Consolidation in the United States Ethylene Market Continues

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Researched by Industrial Info Resources (Sugar Land, Texas)--Only a few years ago, several ethylene producers in the United States permanently idled or closed ethylene units largely because of the cost of meeting stricter environmental compliance requirements or making operations efficient enough to be competitive with the rising cost of feedstock.

During the past year, there has been another round of permanent ethylene unit and plant closures by Eastman Chemical Company (NYSE:EMN) (Kingsport, Tennessee) and Flint Hills Resources LP (Wichita, Kansas), although this time the closures have been related to the sharp decrease in overall demand. Just in the last few months LyondellBasell Industries (Rotterdam, Netherlands), Sunoco Incorporated (NYSE:SUN) (Philadelphia, Pennsylvania) and Dow Chemical Company (NYSE:DOW) (Midland, Michigan) have each announced ethylene unit closures as global markets continue to show no significant signs of improvement in the near future.

Within the last month Dow Chemical announced it had idled one of its two ethylene units in Hahnville, Louisiana, because of current market conditions. This ethylene unit, called the Hydrocarbons 2 Unit and rated at an estimated 1.2 billion pounds per year, is now expected to be permanently shut down. Dow is also idling several other ethylene derivatives along the Gulf Coast, including ethylene oxide, ethylene dichloride, vinyl chloride monomer and polyethylene capacity located in Plaquemine, Louisiana, hydrocarbon rubber production in Seadrift, Texas, and polyethylene production in Freeport, Texas.

Sunoco has announced the permanent closure of its 550-million-pound-per-year ethylene unit located in its Marcus Hook, Pennsylvania, refinery. The unit has been idle since mid-May after a small fire in the unit. LyondellBassell closed its 1.2 billion-pound-per-year ethylene unit located in Alvin, Texas, at the Chocolate Bayou complex earlier this year. Chevron Phillips Chemical Company (The Woodlands, Texas) has some idle capacity as well in its Texas plant. Each of these closures represents just the most recent wave of consolidation in this niche market of the Chemical Processing Industry (CPI). Late last year, Flint Hills permanently closed its ethylene plant located in Odessa, Texas, only months after acquiring it from Huntsman Corporation (NYSE:HUN) (The Woodlands, Texas).

Based on the amount of consolidation being witnessed in downstream markets for polymers, resins and plastics, there doesn't seem to be adequate demand on the horizon to prompt the immediate return to service of any of these plants. Ethylene unit turnaround activity is expected to remain limited for the remainder of this year, although the prospect of major ethylene unit turnarounds, which equal an opportunity for equipment service providers, looks favorable for 2010. For additional information, see related from July 23, 2009 - Planned Ethylene Turnarounds Remain Slim for Second Half of the Year.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.