United States Petrochemicals Report Q4 2011

US petrochemicals growth has been lacklustre this year amid high unemployment, high oil prices and the Japanese tsunami, according to BMI’s latest US Petrochemicals Report. In H111 sales and captive use of major plastic resins totalled 36.5bn lbs, up 1.6% y-o-y. Production of major plastic resins totaled 36.9bn lbs, an increase of 1.0% y-o-y, implying net exports of 400mn lbs. The most dynamic segment was PVC, with sales growing by 5.7% to 7.25bn lbs, leading to 4.3% growth in output to 7.25bn lbs. There were divergent LLDPE and LDPE trends in sales, with growth of 1.7% and - 0.9% y-o-y to 6.68bn lbs and 3.36bn lbs respectively, leading to output growth of 0.7% and 3.3% y-o-y to 6.84bn lbs and 3.45bn lbs. LLDPE benefited from the competitiveness of US PE output in Asian markets.
LLDPE output has been highly robust and resilient to the recession due to its increased use in a broader range of packaging applications, largely at the expense of LDPE. The PS segment recovered well after a lacklustre year in 2010 with H111 sales growing 11.6% y-o-y to 2.78bn lbs and output growing 7.5% to 2.74bn lbs. While HDPE sales were robust with growth of 3.8% to 8.49bn lbs, output grew just 1.9% to 8.57bn lbs. This means demand growth largely benefited imports. The worst performing segment was PP, with sales down 5.9% to 8.49bn lbs and production falling 5.2% to 8.09bn lbs.
Polymer resins output growth of about 3.4% in 2010, following significant declines in the previous two years, was below far lower than we had expected and continues to lag behind trends in the overall economy. The rebound will moderate further in 2011 and 2012 and output may not return to pre-recession levels until 2012 at the earliest. We have raised our forecast for real GDP down in 2011 to 2.6% from 2.9%.
After a period of stagnation and decline, the improved cost position of US petrochemicals bolstered by shale gas discoveries has prompted a flurry of interest in new cracker capacity. Growth in ethane availability paves the way for a potential cracker in the northeast, where the Marcellus shale reserves could support a world-scale plant, in addition to those recently announced by CP Chem and Dow Chemical. New crackers based on shale gas are unlikely to add significantly to exports in the medium- to long-term, but should help keep up PE exports and prevent a decline into import dependency. However, the development of petrochemicals facilities based on shale gas are some way off. It will take at least five years for a world-scale cracker to come on stream and plenty of work will need to be done to provide sufficient infrastructure.
Westlake Chemical says it will expand ethane-based ethylene capacity at Lake Charles, LA by 105,000- 110,000tpa by end-2012. A second Lake Charles expansion will be completed by the end of 2014, although the size of the expansion was not disclosed. In H111 several petrochemical producers made moves, or, like Westlake Chemical, expressed interest in the Marcellus/Appalachia area. Brazil-based Braskem says it would consider a greenfield investment in an ethylene cracker and PE plant in the US.
US-based Dow Chemical plans to increase its ethylene and propylene production, and integrate feedstock from the Marcellus shales as well as Eagle Ford shales in Texas. Canada's Nova Chemicals signed an MOU with Norway's Statoil for supply of ethane from the region, as well as an MOU with US-based Caiman Energy, to buy ethane from West Virginia. Shell has indicated it was planning to build a ethylene cracker to take advantage of the Marcellus deposit. It is also likely to add downstream units to any complex. Bayer announced it is considering selling or leasing its property in West Virginia to develop an ethane cracker using ethane feedstock from Marcellus. CP Chem is considering a 1mn tpa cracker at a Gulf Coast site by 2016-17. Formosa Chemical is evaluating plans to boost ethylene capacity at its Point Comfort, TX facility by about 450,000tpa, probably in 2015.

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Executive Summary 5
SWOT Analysis 7
US Political SWOT 7
US Economic SWOT 7
US Business Environment SWOT 8
Global Petrochemicals Overview 9
Petrochemicals Market Overview 9
Table: World Ethylene Production By Country, 2010 And 2015 (‘000 tonnes capacity) 9
Financial Results 13
Global Oil Products Price Outlook 14
Table: Oil Product Price Assumptions, 2011 (US$/BBL) 15
Table: Oil Product Price Forecasts, 2011-2015 (US$/BBL) 17
US Market Overview 18
Competitive Landscape 19
Upstream 19
Olefins 22
Table: Olefins Production Capacity, 2009 (‘000 tpa) 22
Aromatics 27
Table: Aromatics And Derivatives Capacity, 2009 (‘000 tpa) 28
Mixed Xylenes 29
Table: Xylenes Capacity, 2009 (‘000 tpa) 29
Polyethylene (PE) 31
Table: US Polyethylene Manufacturing And Applications, 2009 31
Table: PE Chain Capacity, 2009 (‘000 tpa) 32
High-Density Polyethylene (HDPE) 32
Low-Density Polyethylene (LDPE) 33
Linear Low-Density Polyethylene (LLDPE) 34
Polypropylene (PP) 35
Table: US PP Capacity (‘000 tpa) 37
Polyvinyl Chloride (PVC) 37
Table: PVC Chain Capacity, 2009 (‘000 tpa) 38
Polystyrene (PS) 39
Table: PS Chain Capacity, 2009 (‘000 tpa) 40
Polyethylene Terephthalate (PET) 41
Table: US Petrochemicals Sector – PET Chain Capacity (‘000 tpa) 42
Synthetic Rubber 44
Financial Results 44
Industry Trends and Developments 48
Government Policy and Regulations 48
Mergers, Acquisitions and Related Developments 48
LyondellBasell Bankruptcy 49
Collapse of the PIC-Dow Merger 50
Dow’s Takeover of Rohm and Haas 50
Impact of REACH 52
Table: Key Elements Of REACH 52
Table: REACH And TSCA Comparison 54
Business Environment Ratings 55
Petrochemicals Business Environment 55
Industry Forecast Scenario 58
Petrochemicals Forecasts 58
Table: US Petrochemicals Industry, 2008-2015 60
Macroeconomic Outlook 61
Table: United States - Economic Activity, 2008-2015 63
Table: United States - GDP By Expenditure, 2008-2015 64
Company Profiles 65
BP 65
Chevron Phillips Chemical Company 68
Dow Chemical 70
ExxonMobil 73
Huntsman 76
Ineos 78
LyondellBasell 80
Occidental Chemical 81
Shell Chemicals 83
Westlake Chemical 84
Appendix: BP 86
Glossary of Terms 87
Table: Glossary Of Petrochemicals Terms 87
BMI Methodology 88
How We Generate Our Industry Forecasts 88
Chemicals and Petrochemicals Industry 88
Cross Checks 89
Business Environment Ratings 90
Table: Petrochemicals Business Environment Indicators And Rationale 91
Weighting 92
Table: Weighting Of Indicators 92
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