Cost Curve Service - Polyethylene

Key trends, such as the recent wave of capacity additions in the Middle East and a shift toward lighter feedstocks as price differentials between crude oil and natural gas-based feedstock have widened in many regions, are significantly affecting the competitive landscape of the polyethylene industry and increasing the share of low-cost polyethylene production. This is putting pressure on higher-cost producers, either through imports or the loss of market share in the export market, as competition in the international marketplace intensifies. The cost advantage of lighter feedstock-based polyethylene production is forecast to persist, with the impact of shale gas putting North America back into the a favorable feedstock.

Capital investments in ethylene and polyethylene facilities will continue to be directed mainly toward countries and regions with advantaged feedstock cost or high demand growth. The availability of low cost natural gas-based feedstocks in parts of the Middle East, Africa, Commonwealth of Independent States (CIS), Southeast Asia and the Americas, therefore, will encourage local investors and also attract foreign investment, particularly for polyethylene plants. Countries with excellent future demand growth prospects, such as China, are also preferred investment locations, often supported by a rapidly growing converter industry that manufactures finished products for export and a large domestic market.

The development of green sources for the production of plastics is advancing steadily and is generating the first tangible results. Commercial production of polyethylene from sugarcane commenced in Brazil in September 2010. Customers include major consumer product corporations that will be using the sugarcane-based polyethylene resins for packaging of cosmetics and container closures. A second project for the production of bio-polyethylene, also in Brazil, was announced jointly by Dow and Mitsui & Co. with start up expected over the next five years.

The Cost Curve Service – Polyethylene analyzes each of the world’s polyethylene production facilities, building up cost based on the technology, estimated feedstock cost, utility consumption and other variable and plant fixed costs. Plant size, degree of integration and operating rates are all taken into account. Views are provided on an integrated and non-integrated basis, including ethylene either at cash cost of production or market price for integrated producers. Cost of delivery from major producing regions to major consuming regions, including freight, logistics and duties, is included to generate delivered cost curves.

The cost curve covers all of the key processes for producing polyethylene, including:

• High-density polyethylene (HDPE)
  • Gas phase
  • PF loop
  • Solution
  • Ziegler
• Linear low-density polyethylene (LLDPE)
  • Autoclave
  • Gas phase
  • PF loop
  • Solution
  • Tubular
• Low-density polyethylene (LDPE)
• Autoclave
• Tubular

Any person, company or government interested in producing or purchasing polyethylene, or designing or constructing polyethylene plants, should be aware of the competitive positions within the global PG/CG polyethylene industry. IHS Chemical, with its extensive databases, models and expertise, has prepared the Cost Curve Service to address this need.

• The deliverable is an interactive Excel spreadsheet that will allow the user to toggle and create key graphs and tables
  • Global curves for HDPE, LDPE and LLDPE for current year, future year, five years out and one historical year for reference
  • Charts showing costs by year for world and ten geographic regions, broken down by net feedstock cost, variable costs and fixed costs.
  • Regional averages and all individual plants for any given region plotted on the curve
  • Integrated curves with ethylene at the cash cost of production for producers who are integrated upstream with ethylene production capacity
  • Delivered curves comparing cost of local production with imports from major producing regions for each major consuming region
  • Breakdown of capacity by major process technology for world and ten geographic regions
  • Cost summary tables showing number of production units, total capacity, average capacity, with total cash cost broken down into feedstock cost, co-product credit, net feedstock cost, variable cost, fixed costs, for world and each of ten geographic regions
• The service will include an Executive Overview, summarizing the key findings from the analysis
• Regional cost structure is included along with production cost economics for major technologies
• Capacity data by unit is included for all years covered in the analysis
• The Cost Curve Service will be updated twice a year on same schedule as the IHS Chemical World Analysis – Polyethylene, typically in the late Fall and very early Spring