After a lengthy stagnation, the U.S. plastics industry is mounting a comeback thanks to a surge of cheap, abundant natural gas that’s providing the nation with a competitive advantage over other countries for the first time in years, a new report finds.
The shale boom reversed fortunes for the U.S. plastics industry, which ranked among the highest-cost producers in the world just a decade ago, according to a new report released by the American Chemistry Council, an industry trade group.
“Today, America is one of the most attractive places in the world to invest in plastics manufacturing,” Steve Russell, the council’s vice president of plastics said in a statement. “Even after recent declines in oil prices, our nation has a decisive edge.”
That’s largely because U.S. manufacturers use raw materials derived from natural gas to produce plastic, in contrast with European and Asian producers that typically rely on oil-based feedstocks, the report found. Domestic plastic makers have been capitalizing on the flood of inexpensive natural gas unleashed in recent years by advances in horizontal drilling and hydraulic fracturing techniques, lowering the cost of U.S. production compared to other countries.
The U.S. has maintained that edge, despite a global crude slump that has buoyed overseas plastics makers, maintaining is position as one of the lowest-cost ethylene producers behind the Middle East and Canada, according to the council.
With access to cheaper feedstocks, U.S. plastics producers are beefing up their plants and preparing to produce more plastic, much of which will be shipped to Asia, Latin America and Europe, the council said. Between 2014 and 2030, net exports of plastics leaving the U.S. are expected to triple from $6.5 billion to $21.5 billion, according to a report by Nexant Consulting cited by the chemistry council.
Shale gas has credited for a renaissance in the U.S. petrochemical industry, but the newly released American Chemistry Council report throws new data behind those assertions.
The industry is expected to spend $46.8 billion in the next decade to manufacture more resin, increase its capacity in plastics compounding, additives and colorants used to transform resins into plastic products, and expand its ability to consume resin that’s not exported, according to the council’s analysis of company announcements made through March.
Some of those investments are slated for the Gulf Coast.
“The Gulf Coast is already a world class energy center with substantial technical expertise, distribution capabilities, and deep manufacturing know-how,” Russell said. “The companies that operate in the Gulf Coast are world leaders with a global footprint.”
Chevron Phillips Chemical is building two new polyethylene units in Old Ocean, near its Sweeny plant in Brazoria County, which are slated for completion in 2017. The units will convert ethylene into pellets that can be sold, melted and formed into a variety of industrial and household plastics. And in December, Ineos Olefins & Polymers USA broke ground on a $500 million expansion at its La Porte manufacturing complex to produce more high-density polyethylene, which is used to make plastic bags, bottles, jugs and pipes.
Overall, plastics industry investments are expected to generate 127,000 new high-paying jobs, the report said. Workers at plastics materials plants, on average, earn $85,000 per year, the council said.
“(That’s) more than 73 percent higher than the average wage for workers across U.S. industries,” Russell said in a statement. “Compares are ‘re-shoring’ jobs to the U.S. as new manufacturing is increasingly being located here at home.