Difficult Times Ahead For US Polyethylene Exports As Business Models Change

This wasn’t the chart that companies and investors expected to see when they were busy finalizing $bns of investment in new US ethylene and polyethylene (PE) capacity back in 2013-4.  They were working on 3 core assumptions, which they were sure would make these investments vastly profitable:

The result is that US ethylene capacity is now expanding by 34% through 2019, adding 9.2m tonnes/year of new ethylene supply, alongside a 1.1m tonnes/year expansion of existing crackers. In turn, PE capacity is expanding by 40%, with supply expanding by 6.5m tonnes/year through 2019.

It was always known that most of this new product would have to be exported, as then ExxonMobil President, Stephen Pryor, explained in January 2014:

“The reality is that the US from a chemical standpoint is a very mature market. We have some demand growth domestically in the US but it’s a percentage or two – it’s not strong demand growth,” Pryor said, adding that PE hardly grew in the US in a decade. “That is not going to change…The [US] domestic market is what is it and therefore, part of these products, I would argue, most of these products, will have to be exported,” Pryor said.”

But now the plants are starting up, and sadly it is clear that none of these assumptions have proved to be correct: