LyondellBasell sees ethylene shortage developing by 2015

LyondellBasell Industries NV, the second-biggest North American producer of ethylene, said global demand for the raw material used in plastics will outpace supply additions through 2015, leading to shortages.

Ethylene demand will rise by at least 70 billion pounds through 2015, driven mostly by Asia, requiring 35 new crackers, as ethylene plants are known, Chief Executive Officer Jim Gallogly said today in a webcast presentation. No more than 24 crackers will be built in that period, leading to shortages and wider margins for producers such as Rotterdam-based LyondellBasell, he said.

“That is a lot of crackers and you haven’t seen anything close to that being announced,” Gallogly said at the Barclays Chemical ROC Stars Conference in New York.

“There should be a demand kick-up and a supply shortage and, as a result, a peak” in profit margins, he said.

Low natural-gas prices relative to oil will continue to benefit LyondellBasell’s U.S. factories as more ethane is extracted from shale gas through 2013, providing enough raw materials to supply five new crackers, Gallogly said. LyondellBasell is focusing on getting more ethylene from existing crackers and may partner with others to build more capacity, Gallogly said.

LyondellBasell fell 89 cents, or 2.1 percent, to $41.33 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 20 percent this year.