The Potential Impact of Shale-Advantaged Resins on Job Growth in Plastics Industry

Transcription

1 Penn State Webinar 10 March 2016 The Potential Impact of Shale-Advantaged Resins on Job Growth in Plastics Industry Martha Gilchrist Moore Sr. Director, Policy Analysis and Economics

2 Shifting Competitive Dynamics and New Chemicals Capacity New Plastics Capacity Investment New Investment and Jobs in Plastics

3 Manufacturing Jobs in Pennsylvania (2014) Fabricated metal product Food Machinery Chemical Primary metal Transportation equipment Plastics and rubber products Computer and electronic product Electrical equipment and appliances Miscellaneous mfg. Printing and related support activities Paper Wood product Nonmetallic mineral product Furniture and related product Beverage and tobacco product Petroleum and coal products Apparel Textile product mills Textile mills Leather and allied product Source: Bureau of Labor Statistics 0 20,000 40,000 60,000 80, ,000

4 Surging Natural Gas Liquids Production in Pennsylvania from Marcellus and Utica Shales Thou. barrels 35,000 30,000 25,000 20,000 15,000 10,000 5, Sources: US Energy Information Administration

5 NA Petrochemical Competitiveness Depends on Feedstock Spread $/gallon $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $ Spread between Naphtha and Ethane Ethane Naphtha Sources: US Energy Information Administration, IHS Chemical Week, ICIS

6 2015 PRODUCTION COSTS Estimated * ($/lb.) U.S. Chemical Industry Global Cost Advantage Relative Position of U.S. ( ) (Petrochemical Production Costs) HIGH WESTERN EUROPE OTHER NORTHEAST ASIA RELATIVE POSITION OF UNITED STATES IN 2005 MIDDLE EAST UNITED STATES IN 2015 CHINA LOW GLOBAL SUPPLY (billion lbs.) *Based on estimates from best available data

7 Lower US Manufacturing Costs: Case of High Density Polyethylene (HDPE) $ per Metric Ton In 2005, U.S. is among highest cost producers globally because of high natural gas costs in U.S. US Gulf Coast (2005) US Gulf Coast (2015) Northwest Europe (2005) Northwest Europe (2015) Middle East (2005) Middle East (2015) Northeast Asia (2005) Northeast Asia (2015) Raw Materials Utilities Direct Costs Other Costs

8 Lower US Manufacturing Costs: Case of High Density Polyethylene (HDPE) $ per Metric Ton By 2015, US among the low cost producers globally, but because of falling oil and naphtha prices a shallower (less steep) cost curve US Gulf Coast (2005) US Gulf Coast (2015) Northwest Europe (2005) Northwest Europe (2015) Middle East (2005) Middle East (2015) Northeast Asia (2005) Northeast Asia (2015) Raw Materials Utilities Direct Costs Other Costs

9 Oil-to-Gas Price Ratio Oil-to-Gas Ratio: A Proxy for U.S. Petrochemicals Competitiveness When the ratio is above 7, U.S. competitiveness is enhanced Oil and Gas Ratio: A Proxy for U.S. Petrochemicals Competitiveness Oil price declines have created some uncertainty about future Current ratio remains very favorable for U.S. competitiveness Growth likely to slow but be offset by stimulative consumer effect Sources: EIA, ICE, NYMEX

10 ACC Database of New Chemical Industry Investment in the U.S. Building began as early as 2010 with small projects to increase ethane utilization As of mid-february, ACC is tracking 266 projects valued at $164B 61% of projects are foreign or include a foreign partner Additional projects in Canada and Mexico In addition, ACC is tracking more than 500 plastic processor projects Complete Planned 55% 30% Under Construction Delayed/ Uncertain 6% 10%

11 Geography of Shale-Advantaged Chemical Investment

12 Cumulative Announced Chemical Industry Investments from Shale Gas Number of Projects Billions $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Total Investment Number of Announced Projects Source: ACC analysis, Dec Dec. 2015

13 Shale Advantage Driving Capacity Expansion Across Many Products Ethane, Propane and NGL Feedstock Ethylene capacity expected to grow by half Ethylene Derivatives PE, vinyls, MEG, EO, etc. Ethlyene cracker co-products on-purpose propylene (PDH, MTP), butadiene Propylene derivatives - polypropylene Complementary products, i.e., chlor-alkali for PVC, industrial gases, etc. Methane Feedstock Methanol and derivatives Nitrogeneous fertilizers ammonia, urea and derivatives (AN, UAN) Demand Driven Products Chemistry used in hydraulic fracturing, drilling, and oil/gas production

14 New Plastics Capacity Investment

15 Industry Investments & Plastics Processors Shale-Driven Benefits 70% of announced chemical industry investment is bulk petrochemicals and plastic resins. Increased resin capacity increased processing capacity Other Benefits of U.S. manufacturing Increased consumer desire for Made in the USA products Rising costs (wages) in China Reduction of transportation/logistics costs Manufacturing proximity to customers, supply chain

16 Plastics Processor Projects Expansions New Construction ACC is tracking over 500 plastics processor projects. 30% New Construction 70% Expansions Adding capacity New lines New equipment Since June 2012, plastics processor projects have been announced by over 400 companies in over 40 states. Source: Plastics News, ACC analysis NOTE: The data is based on publicly available information, which is believed to be accurate, but have not been independently verified by ACC.

