By JACK KASKEY
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
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
Companies are placing bets that the energy revolution
is real and sustainable, Jim Fitterling, Dows
executive vice president of feedstock
s, 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 worlds 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.
US capital spending on chemical factories will peak in 2016
at $14 billion, four times current levels, IHSs 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.