Growing need for chemical distributors in U.S. petchem boom
An immense wave of new ethane crackers, downstream manufacturing and specialty chemical production is set to come online in the coming years adding billions of tonnes of inventory to move, and producers are looking to the chemical distributor network to maximize supply chain efficiencies.
The U.S. Shale Revolution spurred the first wave of construction projects using low cost natural gas based feedstocks and plans for a second wave of activities are already in place.
The American Chemistry Council (ACC) estimates there are 310 projects currently under construction or planned and $185 billion in potential capital investment as of mid-year 2017, up from the 97 projects and $72 billion in March 2013.
There are 474 active upstream projects worth $213 billion in the U.S. and Canada, and another 723 active refining-related projects worth $80.5 billion in North America, according to Industrial Info.
Investment in new polyethylene capacity will increase North American PE production to more than 54 billion pounds by 2020, up from about 44 billion pounds in 2015 as supply grows faster than domestic demand, according to Petrochemical Update’s U.S. Polyethylene Export report released in May 2017.
PE production will exceed domestic demand, adding up to 6-9 billion pounds of excess inventory for export through 2020, assuming 75% of the announced projects start up on time.
The added supply will not only create opportunities to move more product in the U.S, but also for North American companies to export their excess supply to regions like China, Africa and India.
And the chemical distribution network is preparing for this industry growth with training and technology initiatives and grassroots activism.
National Association of Chemical Distributors
Approximately $31.2 billion of U.S. chemical industry sales are through chemical distributors, who are also actively engaged in various phases of import/export trade, according to the The National Association of Chemical Distributors (NACD).
The NACD, established in 1971, is an international association of chemical distributors and their supply-chain partners. Member companies process, formulate, blend, re-package, warehouse, transport, and market chemical products for over 750,000 customers.
Today, there are more than 4,600 chemical distributor facilities in the U.S., which generate $17.5 billion each year in economic output. These same companies produce sales levels of nearly $97 billion every year.
NACD members represent more than 85% of the chemical distribution capacity in the nation and generate 93% of the industry’s gross revenue. NACD members, operating in all 50 states through nearly 2,700 facilities, are responsible for more than 130,000 direct and indirect jobs in the US.
“Collectively, in 2016 our members distributed 35.8 million tons of product to more than 750,000 customers, making a delivery every 8 seconds,” said NACD Public Affairs Manager Matt McKinney.
Growth is being driven by customer needs for just in time service and custom package sizes, McKinney said.
"Distributors offer a service for both the end user and supplier communities. Growth comes from distributors increasing the value proposition to both. It starts with local inventory delivered to the end user when and how they want it, a step in the supply chain that major domestic and international producers can’t competitively execute," he explained.
NACD executives said that distributors will continue to create ever increasing value in this link of the supply chain through innovation.
"That includes finding new ways to get products to market, introduce new products that address inherent risks, and taking on steps in the supply process that otherwise would be handled by the customers, suppliers or both," McKinney said.
Frustrated by ongoing issues with freight train company CSX Rail, the Rail Customer Coalition (RCC), which includes NACD, wrote to federal lawmakers and the Surface Transportation Board about service issues degrading the nation’s rail network.
The issues have put rail dependent business operations throughout the U.S. at risk of shutting down, and caused severe bottlenecks in the delivery of key goods and services.
NACD serves as the preeminent voice of the chemical distribution industry on Capitol Hill. Through daily monitoring of Congressional activities and the organizing of grassroots lobbying efforts, NACD promotes laws and regulations to protect employees, communities and the chemical industry's ability to compete in global markets while providing jobs at home.
NACD training and technology
As a way to handle tremendous growth in the industry, NACD has launched a training program to address issues including regulatory compliance general business and leadership management, responsible Distribution, legal, sales, human resources and more.
NACD members and affiliates can take 30-60 minute online courses on topics such as Responsible Distribution, Transportation, Facility Process Safety, Business Skills, Environmental and Waste Disposal Management, Chemical Product Safety, International Regulations, and security.
In collaboration with NACD, Duke University is now offering two executive education programs, the Duke Leadership program and the Duke Management program with special tuition rates for NACD members and affiliates.
“The Duke Leadership programs helps you build credibility and trust as you promote effective work relationships, high standards and initiatives, said Professor at Duke University’s Fuqua School of Business Allan Lind. “It helps you to understand and leverage your own leadership strengths. It teaches you how to helps your people understand organizational goals so they can accomplish great things.”
Many chemical distributors are focusing on utiilizing logistics software to assist serviceability and profitability on deliveries, as well as more advanced and less timely quality testing equipment and enhanced software systems.
Operating systems that provide historic and real-time data that can be applied to the decision-making process also helps optimize inventories against the needs of local customers and the fluctuations in a volatile pricing market.
"Distributors keep their eyes on emerging technological demand for new ways to interact with buyers all the way through generating new opportunities to executing actual orders and beyond," McKinney said.
By Heather Doyle