US chemical capacity to increase by more than 50 million tonnes

New downstream capital projects are expected to increase U.S. petrochemical capacity by more than 50 million tonnes of new chemical output each year, driving the need for further supply chain investment, the American Chemistry Council (ACC) said.

The US will add at least 55 million tonnes of petrochemical capacity per year. Image: Port of Houston

There are 325 projects cumulatively valued at $194 billion in capital investment that have been announced since 2010, with 49% of the investment completed or under construction, 45% in the planning phase, and 6% of unknown/delayed status, according to the ACC.

This 325 number has skyrocketed over the last five years from the 97 projects worth $72 billion in investment in 2013.

While this capacity number includes all types of feedstock-based projects, the construction and capacity boom largely point to shale gas and the abundance of it in the U.S.

After years of high and volatile natural gas prices, domestic supplies of abundant and affordable natural gas and natural gas liquids (NGLs) have created a competitive advantage for U.S. chemical manufacturers.

Companies from around the world are investing in new projects to build or expand their shale advantaged capacity in the U.S.

Natural -Gas derived Capacity

At least 14 million tonnes of additional petrochemical capacity of natural gas-derived chemicals including ethylene, propylene and methanol, is expected to come online from 2018 through 2023, according to research firm IHS Markit.

For 2018, IHS Markit expects the U.S. to add 5.2 million tonnes of petrochemical capacity.

In 2019 and 2020, the U.S. is projected to add a total of 8.7 million tonnes of production capacity, mostly on the Gulf Coast.

This is just what lies ahead.

Between 2011 and 2017, the U.S. added nearly 14 million tonnes of petrochemical production capacity, according to IHS Markit.

In total, IHS Markit expects the U.S. to add 27.9 million tonnes of new natural-gas derived petrochemical production capacity between 2011 to 2020.

New petrochemical capacity growth in the U.S. is now expected to outpace the Middle East, which will add 21.1 million tonnes of new petrochemical capacity between 2011 to 2020.

Research firm GlobalData sees a similar story, predicting nearly 57 million tonnes of new petrochemical capacity in the U.S. by 2023. This number includes natural-gas derived chemicals and oil-derived chemicals.

The U.S. has the highest planned polyethylene (PE) capacity additions globally with 9.4 million tonnes/year coming online during 2018 to 2022, followed by Iran and China with 5.8 million tonnes/year and 4.4 million tonnes/year respectively, according to GlobalData numbers.

The U.S. will account for more than 25% of the total global planned PE capacity additions in 2022, according to GlobalData.

Supply Chain 

While the growth is a boom for the petrochemical industry, it highlights the need to address key transportation, storage, infrastructure, and global trade issues that will impact the supply chain.

Exports are now critical in the oversupplied U.S. plastics market and will become even more significant in the next few years as additional capacity comes online.

The U.S. supply chain has invested millions to prepare for the export tsunami. U.S. supply chain groups are planning at least $155 billion in capital investments and nearly 80% of that spending will take place in the U.S. Gulf, where chemical exports have already begun to soar.

In its 2016-2020 Port Planned Infrastructure Investment Survey, the American Association of Port Authorities (AAPA) asked its U.S. member ports how much they and their private-sector partners plan to spend on port-related freight and passenger infrastructure over the next five years. The answer was a whopping $154.8 billion, but the dollar figure did not include every U.S. Port. AAPA said it probably had a little over an 80% participation rate.

“Port, private sector and federal spending on infrastructure must be better aligned for safe, efficient goods movement that will grow U.S. jobs and the nation’s 21st century economy,” said Aaron Ellis, Public Affairs Director for AAPA.

U.S. ports are planning investments in terminals, berths, piers, equipment, navigation dredging, expansions, facility rehabs, security, rail and environmental improvements.

Port private-sector partners are planning investments in rails, terminals, equipment, bulk-handling and energy transfer facilities, storage, security, piers and expansions.

Packaging companies have invested in expanding and upgrading both bagging machines and rail-yards.

“More than adequate packaging/warehousing capacity is being developed in the Houston area with steady state shipping. But due to the erratic nature of export market and production, wild swings in volume could result in temporary packaging capacity shortages,” Taylor Robinson of PLG Consulting said.

Other packaging locations are being developed to alleviate potential bottlenecks. Sites being developed include: Dallas/Ft. Worth and Freeport, TX; Savannah, GA; Charleston, SC and New Orleans/Baton Rouge, LA.

Innovative solutions have been developed to handle port congestion, and container availability, including using container availability automation and a Blockchain trial program at the Port of Houston.

Logistics

The new capacity is projected to result in an additional 1.8 million annual shipments by 2020 across all modes of transportation, adding an additional 270,000 railcars, 723,000 truck FTLs (full truckloads), and 808,000 marine TEUs (twenty-food equivalent unit) each year, the ACC said.

In a March 2017 dual report by the ACC and Price Waterhouse Cooper (PwC), the two associations predicted that chemical shipments could increase by 36 million tonnes annually by 2020.

20 million tonnes would be olefins and methanol, which are shipped by pipeline/bulk. The remaining 16 million would be rail, truck, and marine-packed cargo shipments.

This capacity growth from 2017-2020 will result in forecasted minimum 152,400 railcar shipments and 371,900 truck shipments annually from 2017-2020, according to PLG Consulting.

This forecast by PLG Consulting considers the initial product moves from the production facilities so is expected to be substantially bigger as products and by-products can be moved multiple times downstream.

By Heather Doyle

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