Wednesday, January 22, 2014

Don't Expect Cheap Polyethylene Anytime Soon

The plastics industry has now officially entered the shale gas revolution. Plastics News recently wrote that the first ethane molecules from the Marcellus shale formation had finally begun to enter reactors to be cracked to ethylene, with those reactors being owned by Nova Chemicals. The revolution is on!

And from those happy, little, unsaturated molecules, we can now expect prolific polymerizations products from polyethylene pellets to pounce forth, and at such a low cost as to once again re-energize our economy and make us the economic powerhouse of the world. Or at least, that is what we’ve been told.

That is not what we’ve seen however (as I discussed back in September). And that is not what we will see anytime soon either according to consultant Mike Burns’ comments which also happen to be published in Plastics News [*].
” ‘Polyethylene buyers should not expect new lower cost feedstocks [such as those from shale gas] to reduce prices,’ Burns explained. ‘PE pellets are priced at the highest global feedstock, and that has created a price floor for PE.’ “

At least we can take comfort in knowing that all that extra money that we are paying for polyethylene is helping the profits of the companies that make the polyethylene, such as the little ma-and-pa shops, the companies being run out of someone’s garage, or even the ones that the recent immigrant family started. Who am I kidding? Polyethylene is made in extremely large scale in order to reduce the cost as much as possible. You either go in big or you don’t go in at all. Think ExxonMobil, Dow, LyondellBasell, ChevronPhillips and as already noted, Nova. They are the ones that will gain from this price inflexibility, and I hope that they are quite grateful to those of us paying for it.

[*] Please don’t think that I’m taking a shot at Plastics News. I’m not. They do a wonderful job of reporting the news all around the plastics industry. If the news contradicts itself, it’s because the newsmakers are contradicting themselves, not Plastics News.

Previous Years

January 22, 2010: Math According to the Chief Justice

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