The worst of Brazil's recession appears over, and petrochemical players in Latin America's largest economy seem to share the sentiment as they eye the future, particularly for polyethylene and polypropylene. Bernardo Fallas shares what he heard at the Feiplastic International Plastic Trade Show in Sao Paulo and how global majors are positioning themselves with capacity along the US Gulf Coast to target Brazil.
Polymer market expects uptick in Brazil's PE, PP demand in 2017
By Bernardo Fallas, associate editorial director, Americas petrochemicals
Welcome to The Snapshot – our series which examines the forces shaping and driving global commodities markets today.
Visit Brazil, and while folks there will be quick to remind you that a recession of historic proportions is by no means over, they tend to agree the worst appears behind Latin America’s largest economy. A similar sentiment was expressed by polymer market participants at the Feiplastic International Plastic Trade Show, held in early April in Sao Paulo.
While Brazil has one of world's largest chemical markets, it also grapples with huge trade deficit
Brazil has one of the world’s largest chemical markets, with some estimates pegging revenue north of 110 billion dollars as recently as 2015. But the country also grapples with a huge trade deficit, which in 2016 topped 22 billion dollars, according to ABIQUIM, Brazil’s chemical association.
Brazil is also Latin America’s largest producer, consumer and exporter of polymers, mainly polyethylene and polypropylene. The country boasts more than 3 million metric tons per year of PE capacity and nearly 2 million tons per year of PP capacity, all of it controlled by Braskem across four petrochemical hubs.
Braskem expects Brazil’s PE and PP demands in 2017 to hover around 2.5 million and 1.4 million tons, respectively.
But because the company exports a significant portion of its production, the country is also a major import destination for resin from around the world. It was no surprise, then, that in addition to the more upbeat mood of this year’s FEIPLASTIC compared to two years ago, global majors made their presence felt at the fair.
For ExxonMobil, which has world-scale polyethylene capacity in the US Gulf Coast region slated for startup during the second half of the year, Brazil offers a major opportunity in terms of growth. ExxonMobil’s presence is being felt particularly in the metallocene linear low density grades, market sources said. Dow Chemical, a longtime player in Brazil given its Argentina-based production, also has world-scale PE capacity coming online in the US Gulf Coast in 2017 and is looking to increase market share in the region.
ExxonMobil’s and Dow’s projects are part of a wave of new US capacity that is expected to add some 5.4 million tons of ethylene and 3.8 million of PE this year. The expansions and timelines proved a hot topic at the fair given their possible effect on pricing in the region in late 2017 and into 2018.
Meanwhile, Sabic, the Saudi Arabia-based major, is expanding operations and already imports significant amounts of resin, including high-density pipe grade material.
Braskem anticipates 2017 to bring 2% rebound in PE demand, 2.2% increase for PP
Braskem is anticipating a 2 percent rebound in PE demand in 2017 after 6-7 percent contraction in 2015-2016. For PP, a 2.2 percent increase after a roughly 9 percent contraction in 2015-2016. A sign, perhaps, that green shoots, as one US PE producer CEO recently put it, are beginning to emerge.
Until next time on the Snapshot—we’ll be keeping an eye on the markets.