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The Trade Numerologist: The Future of Plastics in the Age of Shale Gas
Trade and production of plastics are getting a boost from more gas drilling, even as the fuel-based material faces opposition because it's so hard to recycle.
Plastics, the skin of 21st century packaged goods, go into the lid of your morning coffee, the case of your smartphone, the shell of your deodorant stick and thousands of other products we use every day.
At the same time, environmentally-minded governments, mostly in the US and Europe, are cracking down on single-use plastics like straws, bags and soda bottles.
Their efforts are outweighed by booming demand in Latin America, Asia and Africa. The upshot: Plastics aren't going away. Annual global consumption is expected to double to over half a billion tons by 2030, from 311 million tons in 2014. The global plastics market is worth around $600 billion a year. Incredibly, global demand for plastic bottles is expected to top 500 billion units this year.
Natural plastics like rubber were first used thousands of years ago. The first synthetic version wasn't invented until the early 20th century using coal. The basic idea is to turn hydrocarbons into polymers, a string of molecules, that can be shaped into anything from Coke bottles to car fenders. Nowadays, the cheapest, most available way to make plastic is with natural gas.
So-called "cracker" plants use high-pressure steam to break apart molecules and make these polymers. For example, ethane, which comes from natural gas, is broken down into ethylene, then pellets of polyethylene, which are shipped all over the world in 25kg bags to be made into plastic.
The massive expansion of shale gas drilling in the US this decade, using hydraulic fracturing, or fracking, has increased US production and exports of polyethylene and expanded that polymer's share of the market for ingredients in plastic. Total ethylene demand is expected to increase to around 200 million tons by 2025, from around 150 million tons today.
Big oil and petrochemical companies such as Shell, Exxon and Dow have invested over $150 billion in hundreds of new US plants, focused around the Gulf of Mexico. That's led to a massive boom, this year, of exports of ethylene, much of which is polyethylene, out of the US.
US polymers of ethylene exports, first 9 months
- 2018: 5.2 billion kg
- 2017: 4 billion kg
- 2016: 4.2 billion kg
- 2015: 3.8 billion kg
- 2014: 3.5 billion kg
- 2013: 3.7 billion kg
- 2012: 3.4 billion kg
- 2011: 3.4 billion kg
- 2010: 3.6 billion kg
- 2009: 3.8 billion kg
The presence of a strong gas industry has always been a key driver of the production of ethylene. That's why countries like the US, Canada, Iran and Qatar are among the top exporters in the world. Other big producers, like Belgium and Singapore, have big ports with petrochemical terminals.
Top exporters of ethylene polymers, first 7 months
- US $5.7 billion (+25%)
- Belgium $3.8 billion (+11%)
- Singapore $3.6 billion (+15%)
- Canada $2.7 billion (+14%)
- South Korea $2.6 billion (+14%)
- Germany $2.4 billion (+14%)
- Iran $2.3 billion (+7%)
- Thailand $2.2 billion (+18%)
- Netherlands $2 billion (+12%)
- Qatar $1.5 billion (+9%)
Plastics can also be made out of propylene polymers, like polypropylene, which comes from naphtha, usually a crude oil derivative. Polypropylene is more opaque and has a higher melting point than polyethylene, making it more of a niche product, favored by the auto industry, and makers of harder products like containers and furniture.
The world's top polypropylene exporters are countries with big petrochemical terminals near ports that import and refine crude oil, like Belgium, which has the port of Antwerp.
Top exporters of propylene polymers, first 7 months, 2018
- Belgium $2.8 billion (+18%)
- South Korea $2.6 billion (+18%)
- US $2.2 billion (+4%)
- Germany $2.1 billion (+15%)
- Singapore $1.9 billion (+13%)
- Netherlands $1.2 billion (+20%)
- France $1.2 billion (+11%)
- Thailand $872.3 million (+41%)
- Taiwan $810.4 million (+29%)
- Spain $691.7 million (+26%)
The global plastics manufactured industry is dominated by Western Europe, especially Germany, Belgium and the Netherlands, China and the US. With companies like BASF and Bayer, Germany is still the world's top exporter of plastics.
Top plastic exporters, first 7 months, 2018
- Germany $45 billion (+14.5%)
- China $40.1 billion* (+16%)
- US $39.2 billion (+15.5%)
- South Korea $20.6 billion (+15.3%)
- Belgium $20.5 billion (+21%)
- Netherlands $16.9 billion (+17%)
- Japan $15 billion (+7%)
- France $14.2 billion (+12%)
- Italy $13.9 billion (+15%)
- Taiwan $13 billion (+17%)
*Projection. Full data not available.
The import market, unsurprisingly, is dominated by companies with the biggest consumer markets: China, the US, and Germany, which packages goods for the entire European Union.
Top plastic importers, first 7 months, 2018
- China $41.1 billion* (+3%)
- US $35.7 billion (+14%)
- Germany $30 billion (+19%)
- France $16.6 billion (+15%)
- Mexico $14.4 billion (+9%)
- Italy $13.8 billion (+15%)
- Belgium $11.9 billion (+7%)
- UK $11.6 billion (+10%)
- Netherland $10.7 billion (+16%)
- Canada $10.1 billion (+7%)
*Projection. Full data not available.
It would seem to be a golden age of plastics. Not everybody agrees. The oceans are increasingly polluted by the stuff. Eight to 12 million tons of plastic are getting dumped in the ocean every year. Four-fifths of all marine waste is plastic.
The problem is that plastic is difficult to recycle. A water bottle used once can hang out around the planet for hundreds of years. Only a tenth of the over six billion tons of plastic produced since the industry really took off in the 1950s has been recycled. The rest is still around, mostly in landfills.
France has pledged to recycle all plastic by 2025 and cut its landfill rate by 50%. Blue-chip companies like Evian, L'Oréal, Mars, M&S, PepsiCo, The Coca-Cola Company, Unilever and Walmart have also pledged to reduce their consumption.
Companies are working on making and marketing substitutes made of materials like fibers, glass and wood. For now, however, plastic's low cost and pliability make it too attractive for manufacturers, consumers and regulators to resist.
The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.
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