The recent wave of expansion announcements for plastic feedstock ethylene can be seen as a good omen for North American plastics processors.
In the last six weeks, petrochemical firms Dow Chemical Co., ChevronPhillips Chemical Co. LP, Nova Chemicals Corp. and Westlake Chemical Corp. each have announced plans to add ethylene capacity in North America. The moves are tied in to new discoveries of natural gas in shale rock and oil sands throughout North America. Natural gas is used to make ethane feedstock which then is converted into ethylene.
Although no formal resin expansion announcements have been made, many market watchers believe more resin eventually will be added, since polyethylene is a large consumer of ethylene. PVC and various specialty resins also use ethylene as a feedstock.
“If you’re a processor in North America right now, there are a lot of reasons to feel more comfortable about the future,” said Phil Karig, managing director of the Mathelin Bay Associates LLC consulting firm in St. Louis.
“You might feel better about local secure [resin] supply instead of material maybe having to come all the way around the world,” he added.
Karig — whose firm’s business includes work with resin buyers — pointed out in a recent phone interview that recent moves will ensure that North American ethylene “will continue to have the second-best cost position in the world, behind only the Middle East.” The new capacity also “could reduce [resin] price volatility — but not necessarily,” he added.
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