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US chemical sector eyes 30% growth over decade

03.27.2014  | 

The producers are adding 105 million metric tons of capacity by 2024, led by ethylene and methanol units on the Gulf Coast, said Russell Heinen, who spoke at the IHS World Petrochemical Conference.



Dow Chemical and other US chemical makers will boost output capacity 30% in a decade as they invest billions of dollars in factories to take advantage of low-cost shale gas, researcher IHS said.

The producers are adding 105 million metric tons of capacity by 2024, led by ethylene and methanol units on the Gulf Coast, Russell Heinen, a senior director at the firm, said in his presentation at the IHS World Petrochemical Conference in Houston. Growth will peak in 2017 with the addition of 23 million tons of capacity.

Gas prices that have dropped by half in a decade in the US are allowing producers to process liquids such as ethane into chemicals at a lower cost than other regions of the world. Dow is spending about $4 billion to expand output in Texas and Louisiana.

“Companies are placing bets that the energy revolution is real and sustainable,” Jim Fitterling, Dow’s executive vice president of feedstocks, performance chemicals and supply, said at the conference.

The cost advantage, combined with expanded production, will result in a five-fold increase in US earnings from ethylene, the world’s most used chemical and a key ingredient in plastics, Dave Witte, senior vice president at IHS, said in a presentation. Ethylene earnings will rise to $31.6 billion in 2018 from $6.9 billion a decade earlier, he said.

Lower energy costs are also attracting other industries to invest in the US, which will help consume some of the new chemical production. Still, exports will need to increase to keep US chemical markets balanced, Witte said.

Spending Peak

US capital spending on chemical factories will peak in 2016 at $14 billion, four times current levels, IHS’s Heinen said in his presentation distributed at the conference. Project costs will increase about 4%/year through 2020, led by a 5.2% annual increase in labor costs, Heinen said.

Global chemical capacity additions, led by Chinese coal-based production, will peak at $120 billion this year and then decline as US construction ramps up, he said.

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