LatAm to continue absorbing considerable PE, PP global capacities coming online

Jonathan Lopez

06-Jun-2023

BUENOS AIRES (ICIS)–Latin America is set to continue being a net importer of polyethylene (PE) and polypropylene (PP) as more global capacities come on stream, an ICIS expert said on Tuesday.

Thais Matsuda, chemicals analyst for Latin America at ICIS, said the region is expected to continue receiving large amounts of the two polymers coming from northeast Asia, the Middle East and the US.

While exports from the Middle East to Latin America are expected to increase in coming years as the region also becomes a key PE and PP producer after sharply increasing its capacities, the US is set to continue being king when it comes to sending product to the region, said Matsuda.

She was speaking at an event organised by the Latin American Petrochemical and Chemical Association (APLA).

AWASH WITH POLYMERS The US is expected to export up to 45% of its PE and PP production that has come online in the past decade, spurred by the shale gas boom.

Matsuda said the US would need to export that 45% of its capacities to keep its operating rates at healthy levels; however, she added this would not include potential rationalisation, i.e. some old plants being shut down in coming years.

The US also plays with the advantage that most of its polymers production is concentrated in the Gulf Coast, a location which makes it very easy sending product to southern neighbours in Latin America.

In fact, Latin America received 70% of its PE and PP imports from North America in 2022, mainly the US.

Meanwhile, northeast Asia producers – China, Korea and Japan, among others – sent in 2022 35% of their PE and PP exports to Latin America.

Source: ICIS Supply & Demand

Therefore, Latin America is set to continue as a major outlet for PE and PP producers globally.

Only in 2023-2024, the global capacities for the two polymers are expected to increase by 26m tonnes, and more are set to come online in 2025 and 2026.

Source: ICIS Supply & Demand

HDPE: high-density polyethylene. LDPE: low-density polyethylene. LLDPE: linear low-density polyethylene. Source: ICIS Supply & Demand

However, Matsuda said PE and PP global supply is expected to outpace demand by a large amount, which will represent a "challenging" scenario for the petrochemicals industry.

In that scenario, prices could come down as producers compete fiercely for market share, she said.

"In summary, a major rebound in crude oil prices has not taken place despite OPEC+ production cuts as economic conditions globally soften," said Matsuda.

"The cost advantage for North America's olefins and derivative plants is set to continue, while excessive new capacity is set to come online, mainly in Asia. An oversupplied market is set to result in a challenging scenario for the petrochemical industry."

The APLA Logistics event runs in Buenos Aires on 6-7 June.

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