What Will Come from the HDPE Glut?

genarex Blog

Source: Plastics News – PE Market Ready for Increased Capacity

In a recent Plastics News article, light is shined upon the Plastics Industry for 2017, as the landscape surrounding all things polyethylene will be changing dramatically. An increase in capacity of 34 billion pounds of polyethylene capacity is possible, which would almost double the current North American capacity.

This transformative level of change will certainly have ripple effects upon the industry. As legislation continues to drive polyethylene out of certain application spaces (microbeads and grocery bags, for example), the overall consumption of polyethylene is not likely to be increased dramatically.

Without disruptive new application spaces coming online for polyethylene, tens of millions of tons of virgin polyethylene will be seeking a home. Who will suffer as a result of all of these material capacity increases?

  • Smaller polyethylene manufacturers – those who do not grow in the PE arms race are likely to lose out as the glut of supply floods the market, dropping PE pricing. If cost positions of the larger players sinks low enough with this new capacity, smaller players are likely to get crushed.
  • Recyclers – recyclers, particularly those of post industrial plastics, and brokers of recycled plastics are almost sure to feel the sting of this change. Low oil costs have chewed away at the margin between virgin and recycled plastics for over a year; will the increase in supply be the straw that breaks many recyclers’ collective backs?
  • Bioplastics manufacturers – both bio-sourced polyethylenes and biobased alternatives to polyethylene will likely suffer here, as the seeming entirety of the increase in scale is configured to grow the petrochemical derived manufacture of polyethylene, increasing the price gap between natural material polymers and their oil based counterparts.

These predictions are based on our opinions and observations only, but 2017 looms on the horizon as a potential pivot-point for commodity plastics in North America as a whole.