June 30, 2017 • Posted in Technical

WSJ Shale Boom Article

The WALL STREET JOURNAL (June 26) recently published a must-read article on how the Shale Revolution in oil and gas production has led to a corresponding boom in plastic resin manufacturing. In all, major petrochemical companies are investing more than $185 billion in new projects that are starting up, under construction or in the planning stage, according to the article.

With advances in fracking technology and horizontal drilling, North American oil and gas production has surged more than 57% in the past decade, making the U.S. the swing producer in energy markets and creating an abundance of the byproducts used to make common plastics, such as polyethylene and polypropylene. “Petrochemical companies are betting the price of the feedstocks—their most costly expense—will remain low for years due to shale drilling,” states the article.

Among the companies investing in new capacity are a number of M. Holland’s strategic suppliers, including Braskem Idesa, Chevron Phillips, LyondellBasell and Nova Chemicals. M. Holland Latinoamérica is an official distributor for Braskem Idesa’s recently opened facility in Mexico, and M. Holland already is distributing material from Nova’s recent expansion in Canada.

The surging production capacity is in marked contrast with less than a decade ago, when more than a dozen Gulf Coast resin facilities were shut down due to the recession, high oil and gas prices and feedstock costs. While North American plants were closing, major petrochemical companies were diverting their investment dollars into projects in the Middle East and Asia.

Describing the turnaround as a “tectonic shift in the hemispherical balance” in raw material production, the article predicts that the plastic industry’s resurgence will generate $294 billion in U.S. economic output and create 462,000 direct and indirect jobs by 2025. It also will make petrochemicals an engine for growth in U. S. exports, with petrochemicals exports projected to increase from $17 billion to $110 billion over the next ten years.

With polyethylene capacity projected to increase by nearly 50% over the next few years, which will far outpace domestic demand, producers are eyeing export markets, especially Latin America. M. Holland has been positioning to support its strategic suppliers move product to export markets. In the past two years the company has established distribution operations in Mexico and the Caribbean and a commercial organization extending through most of Latin America as well as parts of Africa and Europe.

The article notes that logistics constraints could present challenges to the industry’s export plans. The Port of Houston, one of the nation’s leading ports for plastics exports, already is congested and experiencing shortages of bagging capacity and shipping containers. To mitigate the risk for its strategic suppliers, M. Holland is working with one of its Gold Standard Distribution Centers (GSDCs) on a major expansion in the Houston area and with another GSDC on a new break-bulk terminal in Coal City, IL, with rail access to major ports throughout the country. In addition, M. Holland Latinoamérica just opened a new break-bulk terminal near Mexico City with rail access to Mexico’s major ports.

In less than ten years, North America has gone from a declining power in the global plastics industry to a driving force in the industry and the U.S. economy, accounting for half of all capital investments in manufacturing in 2016. And with the resurgence it is becoming front page business news!

See the full article on Wall Street Journal here (subscription required).

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