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IHS CHEMICAL August 2016
Understanding US Bulk Chemical Trade and Logistics in Shale Gas Era
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STUDY CONTRIBUTORSChristopher GeislerVice President / Strategic Study Project Manager
Angela TenneyConsultant / Contributing Editor
Pat McSpaddenManaging Director, Chemical Consulting
Joel Morales, Jr. Director, North American Polyolefins
Robert (Robin) A. Waters Director, Plastics Planning and Analysis
Mark WegenkaManaging Director, Chemical Consulting
Peter FengSenior Director, Aromatic Studies
Nick VafiadisSenior Director, Global Polyolefins & Polymers
Marc AlvaradoDirector, Methanol Studies
Martha RiveraConsultant
The development of significant tight oil and shale gas deposits in the US has resulted in a large increase in US oil and gas production and corresponding increase in the availability of ethane and other natural gas liquids (NGLs) for chemical production. This chemical feedstock and product expansion is impacting US manufacturing and support industries by creating greater opportunities for growth in transportation (i.e., domestic and export marine shipping, railroad, trucking), logistics services (i.e., loading, bagging, trans loading, storage, terminaling) and other manufacturing services.
While the price of oil has dropped significantly in recent years, the low manufacturing cost position of the US, due to the natural gas and ethane advantage, is resulting in new grassroots methanol, ammonia and olefins (ethylene and propylene) and derivative investments. A number of existing US and new international producers have announced new investments in North America based on shale gas derived feedstocks and a full slate of derivative capacity will eventually be announced as well.
Major chemical production additions include ethylene, propylene, methanol, ammonia and their derivatives, such as plastics and fertilizers. With the expected continued expansion in these major chemical chains, IHS Chemical estimates that more than 100 million metric tons (MMT) of new capacity will be added in the US chemical industry by 2025.
IHS CHEMICAL August 2016
Understanding US Bulk Chemical Trade and Logistics in the Shale Gas Era
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Understanding US Bulk Chemical Trade and Logistics in the Shale Gas Era
The vast majority of this new chemical capacity will be converted to plastics, significantly increasing the US net export position of these materials. New domestic fertilizer production will replace imports from South America, the Black Sea and the Middle East. By 2025, US bulk liquid chemical production will expand by nearly 50 MMT and US bulk solid chemical production will expand by 22 MMT. Ethylene and propylene (mostly converted to plastics) will expand US production by 20 MMT through 2025. The most notable bulk liquid chemical additions will be in methanol. The largest bulk solid chemical expansion will be in fertilizers and polyethylene. Polyethylene exports will first target South America and then Asia.
As these chemical products expand, we expect to see increased marine, rail and truck traffic primarily in the US Gulf Coast but possibly later to, and around, several of the East and West Coast ports and terminals.
According to the ACC’s 2015 Guide to the Business of Chemistry, 54% of all US business of chemistry shipments are made by trucks. The preferred transportation mode for US bulk chemicals however is rail or waterborne with 21 and 22% of the tonnage share, respectively. The vast majority of new olefin bulk chemical production will be converted to solid plastic resins (pellets) that are moved in bulk trucks and rail hopper cars or bagged and containerized for export. Bulk natural gas derivatives such as methanol and fertilizer will be moved primarily by marine, rail and truck.
Chemicals make up a significant part of the rail freight in the US, accounting for a 10% share of tonnage and 14% of revenues.
In the US, waterborne transport is often the least expensive method of moving chemicals, and this provides significant business for ocean-going carriers, inland barge operators, and other water freight transportation companies. Chemicals are an important part of US waterborne traffic accounting for 22% percent of the waterborne tonnage.
International transportation of US bulk chemicals is dominated by waterborne shipments either containerized as in the case of plastic resins or by bulk tanker as in the case of liquid chemicals. In a recent study IHS evaluated historic and forecast US international bulk chemical imports and exports by US port. In total, the US will grow to an exporter of more than 30 million metric tons of bulk chemical liquids and nearly 17 million metric tons of bulk chemical solids. Imports of bulk chemical liquids and solids will drop by 11 million tons due to the growth of domestic US bulk chemical production.The US will switch from being a net importer of liquid chemicals to a net exporter over the course of the forecast (by the year 2025). Increased domestic methanol production is a main driver of this switch. In 2010, the US was a net importer of 5 million tons of methanol needed to meet domestic demand. By 2025 the US will be a net exporter of more than 11 million tons of methanol.
The US is currently balanced on bulk solid chemicals with urea imports offsetting plastic exports. With the growth in polyethylene production and without a corresponding growth in US demand, the US will become a large net exporter of plastic resins. Urea imports will also greatly diminish over the forecast.
