Cheaper feedstocks and convenient access to water and rail are largely responsible for a burgeoning plastics market in the Baton Rouge metro area. Much of the demand will come from the auto and appliance markets, as new technologies increasingly make the product, in its myriad forms, more attractive to buyers.
It’s not strictly a local phenomenon, of course. Rising U.S. energy production is providing vast amounts of affordable feedstock for PVC and polyethylene plastic resin production, and producers worldwide are taking notice. The demand is there as well—global demand for petrochemical feedstock is forecast to rise to nearly 18 million barrels per day by 2050.
For these reasons, energy companies are investing billions of dollars in the petrochemical sector, with the heaviest concentrations along the Gulf Coast. American Fuel and Petrochemical Manufacturers members have said they plan to build at least 11 new ethylene plants in the region over a four-year span that began in 2018. Those plants are expected to increase polyethylene capacity by more than 30 percent.
ExxonMobil’s new $469 million polypropylene expansion, currently under construction, is the latest entrant to the Baton Rouge market. The project comes on the heels of a $1.49 billion chloralkali and vinyl chloride monomer production plant at Shintech Louisiana LLC in Plaquemine, which is expected to begin operations in 2021. Elsewhere, Formosa Plastics’ new $9.4 billion manufacturing complex in St. James Parish is expected to break ground later this year.
Travis Fuller, chemical venture growth executive at ExxonMobil in Baton Rouge, says his company’s decision to build locally was a no-brainer, as the site benefits from an abundance of synergies—available space, existing infrastructure, raw materials and utilities.
Once operational in 2021, the new polypropylene unit will produce as much as 450,000 tons of the product a year, which will be bagged and shipped by rail to New Orleans or Houston for export to South America, Mexico and/or certain Asian Pacific countries. To design and construct the unit, an engineering, procurement and construction contract was awarded to Baton Rouge-based Turner Industries and Jacobs Engineering. “Early on, we’ll export more than we’ll keep domestically, simply because there’s not enough domestic demand yet,” Fuller says. “Over the next five to eight years, we expect demand in the U.S. to catch up.”
Developing countries in the Asian Pacific and elsewhere, where the middle class is growing at an unprecedented rate, will be the biggest drivers of demand, by far. “By 2040, 70 percent of the projected 9 billion people on the planet will be considered middle class,” Fuller adds. “They’ll want cars, appliances, food in plastic containers, etc., all of which will require a durable, lightweight plastic such as polypropylene.”
For those reasons, ExxonMobil is tapping into the market in a big way, not just in Baton Rouge but at other plants in Texas and elsewhere. The expansion is part of the company’s $20 billion “Growing the Gulf” initiative to expand manufacturing facilities across the Gulf region.
The increase in petrochemical production and resulting boom in export traffic will likely put a strain on local ports. To stay ahead of the game, the Port of Greater Baton Rouge pioneered its new container-on-barge service three years ago, where empty containers are barged from Memphis to Baton Rouge to be loaded with resin, then continued downriver to New Orleans for international transport.
Jay Hardman, executive director at the port, says the service is growing like gangbusters. “Our container count has gone up significantly in 2018 over 2017, and plastics is fueling that growth,” Hardman adds. “They’re being put in containers and taken to the Port of New Orleans for export.”
The service has expanded the transportation portfolios of many Baton Rouge-area plants, most significantly Shintech in Plaquemine, the largest producer of PVC resin in the U.S. and 12th in container exports. Dow is another big customer.
The Baton Rouge port has also carved out 3 acres for stacking empty and full containers and plans to “begin operating a machine in February that will pick up the empties and stack them five high,” Hardman says. As an additional measure, the port stores plastic pellets in its transit sheds and is expanding into other areas to accommodate growth.
“We’ve got a $5 million expansion underway at our container terminals, where we’re pouring new concrete and putting in lighting so we can run around the clock,” he adds. “The end goal is to create efficiencies in the system, help drive down cost and make the process more cost-competitive.”
It’s not likely that ExxonMobil will be using the port’s container-on-barge service anytime soon, as the plant’s east bank location makes it impractical. Nonetheless, Hardman says he’s developing property on the east side of the Mississippi River that could one day be used for that purpose. As for now, the “bare bones” 6-acre site won’t have the size or capabilities to handle a significant container operation.
Dampening the mood
Despite the confidence of many plastics producers, there are some “flies in the ointment” that could dampen expectations. For ExxonMobil, steel tariffs resulting from the trade war with China are cause for concern, as much of the specialized equipment it needs for construction must be imported from overseas, beginning in March.
Another obstacle—Baton Rouge’s infamously strained interstate system could make it difficult to transport workers to the site as construction ramps up. Available skilled labor is another challenge. “It can be expensive to build when you don’t have access to an abundance of skilled labor,” Fuller says. “We hope that by choosing a local engineering firm and contractor that we’ll have access to an adequate supply without having to go to Texas and Florida to find workers.
“We’re hoping these people will be able to work on this project and go home at night. That’s what we’ve seen so far. If we can do that, the quality of labor will be better.”
Elsewhere, there have been other obstacles. Formosa in St. James Parish has had to contend with local opposition from a variety of advocacy groups. Environmentalists in the region have tried to block the project, arguing it would emit pollution into black communities along the Mississippi River corridor, generate greenhouse gases and add to worldwide plastics pollution.
Led by the Louisiana Bucket Brigade, the groups have organized marches and demonstrations against Formosa and other plants. Nonetheless, the Formosa site received a much-needed air permit in January, giving it the green light to move forward.
As for its part, Formosa has offered financial assistance for area roads, a park and a nearby elementary school. The company also says it will hire locally and create a workforce academy to train parish residents.