Supply chain dollars speed up to keep up with US export growth

While US petrochemical companies prepare to export more chemicals than ever before, a new report found that supply chain budgets are surging as the industry catches up to the profound downstream growth.

For the energy renaissance to continue, crucial new infrastructure investments are essential. Image: Aerial view of Houston, Texas

Supply chain budgets will be increasing over the next five years, at least 90% of buyers said in a recent Petrochemical Update Poll.

Only 10% of those polled said supply chain budgets would stay the same, and not one person polled is expecting to see a decrease in supply chain spending.

The Petrochemical Update Poll was given to U.S. supply chain executives of major downstream companies in June 2018. Those interviewed have jobs in procurement, logistics, plant management, projects, business development and maintenance.

Budgets expand

General optimization of the supply chain, followed by time delays, and then increasing freight charges were the top reasons executives listed for a need to increase spending over the next five years.

Other reasons budgets are increasing include: a shortage of drivers, insufficient customer service, limited equipment supply in the U.S. Gulf, taxes, improvement projects, permits, and safety improvement.

The number one concern was over capacity and the extensive growth in the U.S.

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.


Nearly 11% of those polled see digital transformation as a key challenge to supply chain optimization, and at least 21% said that implementing digitalization is a key area where collaboration with external partners would be needed.

More than 50% of those polled said their companies were planning to invest in blockchain technology, 30% of companies would invest in artificial intelligence, and the rest will be investing in robotics and drones.

Blockchain, autonomous transportation, drones, robotics, cloud computing, Internet of Things, machine learning and data analysis are the key topics supply chain executives want to discuss at industry conferences.


When it comes to who is responsible for spending supply chain dollars, more than 40% of companies rely on procurement professionals.

Other key spenders include the Plant Manager, the Business, Project Director, Supply Chain Manager, or in some cases, the IT department.

The best way to find external partners is through networking events and conferences/tradeshows, the executives said.


Those with buying power find that presentations, face-to-face meetings and product demonstrations are the most compelling form of solution provider engagement.

Capacity growth

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.

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

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

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.

North American polyethylene (PE) production is expected to increase 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 2017.

U.S. PE production will exceed domestic demand, adding up to 6-9 billion pounds of excess inventory for export through 2020, according to the report.

Refined products, crude oil and natural gas liquids (NGLs) exports are growing as well.

From 2010 to 2017, these waterborne exports increased more than four-fold from 1.2 million barrels/day to 5.4 million barrels/day, according to the International Trade Commission (ITC).

Supply chain impact

The American Chemistry Council (ACC) estimates that the announced investment of more than $160 billion over the next decade will help create 426,000 direct and supply chain jobs in the U.S. economy.

In a 2017 report by the ACC and Price Waterhouse Cooper (PwC), the two associations predicted that chemical shipments could increase by approximately 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.

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, and 808,000 marine TEUs each year, according to ACC analysis.

Infrastructure investment

For the energy renaissance to continue, crucial new infrastructure investments are essential, according to a July report issued by the American Fuel and Petrochemical Manufacturers (AFPM).

Bringing the benefits of the energy renaissance to consumers requires midstream infrastructure –the integrated systems of pipelines, ports and waterways, railroads, roadways and storage facilities.

“Today the United States is developing its energy resources at record levels, but to continue, our infrastructure must keep pace,” said AFPM President Chet Thompson.

“AFPM members are investing billions of dollars in new infrastructure, but crucial investments rely on ensuring that federal policies provide regulatory certainty to efficiently build out a network that reliably delivers America’s energy and keeps our economy competitive.”

By Heather Doyle