Rising tide of natural gas boosts chemical exports and cargo transport industry

What’s good for the chemical industry also appears to be good for the cargo transport industry.

The boom in natural gas supplies from shale is dramatically cutting the cost of chemicals, which were exported to China and beyond at a record pace in 2013, subsequently driving increased demand for large containers delivering everything from plastics to paints.

“The impact of U.S. petrochemicals is going to be significant for the recovery of chemical tankers,” Rohit Pattnaik, an India-based analyst at Drewry Maritime Research, recently told Bloomberg.

The ripple effect of increased natural gas supplies and a thriving chemical industry is pushing fleet use to 87.8 percent of available transportation capacity in 2013 and close to 90 percent next year, the highest since 2008, according to RS Platou Markets AS. Demand for chemical transport vessels will advance 3.6 percent this year, Bloomberg reports.

Cargoes are increasing in part because output of  natural gas in the U.S. rose to 2.48 trillion cubic feet in April, the highest for the time of year on record, and up from 2 trillion cubic feet a decade ago. Bloomberg explains:

The expansion drove down the fuel’s price by 78 percent from its peak in 2005, improving margins for chemical makers using gas-based feedstocks. Plants using ethane to make ethylene, a component for detergents and plastics, are earning $1,034 a ton. Margins for European manufacturers using naphtha, a refined oil product, are less than half that because crude is only 27 percent below its peak in London trading.

The chemicals can be shipped to Asian markets, which will generate profitable ton-miles for the cargo transport industry, according to Rikard Vabo, an Oslo-based industry analyst. “There’ll be continued growth in fleet utilizations coming up every day.”

The chemical industry is proving an export juggernaut. The U.S. is the world’s largest exporter of organic chemicals, accounting for approximately 25 percent of volumes, Bloomberg reports, with China the largest importer.

The chemical industry is one of the nation’s largest exporters, accounting for 12 percent of all U.S. exports, according to the American Chemistry Council. ACC’s chief economist Kevin Swift projects the chemical industry’s trade surplus will reach $46 billion by 2020, compared to $800 million last year.

A recent ACC report described the economic impacts of the chemical industry’s global competitive advantage driven by shale gas. ACC’s running tab of 117 projects represents a cumulative chemical-industry investment of more than $80 billion.

Much of the planned investment is geared toward export markets for chemistry and plastics products, which can help improve the U.S. trade balance.

, , ,