The Potential Impact of
Shale-Advantaged Resins on
Job Growth in Plastics Industry
Penn State Webinar
10 March 2016
Martha Gilchrist Moore
Sr. Director, Policy Analysis and Economics
Shifting Competitive Dynamics and New Chemicals Capacity
New Plastics Capacity Investment
New Investment and Jobs in Plastics
Manufacturing Jobs in Pennsylvania (2014)
0 20,000 40,000 60,000 80,000 100,000
Fabricated metal productFood
MachineryChemical
Primary metalTransportation equipment
Plastics and rubber productsComputer and electronic product
Electrical equipment and appliancesMiscellaneous mfg.
Printing and related support activitiesPaper
Wood productNonmetallic mineral product
Furniture and related productBeverage and tobacco product
Petroleum and coal productsApparel
Textile product millsTextile mills
Leather and allied product
Source: Bureau of Labor Statistics
Surging Natural Gas Liquids Production in Pennsylvania from Marcellus and Utica Shales
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Thou. barrels
Sources: US Energy Information Administration
NA Petrochemical Competitiveness Depends on Feedstock Spread
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Spread between Naphtha and Ethane Ethane Naphtha
$/gallon
Sources: US Energy Information Administration, IHS Chemical Week, ICIS
U.S. Chemical Industry Global Cost Advantage
Relative Position of U.S. (2005-2015)(Petrochemical Production Costs)
2015 P
RO
DU
CT
ION
C
OST
S
Est
imate
d *
($/lb
.)
GLOBAL SUPPLY
(billion lbs.) *Based on estimates from best available data
HIGH
LOW
MIDDLEEAST
UNITED STATESIN 2015
CHINA
WESTERNEUROPE
OTHERNORTHEASTASIA
RELATIVEPOSITION OF UNITEDSTATESIN 2005
Lower US Manufacturing Costs: Case of High Density Polyethylene (HDPE)
US GulfCoast(2005)
US GulfCoast(2015)
NorthwestEurope(2005)
NorthwestEurope(2015)
MiddleEast
(2005)
MiddleEast
(2015)
NortheastAsia
(2005)
NortheastAsia
(2015)
Raw Materials Utilities Direct Costs Other Costs
In 2005, U.S. is among highest cost producers
globally because of high natural gas costs in U.S.
$ per Metric Ton
Lower US Manufacturing Costs: Case of High Density Polyethylene (HDPE)
US GulfCoast(2005)
US GulfCoast(2015)
NorthwestEurope(2005)
NorthwestEurope(2015)
MiddleEast
(2005)
MiddleEast
(2015)
NortheastAsia
(2005)
NortheastAsia
(2015)
Raw Materials Utilities Direct Costs Other Costs
$ per Metric TonBy 2015, US among the low cost producers globally,
but because of falling oil and naphtha prices…a
shallower (less steep) cost curve
Oil-to-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
When the ratio is above 7, U.S. competitiveness is enhanced.
Sources: EIA, ICE, NYMEX
0
5
10
15
20
25
30
35
40
45
2005 2010 2015 2020
Oil-t
o-G
as
Pri
ce R
ati
o
Oil and Gas Ratio: A Proxy for U.S. Petrochemicals Competitiveness
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
10%
30%
55%
6%
Complete Under Construction
Planned Delayed/ Uncertain
Geography of Shale-Advantaged Chemical Investment
Cumulative Announced Chemical Industry Investments from Shale Gas
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0
50
100
150
200
250
300
Total Investment Number of Announced Projects
BillionsNumber of Projects
Source: ACC analysis, Dec. 2010 – Dec. 2015
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
New Plastics Capacity Investment
Shale-Driven Benefits
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
Industry Investments & Plastics Processors
• 70% of announced chemical industry investment is bulk
petrochemicals and plastic resins.
• Increased resin capacity increased processing capacity
Plastics Processor Projects
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.
• 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.
New
Construction
Expansions
The Build-Out is Underway(Spending on Plastics/Rubber Products Industry Projects)
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
02 04 06 08 10 12 14 16
Tho
usa
nd
s
$ Billions(seasonally adjusted annual rate)
Note: Data are presented as a 3 month moving average to smooth month-to-month variations.
Source: Census Bureau
Announced Plastics Processor Projects by State
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 –1/7/16
Note: 1 project
has been
announced in
AK; none in HI
(not shown)
Announced Projects
40+
30-39
20-29
10-19
5-9
1-4
0
Announced PlasticsProcessor Projects by State
States where five or more projects have been announced since June 2012
0
5
10
15
20
25
30
35
40
45
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
Num
ber
of
Announced P
roje
cts
Source: Plastics News, ACC analysisNOTE: The data is based on publicly available information, which is believed to be accurate, but have not been independently
verified by ACC.
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
Consumer
and
Institutional
Products
Transportation
Building & Construction
Electrical &
Electronic
Packaging
Industrial/
Machinery
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.
Healthcare/
Medical
Products
Automotive
Impact on Major Markets
New Investment and Jobs in Plastics
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.
Incremental Gain in Plastics Industry Investment
Motivated by Shale Gas Advantage ($ bill)
Plastic Resins$24.7
Plastic Products
$19.6
Plastic Compounding and Additives
$2.5
Total
Investment
$46.8
billion
Source: American Chemistry Council
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Plastic Resin Compounding, Additives, Etc.
Plastic Products - Machinery and Molds Plastic Products - Other Investment
$ billion (2013)
Plastics Industry Investment From Shale Advantage
* Because peak year is different for different segments, it is the average of 2018-2020
**Direct Impacts include construction of new facilities and purchase and installation of machinery and equipment
Payroll and Output in $2013
Economic Impact During Investment Phase (Peak Year*)
Payroll Output ($ 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 molds5,100 $390 $1,300
Other plastic products investment 7,600 $570 $1,800
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
Jobs
Direct Impacts from Investment in New Capacity**
Indirect Impacts
Payroll-Induced
Payroll and Output in $2013
Economic Impact of Output from New Capacity of Shale-Advantaged Resin
Payroll Output Investment
($ mill) ($ mill) ($ mill)
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
172,900 $12,400 $71,800 n/a
161,400 $7,800 $27,800 n/a
Total 461,800 $26,700 $167,000 n/a
Jobs
Indirect Impacts
Payroll-Induced
Direct Impacts from Investment in New Capacity
2013
Employment
Incremental Jobs
from New
Capacity
Incremental Jobs
as % of 2013
Employment
Plastic Resins 55,200 12,400 22.4%
Plastic Products 526,550 110,100 20.9%
Plastic Compounding,
Additives, etc. 23,000 5,000 21.7%
Jobs from New Output Along Plastics
Industry Supply Chain
• 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 (short-or over-supply) created by variations in regional supply vs. demand growth and government policies
Key Investment Risks for Chemicals and Plastics