Global chemicals industry set for huge overhaul

Dec. 19, 2012

The global chemicals industry is set to go through revolutionary changes on a scale it has not seen for 75 years, dramatically changing the industry over the next few years, according to Kevin Swift of the American Chemistry Council.

The global chemicals industry is set to go through revolutionary changes on a scale it has not seen for 75 years, dramatically changing the industry over the next few years, according to Kevin Swift of the American Chemistry Council, quoted by the Financial Times.

The last time the industry was shaken in such a profound manner was in the years before World War II, when key discoveries like nylon, synthetic rubber, PVC plastic and polystyrene gave the industry a huge boost. This time, however, the change is coming from outside the industry itself and is related to the unprecedented boom in U.S. shale gas production, which has pushed down the prices of the major petrochemicals used as feedstock in the sector, such as ethane. Cheap feedstocks are likely to overhaul international petrochemical markets, the Financial Times noted.

According to Anton Ticktin of chemical industry investment bank Valence Group, the boom in U.S. shale gas production is giving the United States a huge advantage. The country is already seeing lower costs compared to the industry in Europe, China or Latin America and it is believed that in the future they will even drop below the level in the Middle East. The rapid development of the oil and gas industry is attracting numerous investors willing to pour money into U.S. chemicals production, while just a few years ago large companies were ready to desert the U.S. market and focus on downstream production.

RELATED: Researchers aim to shift chemical industry toward sustainability

Currently there are at least 17 different projects at various stages of advancement to increase capacity in cracking ethane to produce ethylene, said industry group ACC. While it is hardly a surprise that U.S.-based companies like Dow, ExxonMobil and the Chevron-Phillips 66 joint venture CPChem are getting involved in such projects, a number of major international players are also on the lookout for opportunities, including Royal Dutch Shell, Formosa Plastics of Taiwan and Braskem of Brazil. If those projects are approved they could boost U.S. ethane cracking capacity by 40 percent by 2018.

Just over a period of 12 months, the price of ethane in the United States has dropped from about $0.80 to $0.23 per gallon, as U.S. gas producers are focusing on natural gas liquids production. Ethylene, which is made from ethane, accounts for about 40 percent of the total world trade in chemicals, so the surge in production will provide immense opportunities for the United States, the Financial Times said.

Still, prices are not likely to stay that low in the long term, as Andrew Liveris, chief executive of Dow, believes ethane in the "high 30s" of cents per gallon would be a realistic price in the future. However, even if ethane prices reach $0.40 to $0.50 per gallon, this would translate into ethylene costs of $400 to $500 per ton in the United States, compared to $1,200 per ton in Europe. Industry experts are waiting for a response from European chemicals companies, but there are indications that some of the biggest businesses will start investments of their own to tap the U.S. resources, the newspaper added.

Sponsored Recommendations

Choosing The Right Partner for CHIPS Act Investments

As the U.S. looks to invest in the semiconductor research and production using CHIPS Act 2022 funding, it's important to choose the right partner.

EMWD Uses Technology to Meet Sustainability Goals

Eastern Municipal Water District pilots artificial intelligence-enabled control and machine learning to help save energy, reduce costs, and improve quality.

Protein Processing Solutions: Automation & Control

For protein processors looking to address industry challenges, improve efficiency, and stay ahead in a competitive market, Rockwell Automation offers tailored automation, control...

Automotive Manufacturing Innovation: Smart Solutions for a Connected Future

Rockwell Automation provides automation and control systems tailored for the automotive and tire industries, supporting electric vehicle production, tire production, battery production...