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North American petrochemical renaissance reshaping Latin American industry

Hydrocarbon Engineering,

According to IHS, growing demand for chemicals, plastics and durable goods in Latin America is elevating the region as a strategic market for North American petrochemical producers.

At the same time, the North America petrochemical renaissance, which is being driven by low cost shale feedstocks, is reshaping the Latin American petrochemical industry, including investments and projects in Brazil, Mexico, and other countries in the region.

Rina Quijada, senior director, Latin America, for IHS Chemical, commented: “This is a critical time of change and opportunity for the Latin American petrochemical industry. On the one hand, we have steady economic growth in the region, which is driving demand for chemicals and finished goods, and at the same time, we have significant surplus chemical capacity coming from North American producers, who are now viewing Latin America as a long term strategic partner”.

According to IHS economic analysis, Latin American GDP performance is expected to slightly outpace global GDP growth by 2018, with Brazil accounting for 40% of the region’s total GDP growth. To meet increased regional consumer demand, competitively priced finished products will be produced by sourcing resins from low cost sites in North America and converting them into plastics and other high value chemicals.

Before the North American shale energy revolution, which has created a significant supply of natural gas and tight oil and driven the US petrochemical renaissance, numerous petrochemical projects were planned in Latin America that were naphtha based, but all those plans are now under reevaluation. On the other hand, the Braskem-IDESA ethylene/polyethylene project in Mexico, called Etileno XXI, is the first site to come onstream in Latin America by the end of 2015.

“The US has announced approximately 10 million t of ethane based ethylene capacity”, Quijada said. “That is significant capacity expansion, and since their production will exceed domestic demand, they will have to export excess production. Latin America represents an attractive export option, due to geography, economics, demand, and attractive netback for North American producers”.

IHS holds that these market challenges are creating both challenges and opportunities for domestic and state owned petrochemical producers. Additionally, for the industry to grow in the region, capital investments in infrastructure must be made.

Quijada continued: “Limited access to hard currency makes it challenging for some countries in Latin America to remain competitive in a global market. Unless additional capacity is added in the region to meet growing demand of end use products, countries will have to rely even more on imports, which are risky due to exchange rate fluctuations. The market is changing, so companies are now adapting to change”.

Adapted from a press release by Emma McAleavey.

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