17 The Build-Out is Underway (Spending on Plastics/Rubber Products Industry Projects) $ Billions (seasonally adjusted annual rate) $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $ Note: Data are presented as a 3 month moving average to smooth month-to-month variations. Source: Census Bureau

18 Announced Plastics Processor Projects by State Announced Projects Announcements since June 2012 Source: Plastics News, ACC analysis NOTE: The data is based on publicly available information, which is believed to be accurate, but have not been independently verified by ACC. Updated 1/7/ Note: 1 project has been announced in AK; none in HI (not shown)

19 IN MI OH WI TX NC KY SC TN IL GA CA MN PA AL MA FL NY MO VA WA CO CT IA KS LA NV Number of Announced Projects Announced Plastics Processor Projects by State States where five or more projects have been announced since June Source: Plastics News, ACC analysis NOTE: The data is based on publicly available information, which is believed to be accurate, but have not been independently verified by ACC.

20 Impact on Major Markets Consumer and Institutional Products Healthcare/ Medical Products Transportation Building & Construction Industrial/ Machinery Packaging Automotive Electrical & Electronic Investment across markets: One-third in Consumer & Institutional Products and/or Transportation markets Medical/Healthcare and Automotive are large subsets One-fifth in Packaging markets Various other markets also experiencing growth NOTE: This chart is intended to be a proportional representation, based on ACC analysis and publically available information, of plastics processor projects by Major Markets. The PIPS definitions for Major Markets were used to develop this chart.

21 New Investment and Jobs in Plastics

22 May 2015 ACC Analysis: Rising Competitiveness for U.S. Plastics Question: What economic and job impacts will accrue from the changing competitiveness and announced investment? Of the new investments in resin capacity, about half is expected to be exported to markets in Latin America, Asia, and Europe. The remaining half will be consumed in the U.S. New capacity in plastic processing New capacity in compounding, additives, etc.

23 Incremental Gain in Plastics Industry Investment Motivated by Shale Gas Advantage ($ bill) Plastic Compounding and Additives $2.5 Plastic Products $19.6 Total Investment $46.8 billion Plastic Resins $24.7 Source: American Chemistry Council

24 $ billion (2013) Plastics Industry Investment From Shale Advantage $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Plastic Resin Plastic Products - Machinery and Molds Compounding, Additives, Etc. Plastic Products - Other Investment

25 Economic Impact During Investment Phase (Peak Year*) Direct Impacts from Investment in New Capacity** Payroll Output ($ mill) ($ mill) Plastic Resins 15,700 $1,260 $4,100 Plastic Compounding, Additives, etc. 1,500 $110 $400 Plastic Products 12,700 $960 $3,100 Plastic-making machinery, equipment and molds 5,100 $390 $1,300 Other plastic products investment 7,600 $570 $1,800 Indirect Impacts Payroll-Induced Jobs Total Direct 29,900 $2,330 $7,600 29,000 $2,000 $7,200 37,600 $1,900 $5,900 Total 96,500 $6,230 $20,700 * Because peak year is different for different segments, it is the average of **Direct Impacts include construction of new facilities and purchase and installation of machinery and equipment Payroll and Output in $2013

26 Economic Impact of Output from New Capacity of Shale-Advantaged Resin Payroll Output Investment Jobs ($ mill) ($ mill) ($ mill) Direct Impacts from Investment in New Capacity Plastic Resins 12,400 $1,100 $22,700 $24,700 Plastic Products 110,100 $5,200 $41,400 $19,600 Plastic Compounding, Additives, etc. 5,000 $300 $3,200 $2,500 Total Direct 127,500 $6,500 $67,400 $46,800 Indirect Impacts 172,900 $12,400 $71,800 n/a Payroll-Induced 161,400 $7,800 $27,800 n/a Total 461,800 $26,700 $167,000 n/a Payroll and Output in $2013

27 Jobs from New Output Along Plastics Industry Supply Chain 2013 Employment Incremental Jobs from New Capacity Incremental Jobs as % of 2013 Employment Plastic Resins 55,200 12, % Plastic Products 526, , % Plastic Compounding, Additives, etc. 23,000 5, %

28 Key Investment Risks for Chemicals and Plastics Unpredictable energy dynamics Workforce development issues Chemical plant operations personnel, engineers, etc. Construction trades and labor Shortages of key equipment, etc. Both lead to capital cost escalation Wage increases Costs of valves, pressure vessels, pumps, etc. escalating Infrastructure bottlenecks (e.g., Houston Ship Channel) Market access/trade exposure (e.g., protective tariffs) More stringent environmental and other regulations affecting license to operate Market imbalances (shortor over-supply) created by variations in regional supply vs. demand growth and government policies

29 Questions? (202)