The announcement by LyondellBasell Industries that it is acquiring rival A. Schulman Inc. for $2.25 billion is another in a long line of positive indicators on how affordable prices for natural gas are helping to grow the U.S. economy.
LyondellBasell has focused its business on the manufacture of polymers targeting the automotive industry, and now believes the acquisition of A. Schulman will allow it to diversify its business into what it calls “high-growth end markets” like agriculture, electronics and appliances, and building and construction. As the U.S. economy continues to grow at a rapid pace, LyondellBasell hopes to take advantage as a supplier to these high-growth sectors.
Few sectors of the U.S. economy have been on a growth trajectory higher than that of the chemicals and plastics industry over the last half-decade. This is an industry that saw a very high degree of flight of capital investment overseas during the 1990s and 2000s, as tight supplies and high prices for natural gas — the industry’s major feed stock — made it far cheaper to invest in new plant and equipment in other countries. But with the discovery of massive natural gas shale plays like the Haynesville in Louisiana and the gigantic Marcellus in Pennsylvania/Ohio/West Virginia, the concerns about high prices or lack of adequate domestic supplies have dissipated.
In a December 2017 report titled “U.S. Chemical Investment Linked to Shale Gas: $185 Billion and Counting”, the American Chemistry Council (ACC) reports that, as of December, it has identified 317 new projects that will either expand existing chemical plants or build new ones in the United States. Of those, 48 percent have been completed or are currently under construction, 44 percent are in the planning phase, and the status for the remaining 8 percent is currently unknown.
One of the most compelling findings in the ACC report is that “Fully 63 percent of the announced investment is by firms based outside the U.S.” Thus, the sea change in U.S. natural gas supply and prices during this decade has completely transformed this major industry from one where U.S.-based companies were fleeing to invest billions in capital dollars overseas to one in which companies based overseas are competing with U.S.-based firms to invest in new plant and equipment in the United States.