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Despite struggles, Europe still key market in global resin picture

By: Frank Esposito

April 15, 2014

HOUSTON — Challenges and opportunities facing international plastics and chemicals markets were tackled by a trio of top executives at the IHS World Petrochemical Conference in Houston.

Like the United States, Mexico has large shale gas deposits. Development of these assets could give Mexico “the opportunity to replicate the success of unconventional oil and gas in North America,” according to Jose de Jesus Valdez Simancas, president of Mexico City-based petrochemicals firm Alpek SA de CV. Alpek’s assets include DAK Americas, which ranks as one of North America’s largest PET resin makers.

Mexico ranks sixth in global shale gas deposits. Elsewhere in Latin America, Argentina ranks third and Brazil ranks 10th. Mexico and Brazil account for about 70 percent of Latin American petrochemicals demand, Simancas said at the event, which was held March 26-27.

Investment is needed to develop Mexico’s natural gas base, and Simancas explained that new energy reforms there will allow private investment into upstream sectors. Currently, imports account for 30 percent of Mexico’s natural gas supply. Natural gas also is becoming more important as Mexico’s oil production has dropped 25 percent in the last eight years.

Mexico also will be the site of the next big polyethylene and ethylene expansion in the region, when the Braskem Idesa JV opens a major complex in Coatzacoalcos in 2015.

The European petrochemicals sector continues to battle its way back to prosperity, according to Daniele Ferrari, CEO of petrochemicals maker Versalis SpA in Milan, Italy.

“The world economy is up, but Europe continues to struggle,” he said.

Much of the region is emerging from recession, and its costs for natural gas — some of which is imported — remain high. The European trade balance would be positive without energy, Ferrari added.

“European chemical sales are growing, but they’re a smaller part of the global market,” he explained. “European companies have been squeezed by stagnant demand, high-priced feedstocks and bureaucratic burdens.”

But Ferrari added that “there’s a lot at stake” for the petrochemicals industry in Europe. The region has a population of 740 million, produces 41 percent of the world’s exports and is home to 20 percent of world plastic production.

European firms have responded by rationalizing older capacity — including more than 3 billion pounds of PE and ethylene — and by retrofitting production units to use lighter, natural gas-based feeds.

For its part, Versalis has invested in a pair of joint venture elastomers projects in Asia and in bio-based chemical projects in Europe with Genomatica and Elevance.

Petrochemical capacity and consumption continue to grow in the Middle East, according to Warren Wilder, executive director of downstream chemicals for state-owned Saudi Aramco in Riyadh, Saudi Arabia.

But the region’s big challenge is in “human capital” — finding workers for its industries.

Wilder said Saudi Arabia “continues to be a leader in the region” because of its strong GDP growth and young and growing population. Industries there also are moving from commodity products like PE and PP to performance polymers — such as nylon, polycarbonate and elastomers — as well as specialty chemicals. Saudi Aramco also has partnered with Dow Chemical on the massive Sadara joint venture plastics and petrochemicals complex in Saudi Arabia.

“Our greatest shortage is skills, not capital and not feedstocks,” Wilder said. “We’re evolving toward value-added chemical and plastics products.”