With low natural gas prices driving increased petrochemical investment in the US, an estimated 49 million metric tons of new bulk liquid chemical production will have been added over the period of 2010 to 2025, mostly in the US Gulf Coast, which will account for 89% of the production increase. For liquid chemicals, U.S. shale gas developments will result in increased production of syngas chemicals (ammonia and methanol), caustic soda, EDC and glycol.
As US production increases, fewer imports will be necessary to meet domestic demand. New methanol production is expected to replace global imports. Most of the import substitution will come at the expense of South America and the Middle East. Methanol imports into the ports on the Lower Mississippi River and Texas coast will diminish rapidly. Imports from Canada will also take a hit but still continue into the Northwest and Upper Midwest. As imports into other US ports decrease, the USGC will remain a key import location, followed by the Upper Midwest as the entry point for Canadian exports to the US. Ammonia imports will decrease as well.
Due to low cost ethylene for manufacture of styrene and MEG, these bulk liquid chemicals will see increasing net exports. The growing styrene export position will result in an increase in benzene imports. The USGC will see the greatest change in international trade flows. Ports from Corpus Christi to New Orleans will generally see reducing international import shipments followed by increasing international exports.
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Understanding US Bulk Chemical Trade and Logistics in the Shale Gas Era
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Understanding US Bulk Chemical Trade and Logistics in the Shale Gas Era
US Bulk Liquid Chemicals Production
LocationThousand Metric Tons
Difference2010 2025
Northwest 385 571 186
Southwest 2,743 3,241 498
USGC 51,589 95,443 43,854
Southeast 4,086 5,120 1,034
Northeast 1,390 1,573 183
Upper Midwest 3,886 7,659 3,774
Total 64,265 113,609 49,344
US Bulk Liquid Chemicals Demand
LocationThousand Metric Tons
Difference2010 2025
Northwest 1,780 2,129 348
Southwest 2,858 3,911 1,053
USGC 42,163 57,418 15,255
Southeast 9,952 10,856 904
Northeast 2,859 2,310 (549)
Upper Midwest 10,815 15,740 4,889
Total 72,687 95,054 22,366
US Bulk Liquid Chemicals Imports
LocationThousand Metric Tons
Difference2010 2025
Northwest 982 1,206 223
Southwest 618 459 (159)
USGC 11,129 6,255 (4,874)
Southeast 1,119 557 (561)
Northeast 980 604 (376)
Upper Midwest 1,847 2,288 442
Total 17,215 11,411 (5,804)
US Bulk Liquid Chemicals Exports
LocationThousand Metric Tons
Difference2010 2025
Northwest 221 44 (177)
Southwest 20 34 14
USGC 7,228 29,536 22,308
Southeast 4 18 14
Northeast 399 397 (2)
Upper Midwest 453 534 81
Total 8,757 30,606 21,849
US Bulk Solid Chemicals Production
LocationThousand Metric Tons
Difference2010 2025
Northwest 181 190 9
Southwest 1,422 3,074 1,652
USGC 24,739 39,049 14,310
Southeast 832 997 165
Northeast 881 2,190 1,309
Upper Midwest 2,282 6,822 4,540
Total 30,337 52,322 21,985
US Bulk Solid Chemicals Demand
LocationThousand Metric Tons
Difference2010 2025
Northwest 2,396 2,838 442
Southwest 2,705 3,693 988
USGC 2,970 4,306 1,337
Southeast 3,498 4,624 1,126
Northeast 4,615 6,142 1,527
Upper Midwest 15,556 21,051 5,495
Total 31,761 42,680 10,919
US Bulk Solid Chemicals Imports
LocationThousand Metric Tons
Difference2010 2025
Northwest 1,087 882 (205)
Southwest 178 62 (116)
USGC 3,819 1,067 (2,751)
Southeast 343 102 (241)
Northeast 587 268 (318)
Upper Midwest 2,761 1,563 (1,197)
Total 9,507 4,105 (5,402)
US Bulk Solid Chemicals Exports
LocationThousand Metric Tons
Difference2010 2025
Northwest 16 66 50
Southwest 1,141 1,523 382
USGC 5,675 11,943 6,268
Southeast 0 499 498
Northeast 248 562 314
Upper Midwest 1,502 1,949 446
Total 9,289 16,980 7,692
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How has the US Shale Gas Revolution altered the competitive landscape of the petrochemical industry? Find out more with the New Strategic Report “US Bulk Chemical Industry: Trade and Logistics in the Shale Gas Era” from IHS Chemical. www.ihs.com/US-Trade-Logistics
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