US polyethylene flood in 2H 2019 to squeeze supply chain
A flood of polyethylene is expected to come online as mega projects start up during the second half of 2019 and demands for creative supply chain solutions have never been so important, an industry executive told Petrochemical Update.
U.S. ports, rail, trucks, packaging and other major logistical providers in export supply chains stepped up operations in the last few years to handle the extra petrochemical exports from the U.S., but more innovation is needed, according to supply chain managers.
“The supply chain will have to keep it up as the next wave in new U.S. petrochemical manufacturing facilities is coming,” Bob Rhoades, general manager, global supply chain at Chevron Phillips Chemical said.
U.S. manufacturers have added 6.5 million tons of polyethylene (PE) production capacity since 2017, according to ICIS. Much of that new output is targeted for exports.
Rhoades said that since the first wave of projects came online, 25-30% of U.S. PE production now is exported.
More than likely with U.S. growth remaining at 4%, that percentage will increase since as much as 90% of the PE produced from the facilities in the next wave will probably be exported.
U.S. producers are expected to add 12.1 million tonnes of polyethylene before 2022, according to ICIS.
Second Half Supply
A few previous delays could cause these projects to come online simultaneously creating a flood of supply.
Sasol pushed back the estimated start-up date for its new 1.5 million tonne/year cracker at its Lake Charles, Louisiana, complex, along with its new 470,000 tonne/year linear low-density polyethylene plant cracker in Lake Charles, Louisiana to July, a five-month delay from its most recent estimate.
Incomplete engineering work, weather issues and productivity losses pushed the cracker startup date.
The company announced on February 13, 2019 that the LLDPE plant had reached on-spec status, about two months late, but full operation and projected start-up dates for several other units have been pushed back.
The 300,000 tonne/year ethylene oxide/ethylene glycol (EO/EG) unit is expected to start up in June, and the 420,000 tonne/year low density PE (LDPE) in August. Alcohols and ethoxylates units will come on November 2018-January 2020, according to ICIS.
Sasol’s Lake Charles cracker will now more than likely come online just as Formosa’s Point Comfort cracker in Texas is coming online.
The 1.0 million tonne/year Westlake/Lotte and the 500,000 tonne/year Shintech crackers are expected to come online prior to Sasol and Formosa.
However, Shintech has not yet chosen a new target startup date for its new 500,000 tonne/year cracker in Plaquemine, Louisiana, the company said in its most recent earnings calls.
Contractor issues last summer caused a construction slowdown on the $1.4 billion project that delayed its original mid-2018 startup. Shintech had expected to wrap up construction and possibly start up by the end of 2018, but the process of testing all systems pre-startup remains underway, according to Platts.
Trade is booming in the U.S and poised to drive chemical exports even higher. The latest ACC estimates are forecasting a $70 billion trade surplus by 2025.
As the U.S. opens trade battles on multiple fronts including China, Europe, North America, and Turkey; business confidence and financial markets will be impacted, analysts warn.
Image: American Chemistry Council
“We expect more trade in the future based on our access to cheap and abundant natural gas,” said Ed Brzytwa, Director for International Trade for the ACC.
“We are exporting way more than we are importing and we need to export those products all over the world. The U.S. can’t consume all of those products on its own.”
Supply Chain Innovation
Trucking companies, railroads, packagers and ports need to foresee bottlenecks and other problems and plan to better address them, Rhoades said.
Finding enough shipping containers to export product remains an issue as well, and the trade war isn’t helping without imports coming in.
Data and Analytics
Digitalization is the next big thing producers are focusing on to make supply chain communication faster and more efficient. There is a tremendous amount of data available. The big issue comes in analyzing and acting on the data, Rhoades said.
Chevron Phillips said they are using an Electronic Data Interchange (EDI) with customers in their supply chain.
Shorter truck routes
The truck industry continues to face a record labor shortage with more than 60,000 drivers needed now to meet demand. If current trends hold, the shortage could swell to over 174,000 by 2026, the American Trucking Association said.
Suppliers are redesigning supply chains to have more driver friendly routes where length of haul routes is shorter and get the drivers out and back in the same day.
Real Time Rail
Rail carriers are putting tech to work to solve issues on delivery forecasting, so customers do not find out 30 minutes before a delay that a product is not arriving when it is supposed to arrive.
“Real time data will help the customer find out if there will be a service interruption, so you will understand if you are not going to be able to serve a customer at all or if you can find a solution for the customer,” said Phillip Hoskins, Sr. Director Business Development for Savage Services.
IntelliTrans has begun tracking over a half million rail cars a month and as a result, started applying machine learning techniques to find out what is impacting estimated time of arrivals based on this data.
“This is about 1/3 of the rail network - so if we did it across the entire rail network, we could determine for specific routes if there are certain parameters that might predict a late shipment further in advance than we are able to do today,” said Kenneth Sherman, Vice President & General Manager for IntelliTrans.
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