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Peak Chemical Profit to Double in North America on Shale

March 20 (Bloomberg) -- North American chemical makers will earn twice what they did in the last cyclical peak as cheap natural gas combines with an improving global economy to boost exports, an industry consulting group said.

Petrochemical earnings globally will peak in 2017 as rising demand outpaces new production capacity, Dave Witte, a senior vice president at IHS Inc., said today at the IHS World Petrochemical Conference in Houston. Pretax profit per ton will double in North America from the last peak in 2008, while earnings in Asia and Europe will follow past trends, Witte said.

Dow Chemical Co. and Exxon Mobil Corp. are among producers planning new U.S. plants that make ethylene, a chemical building block, from ethane and other natural gas liquids, which have dropped in price with increased production from shale rock formations. Much of the new production will be exported to fast-growing emerging markets, Witte said.

“North America is not a growth market, but we are back in the game as an exporter to the world,” Stephen Pryor, president of Exxon’s chemical business, said at the conference.

As production in North America rises, the least competitive European assets that use oil-derived naphtha will be shut, said Gary Adams, IHS chief advisor. About 2 million tons of annual ethylene capacity may need to close in Europe as North American exports increase, Graeme Burnett, a senior vice president at Total SA, said at the conference.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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