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TitleThe Shift from US Production of Commodity Petrochemicals to Value-Added Specialty Chemical
LanguageEnglish
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Page 1

,THE SHIFT FROM U.S. PRODUCTION
OF COMMODITY PETROCHEMICALS
TO VALUE-ADDED SPECIAL TY
CHEMICAL PRODUCTS AND
THE POSSIBLE IMPACT
ON U.S. TRADE

Report on Investigation
No. 332-183 Under Section ·
332{b) of the Tariff Act
of 1930

0

USITC PUBLICATION 16 77

APRIL 1985

United States International Trade Commission I Washington, D.C. 20438

Page 2

UNITED STATES INTERNATIONAL TRADE COMMISSION

COMMISSIONERS

Paula Stern, Chairwoman

Susan W. Llebeler, Vice Chairman .

Alfred E. Eckes
Seeley G. Lodwick

David a. Rohr

Prepared principally by

Eric Land, Project Leader

Edward J. Matusik, Jr.

Edward J. Taylor

Office of Industries

Acting Director, Vern Simpson

Address all communications to

Kenneth R._ Mason, Secretary to the Commission
U11ited S~ates International Trade Commission

·w ashington, DC 20436

Page 81

63

These world-scale petrochemical projects are either joint ventures
between SABIC, the state-owned corporation for. the establishment of
capital-intensive industry projects, and several of the world's largest ·
petroleum and chemical.companies, or private Saudi investments. Feedstocks
for these plants will be derived from natural gas which was previously burned
("fl~red") during the processing of crude oil. Collecting and using this
formerly wasted gas gives the kingdom an extremely cheap source of raw
material. !I .In exchange for the cost advantage of the natural gas
feedstocks, the joint ventu.re partners have agreed to market that portion of
the production earmarked for export, and to train Saudi workers in the
operation of the facilities. Saudi Arabia then benefits from having
established worldwide foreign marketing and distribution networks for its
goods and having its citizens trained in skilled technical areas. The Saudis
project their 1990 capacity in basic commodity petrochemicals to be about 6
percent of the total world capacity. !I

The presence of the Saudi facilities has been already felt in Europe.
The plant at Al-Jubail·, National Methanol Company (Ibn Sina), jointly operated
by sa:blc" and two U.S._;based multinationals, began shipments of methanol to Far
Eastern markets and the EEC in July 1984. The first shipments included a 26.5
million pound parcel t~ India and 5.5 million pounds to Spain, both priced at
$i40 per metric· ton. ··.A s.econd deal has also been concluded by Sabic for
delivery of 44 miflion· poirn~ds (20,000 metric tons) to India at $155 per
ton. i1 The i:nethanol from the Al..:.:Jubail.plant was shipped by chemical tankers
owner by· a ·Norwegian._firm with a long-term contract with the National Methanol
Company. ~/"In 1985, a 43 ,000-dWt methanol carrier is schedu],.ed to be "
delivered to.the National.Shipping Company of Saudi Arabia. The ship, built
in South Korea, will be. chartered by the National Methanol Company and used
exclU.sively for shipi:nents of this chemical. ~/ -i

Shipments of methanol from the first Saudi methanol unit onstrearn owned
by the Saudi Methanol Comp_any, which began production in April 1983, have
totaled 107,000 metric tons to the EEC and 100,000 metric tons to other
markets. 6/ SABIC also plans to establish a U.S. sales office in either New
York or Houston to ll\ilrket approximately 120,000 metric tons of met~anol and
100,000-150,000 metric tons of ethylene glycol in the United States. ll

!I U~S. International Trade Conunission, The Probable Impact on the U.S.
Petrochemical Industry of the Expanding Petrochemical Industries in the
Conventional Energy Rich Nations, USITC Publication 1370, April 1983.

!I Ibid. . .
it. "Saudi Methanol Sales Start to Increase Pace," European Chemical News,

Sept. 3, 1984, p. 6. .
· 4/ "Enichem Signs Commercial Pact With Saudi Chemical Industry," European

Ch;mical News, July 9, 1984, p: 1'0.
~/ "Distribution_ Patterns for Methanol to Change," European Chemical News,

Jan. 2 and 9, 1984, p. 14.
!!_I "Saudi Methanol Sales Start to. Increase Pace," European Chemical News,

Sept. 3, 1984, p. 6.
ll "Who's Who in Saudi Chemicals,"·Chemical Week, Jan. 16, 1985, p. 10.

<.

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64

By mid-1985, Saudi ethylene capacity will be 1.6 million metric tons per
year. 11 This will represent approximately 3 percent of the world's total
capacity. Although the Saudis will not have a major share·of world capacity,
their feedstock price advantage could enable them to direct the market price
for the comrnodity. It .is estimated that the Saudi-produced :ethylene could be
priced at $258 per ton, 48 percent less than U.S. material, 61 percent less
than European and 63 percent :less than the Japanese product. ~/

Other Conventional Energy Rich Nations

Mexico

Petroleos Mexicanos (PEMEX), a government owned corporation formed in
1938, is the sole owner of "basic" commodity petrochemical industries in
Mexico. The ownership extends to some first and second generation derivatives
as well. Mexico's industrial power in petrochemicals resides primarily in its

.extensive natural resource base. As of January 1, 1985, Mexico's proven crude
petroleum reserves were·48.6 billion barrels, placing it fourth in the world
behind Saudi Arabia, Kuwait, ·and the Soviet Union. 11

Utilizing its position as the world's fourth largest source of crude
petroleum, Mexico feels it can both provide for· its own growing demand 'for
petrochemicals and also become one of the largest producers· for the

. international market. Its proximity to the United States, the largest atid
most stable market for conunodity petrochemicals, gives Mexico a marked
advantage when compared with the Middle Eastern nations. But 'PEMEX, which
does not permit any joint-venture operations where basic comrnoditity
petrochemicals are concerned, also retains some first and second downstream
derivatives for its quasi-Government ownership. ii This makes it necessary
fo~ Mexico to develop its own distribution and marketing structure, whereas
Saudi producers, for example, can use their joint-veriture partners' alrea~y
established marketing· networks. The Mexican Government recognizes the obvious
drawbacks to this situation. In February 1984, Mexico's National Commission
on F~reign Investment addressed the problem by ·announcing that the Government
planned to promote foreign investment in certain key industrial areas. ~I The
announced reason was to bring in foreign investment capital and to develop
downstream industries, a weak point in Mexico's industrial structure. ~I

In 1982, Mexico had a petrochemical trade deficit of $400 million. ll In
1982, imports of chemicals .were valued at $2.2 billion, but exports were only

11 U.S. International Trade Commission, The Probable Impact on the U.S.
Petrochemical Industry of the Expanding Petrochemical Industries in the
Conventional Energy Rich Nations, USITC·Publication 1370, April 1983.

~I Ibid.
11 "Worldwide Report," Oil & Gas Journal, Dec. 31, 1984, pp. 74-75.
ii U.S. International Trade Commission, The Probable Impact on the U.S.

Petrochemical Industry of the Expanding Petrochemical Industries in the ·
Conventional Energy Rich Nations, USITC Publication 1370, April 1983, pp.
104-121.

2_1 "Mexico: U.S. Exports Increase As Adjustment Continues," Business
America, Aug. 20, 1984, p. 25.

~I Ibid.
71 "International Forecast," Chemical Week, Jan. 25, 1984, pp. 74-76.

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