Shale driving reshoring work back to Appalachia – Plastics News

by admin on December 15, 2021

Supplies of resin and other feedstocks — along with lower shipping costs — are driving reshoring work back to Appalachia and other parts of the U.S.

That’s the viewpoint of Greg Kozera, marketing director with Shale Crescent USA, a trade group based in Marietta, Ohio.

He says Shell Polymers’ pending opening of a major polyethylene resin complex in Monaca, Pa., will be a huge boost for the Appalachia region, which covers parts of Ohio, Pennsylvania and West Virginia. The Shell plant will have more than 3 billion pounds of annual PE production capacity and is set to open in the first quarter of 2022.

Shell chose the site because of its access to the Marcellus and Utica shale-based natural gas deposits. Natural gas can be converted into ethane and then into ethylene and PE resin. The site will be the first U.S. PE plant built outside of the Gulf Coast in at least 40 years.

“We’re seeing more reshoring activity,” Kozera said in a recent interview with Plastics News. “Processors will reshore if they know they can get more PE [resin] and have a reliable supply of it delivered by truck. They know they can depend on it, while a lot of Gulf Coast PE sites have had to declare force majeure because of hurricanes.”

In a recent column for Shale Crescent, Kozera pointed out that exercise equipment maker Peloton is building a plant in Northwest Ohio, “where their raw materials and customers are both located.”

“We know others will follow when they understand the cost advantages the USA and the Shale Crescent USA now have over foreign manufacturers,” he wrote. “Regional companies are pivoting and expanding. Foreign companies see advantages of manufacturing where their customers are located. They are coming to the region.”

Early next year, Shale Crescent will release a study done in conjunction with the Jobs Ohio trade group comparing manufacturing costs in Cambridge, Ohio — a city of 10,000 in the region — to those in China.

“We won big time head to head,” Kozera said. “U.S. manufacturers think they can’t compete with China on labor, but China’s labor costs are rising.”

According to Kozera, the “two big features” in current reshoring decisions are feedstocks and transportation. Natural gas supplied from the Marcellus and Utica shale deposits provide feedstocks, while rail and trucking costs in the U.S. currently are less than ocean shipping rates.

Higher natural gas prices in recent months also have made the market more appealing, Kozera said, allowing energy firms to pay down debt and remain in the region. With few exceptions, natural gas prices had been below $4 per million Btu since 2015, but they were above that level from late August to early December and were at $3.80 in early trading Dec. 16.

Shale Crescent also has been contacted by plastics recycling firms looking to establish a presence in the region.

“Plastic remains a very sustainable material,” Kozera said. “If you’re against plastic manufacturing, are you even an environmentalist?”

“We need to continue to use our energy advantage,” he added. “The time is here to make products in the U.S.”

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