LyondellBasell Rides High on Strong Demand, Prices for Ethylene with $9 Billion in Active Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--LyondellBasell Industries NV (NYSE:LYB) (Houston, Texas), like many other producers in the Chemical Processing Industry, has benefited from years of cheap feedstock and strong demand for ethylene, a key component in plastics. LyondellBasell is involved in more than $9 billion worth of active projects, according to Industrial Info's project database, including more than $638 million worth that are expected to begin or finish construction in 2018.

In a quarterly earnings-related press release, the company said higher ethylene prices and a 13% increase in global ethylene production put full-year 2017 sales at $34.48 billion, an 18.2% increase from 2016. Profits for 2017 stood at $4.88 billion, a 27.1% increase. In the fourth quarter alone, an $819 million benefit from the recently passed U.S. tax bill contributed to a $1.9 billion profit, up from $763 million in fourth-quarter 2016. LyondellBasell's capital spending for 2017 totaled $1.5 billion.

The company has a slew of big-ticket projects underway along the U.S. Gulf Coast, led by three in the Houston area: the addition of inside-battery and outside-battery segments of a new polyethylene unit at a complex in La Porte, Texas, and the addition of a propylene oxide/tertiary-butyl alcohol (PO/TBA) unit at a complex in Channelview, Texas.

The construction of the "Hyperzone" unit in La Porte began in the fourth quarter and is expected to produce 1.1 billion pounds of polyethylene, while LyondellBasell reached a final investment decision and began site preparation for the new unit in Channelview, which is expected to produce 1 billion pounds per year of PO and about 2.2 billion pounds per year of TBA. For more information, see Industrial Info's project reports on the inside-battery and outside-battery additions in La Porte and the Channelview addition.

Also at the Channelview facility, LyondellBasell is considering a capacity increase through an ethylene unit debottlenecking. The project would boost capacity by about 550 million pounds per year of ethylene. For more information, see Industrial Info's project report, and August 17, 2017, article - LyondellBasell Eyes One More Ethylene Debottleneck at Channelview Site.

Domestic consumption of ethylene has been bolstered by a recovering automotive industry, in which automakers are using plastic components to reduce the weight of vehicles, thereby improving their fuel economy. China also is seeing stronger demand in its own automotive market, where vehicle sales have grown at a compound annual rate of 13.7% in the 2012-16 period; online sales alone grew at a 65.5% rate in the same time, according to the Financial Times. But the U.S. and China also are seeing stronger demand for plastics products in industrial machinery and consumer goods, particularly food packaging.

For more information, see Industrial Info's January 17, 2018, article - Plastics Industry Plays Growing Role in U.S. Automotive Growth.

"The complementary performance of our two global olefins and polyolefins segments, combined with the relative stability of our intermediates and derivatives business portfolio, provided a resilient platform for profitability during 2017," said Bob Patel, LyondellBasell chief executive officer, in the press release. "In 2017, global operating rates remained strong due to delays in new capacity, a volume shortfall from Hurricane Harvey and an improving Chinese market."

LyondellBasell also is pursuing efficiency improvements to enhance ethylene production at several U.S. facilities. The company is preparing to demolish a product-packaging unit and a wastewater unit at a plant in Clinton, Iowa, to pave the way for a proposed new wastewater unit that will reuse effluent water at 960 million-pound-per-year ethylene plant. For more information, see Industrial Info's project reports on the old unit and new unit.

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