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South America to be key market for global PE exports through 2018

By: Bob Moser
PLASTICS NEWS CORRESPONDENT

September 13, 2013

SÃO PAULO — South America will be the key market for North American polyethylene producers to focus exports over the next half decade, as regional demand is projected to rise nearly 5 percent per year through 2018 while production capacity remains stagnant, according to IHS Inc.

The continent is currently a net importer of PE to the tune of 4 billion pounds, which should increase to 6.6 billion pounds by 2018. North America currently supplies 52 percent of South American PE imports, a figure projected to rise to 62 percent within five years, said Nick Vafiadis, senior director for global polyolefins and plastics at IHS, during the Latin American Petrochemicals & Polymers Conference in São Paulo, Sept. 4-5.

PE global demand is projected by IHS to grow by an average of 4.6 percent annually over the next five years, from 181 billion pounds this year to 227 billion pounds in 2018. By the end of this decade, North America will be a shale gas-driven force in competitive production and export.

"We are going through a significant, fundamental change in the market (re: shale gas), and it will affect all of you in production and trade," said Rina Quijada, senior director Latin America for IHS. "It may seem we talk too much about shale gas, but the message we want to leave South America's southern cone with is to expect this major shift."

Global ethylene production in 2013 is expected to reach 293 billion pounds, out of a potential 340 billion pound-production capacity (86 percent utilization). Of that, Asia-Pacific leads suppliers with 32 percent of total production, followed by North America (23 percent). South America trails all major markets with 4 percent.

South America's 2013 ethylene production capacity is 13 billion pounds, with Brazil accounting for 71 percent of that total. Naphtha accounts for 78 percent of Brazil's production, and Braskem imports 52 percent of its total naphtha demand for crackers.

There's little flexibility for Brazil in terms of current feedstocks, and the devaluation of Brazil's currency this year has made imports even more costly, Vafiadis said. Brazil is currently producing about 441 million pounds of ethylene from ethanol, but optimism from recent years of growth in this green niche has waned, following multiple delays on new ethanol-to-plastics projects, and the steadily rising price of ethanol for auto fuel.

Proposed crackers at Brazil's Comperj project are expected to move to a natural gas-based feedstock from offshore pre-salt oil exploration, and away from naphtha as originally planned. Braskem said it will announce in 2014 whether it will go forward with a Comperj investment, and is believed to be re-evaluating the project based on shale-based capacity additions in North America.

Brazil's Comperj likely will not be operational until at least 2019, Vafiadis said.