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Port Could Benefit from Plastic Resin Export Growth

August 30, 2017


It’s comeback time for one of the unlikeliest of commodities, and its growing use overseas could pay dividends for the Port of Long Beach.

Plastic resin, used to make everyday items like plastic wrap, shopping bags, consumer packaging and other plastic products, is seeing a resurgence. Horizontal drilling and hydraulic fracturing for natural gas have created an abundance of the “feedstock” used to create plastic resin.

And production of plastic resin is only expected to heat up, thanks to petrochemical companies investing billions of dollars in facilities, some of them coming online by the end of the year.

“You’re going to see an explosion of plastic resin here in the fourth quarter,” said Ray Hufnagel, President and CEO of Plastic Express, whose company specializes in the import and export of plastic resin, much of it moved through the Port of Long Beach.

And with the U.S. market already saturated, that oversupply of plastic resin is going overseas to countries in Asia, South America and Northern Africa.

According to PLG Consulting and Townsend Solutions, international demand for polyethylene, the most common plastic resin, is anticipated to swell to 170 million metric tons per year by 2026, up from 100 million metric tons produced in 2016.

“It actually gives the U.S. a sizable advantage over other resin-producing countries because of the lower feedstock prices, so you have a new plastic renaissance going on,” Hufnagel said.

This renaissance may also be a boon for the Port of Long Beach.

Currently, 45 percent of plastic resin exports move through the Port of Houston, while another 30 percent is handled through ports in Savannah, Charleston, New Orleans and New York.

The ports of Long Beach and Los Angeles handle about 18 percent of plastic resin exports, most of that coming from Houston by rail.

But Long Beach could seize more of that market share from Houston, whose port is running out of vessel space and empty containers to meet what will soon become a massive oversupply of plastic resin. It’s too early to know if the recent flooding in Houston from Hurricane Harvey will also impact shipments.

Massive investment
Since 2010, companies have invested $85 billion in petrochemical projects that have either been completed or are in the midst of construction, according to the American Chemistry Council.

That includes two projects set to start production this year, including Chevron Phillips Chemical’s polyethylene facility in Old Ocean, Texas.

ExxonMobil Chemicals also expects to produce more than 55,000 to 60,000 TEUs annually in plastic resin and truck it to and from the Port of Houston, which could run out of capacity for the shipments.

So producers are looking at the surplus of empty containers in Dallas, a major import distribution center, to route shipments through the Port of Long Beach and on to Asia. Recently, the port has been teaming with Union Pacific and BNSF railways to increase those shipments.

In late 2016, the Port of Houston was backlogged with so much congestion that customers experienced 30-day waits to book a container to ship plastic resin to China and other countries.
The Port of Long Beach, which captured a lot of business as a result of the congestion, is well positioned to grow its export market share and improve its import-dominated trade balance.

While the Port of Houston has a handful of weekly services to Asia, the ports of Long Beach and Los Angeles have nearly two dozen weekly services to Asia, as well as on-dock rail capability at nearly every terminal. Long Beach can also accommodate big ships with its deep channels.

Rail expansion
The Port of Long Beach is expanding on-dock rail at several terminals, including Long Beach Container Terminal, and has a Pier B rail yard project currently under environmental review.

“The combination of surging demand and limited capacity in other gateways has positioned the Port of Long Beach well to capture a significant share of U.S. plastic resin exports, which we are aggressively pursuing," said Mario Cordero, Port Executive Director. "With our on-dock rail capabilities and expansion plans, on top of our numerous weekly services to Asia and world-class customer service, we are ready and poised to see significant growth in this market.”

Union Pacific Railroad has prepared for this kind of growth, partnering with packaging industry leader Katoen Natie to offer a “Dallas to Dock” service, transporting plastic pellets in hopper cars from the Gulf region to Dallas. There the pellets are packaged and transferred to intermodal containers to continue their journey to ports like Long Beach.

Union Pacific boasts extensive rail infrastructure in the Gulf Coast region, combined with more than 32,000 total route miles of track across the western two-thirds of the U.S. In the last eight years, UP has invested $6.3 billion in infrastructure in its Southern Region, including $4 billion in Texas alone.

In the last three years, Plastic Express has seen 20 percent growth each year because of plastic resin, said Hufnagel, whose company ships 50 containers a day in and out of the Port of Long Beach.

“And we’re getting ready for (even more growth),” he said.

In California, Plastic Express has acquired an additional 500,000 square feet of warehousing in the past 1½ years and hired 60 more employees. The company also acquired 500,000 square feet of space and hired another 60 employees in Texas.

It’s all centered around packaging and shipping plastic resin for export, Hufnagel said.

“These expansions in domestic plastic production will allow us to streamline our business model through vertical integration of value added services,” he said. “It will optimize the global supply chain for the long haul.”

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