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Low-cost U.S. chemical feedstocks not enough to compete with China
HOUSTON – Competition for agreements to construct new petrochemical facilities will pit low feedstock prices in the U.S. against low-and-declining construction costs in China, Russell Heinen, Senior Executive Director of Chemical Consulting at IHS Markit OMDC Consulting, said today at the monthly roundtable luncheon of the Rice Global Engineering & Construction Forum (RGF).
“The cost-difference between China and the U.S. has always been an issue,” Heinen said. “What has changed is that China can now supply nearly 100 percent of the materials needed for a project, which has further reduced costs of facilities in that country.
“At the same time, U.S. construction costs continue to rise largely due to increasing labor costs,” he said. “That is important now because the differentials have reached the point that very strange project configurations and options are beginning to look economic.”
Heinen said rapid production growth from shale wells has provided the U.S. with a great economic advantage as a supplier of feedstocks.
“How this advantage is leveraged could change due to the widening differential between building in China and on the U.S. Gulf Coast,” he said. “Understanding the forces that influence where and what chemical companies build enables energy engineering and construction to focus their efforts on sectors that offer the best opportunities.”
About Russell Heinen: Russell Heinen serves as Senior Executive Director of Chemical Consulting at IHS Markit OMDC Consulting, where he focuses on issues impacting company competitiveness. Prior to 2015, he was senior director of the technology and analytics group, in which position he was responsible for IHS Chemical’s Process Economics Program (PEP), Competitive Cost and Margin Analytics program, and IHS Downstream Capital Cost Service. In addition to managing these programs, he also managed platform development initiatives such as the Global Price System and Scenario Forecasting System. In that role, Heinen’s responsibilities included management of existing programs and development of new services that integrated the upstream and downstream expertise residing in the other parts of HIS. Heinen continues involvement in consulting activities, especially related to process technology evaluation and operations.
For more information about U.S.-China competition chemical processing facilities, please contact: Russell Heinen at 281-203-6285 or at russell.heinen@IHSMarkit.com.
About the Rice Global Engineering & Construction Forum: The Rice Global E&C Forum is a voluntary academic-industry organization dedicated to stimulating original thinking, discussion, and resolution of the major economic, political, strategic and technological challenges and opportunities faced by global engineering and construction companies. The RGF hosts monthly roundtable luncheons and a fall conference each year on the campus of Rice University.
For more information about the RGF, please contact: Martin Van Sickels, RGF executive director, at 281-370-0374 or firstname.lastname@example.org; Marty Schweers, RGF Board of Directors chair, at 713-753-2221 or email@example.com; or A. D. Koen, RGF media advisor, at 713-812-1623 or firstname.lastname@example.org.
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