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Houston-area petrochemical producers look overseas to sell plastic

The U.S. Gulf Coast is awash in plastic. Who will buy it?

That’s the key question this year for Houston-area polyethylene producers who have capitalized on a petrochemical boom driven by the abundance of cheap natural gas flowing from West Texas. At Wednesday’s ICIS Outlook Seminar in Houston, analysts said that the region’s largest plastics manufacturers are searching overseas for new export markets amid a mounting domestic glut.

Polyethylene, the world’s most common plastic, is used to make bottles, containers and a range of other consumer products. In the U.S., it’s manufactured using ethane, a natural gas liquid often used as a feedstock for ethylene.

The ongoing shale boom in the Permian Basin and elsewhere has enabled U.S. petrochemical producers to churn out polyethylene at a steep cost advantage to Asian and European manufacturers that typically use heavier, more expensive feedstocks.

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ICIS, a global energy and petrochemical research firm with offices in Houston, reported that U.S. producers added 3.5 million tons of polyethylene production capacity last year, and much more is on the way. Petrochemical giant LyondellBasell, for example, is adding to its La Porte complex a $700 million plastics plant expected to produce more than a billion pounds of polyethylene each year.

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ICIS anticipates that by 2019, the U.S. will increase its polyethlyene production by 40 percent to 6.5 million tons a year. By 2022, that amount could balloon to 12.1 million tons a year, nearly a 75 percent increase from current levels.

Domestic demand, meanwhile, is expected to grow far more slowly, said ICIS deputy managing editor Zachary Moore. That dynamic is driving producers to look for new, developing markets in Asia and Europe where plastics consumption is increasing.

“Exports are going to become much more important,” Moore said.

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