butadiene and benzene. The fall in ethane costs filtered through to improved polyethylene (PE) margins.
Over the last quarter BMI has revised the following views:
- The ‘fiscal cliff’ and ongoing eurozone debt crisis pose significant risks to the sector, and BMI believes there is significant potential for y-o-y decline in activity in Q113.
- Demand for ethane is set to soar in H213 as the intensive cracker turnarounds carried out in H212 come to an end and North American producers expand their ethane processing capability. This could both raise feedstock prices and potentially create a glut in ethylene supply, squeezing margins. Gas prices will need to remain low compared to oil prices and demand remains adequate to absorb increased supply.
- Over 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 by 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.
- US ethane-fed petrochemicals production can undercut naphtha-fed Latin American output and boost US participation in the regional market. As a result, US PE exports could exceed 40% of output by 2017, up from around 20% in 2012.
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