North American plastics producers are benefiting from the supply of low-cost new feedstocks, leading to a manufacturing renaissance, according to a new report.
The boom in shale-gas development means that natural gas supplies are expanding all the time, keeping prices down. And the availability of inexpensive natural gas-based feedstocks is having a direct impact on the production of ethylene, which is used to make various plastics, including polyethylene (PE), IHS explained.
Polypropylene (PP) is also benefiting from the supply of competitive natural gas feedstocks in North America, with an increase in production of propylene.
"These new feedstocks are giving North American producers an advantageous, low-cost position compared to most of the global competition," commented Nick Vafiadis, senior director of global polyolefins and plastics at IHS Chemical. "Those cost-advantages are providing these producers strong financial incentives to establish new facilities and to operate them at full capacity, but the implications for the market are quite disruptive, and the industry is evolving rapidly."
IHS has estimated that PE demand in North America will rise by 20 percent in 2013-2018. The combined market for the United States, Canada and Mexico amounted to more than 23 million metric tons (MMT) last year and is forecast to reach almost 28 MMT 2018.
PP demand, meanwhile, is anticipated to increase by 18 percent, rising from 8.9 MMT in 2013 to more than 10 MMT by the end of the forecast period.
Virtually every major PE producer in North America has announced an expansion of existing capacity, Vafiadis said. IHS also expects to see additional PP capacity being added over the next five years.