BUENOS AIRES, ARGENTINA — Toward the end of 2000, Dow Chemical Co. will launch a 595 million-pound-per-year plant in Bahia Blanca, Argentina, concluding a cycle of investments aimed at positioning the firm as a major polyethylene player in South America. The new unit will make between 110 million and 154 million pounds per year of high density polyethylene, and will use the rest of its capability to produce linear low density PE.
"We'll launch the plant producing mainly Dow's linear octene resin Dowlex, then begin producing Elite [metallocene] grades in the first half of 2001," said Isidro Quiroga, business development manager for Dow Latin America division.
Dow's resin business in Argentina operates under the Polisur SA's umbrella, a Buenos Aires-based association in which Dow Chemical Co. of Midland, Mich., holds a 70 percent stake, and the Spanish Repsol YPF group, 30 percent.
Besides a nearly completed Solutia Inc. facility, Polisur operates three plants in the Bahia Blanca complex, which already has annual capacity of 695 million pounds per year. The plants comprise an HDPE slurry facility, which in March boosted annual output from 132 million to 254 million pounds; a swing gas-phase HDPE/LLDPE unit that produces 254 million pounds a year; and a 187 million-pound-per-year LDPE production line.
When the new plant starts up, the gas-phase unit — which now produces only about 88 million pounds of LLDPE a year — will focus on making HDPE, Quiroga said.
Expanding the existing units and building the new plant cost about $250 million.
Dow's South American PE production also includes a 106 million-pound-per-year LDPE plant in Talcahuano, Chile; and it holds a 25.2 percent minority interest in Petroquimica Triunfo SA, an LDPE unit in Triunfo, Brazil, with an output of 287 million pounds.
With its new Bahia Blanca plant and its stake in Petroquimica Triunfo, Dow soon will reach total PE capacity of 1.68 billion pounds a year in South America.
Also, if its proposed merger with Union Carbide Corp. is approved, Dow's total capacity in the region will reach 2 billion pounds — including Carbide's 317 million pound LDPE plant in Cubatao, Brazil.
For now, the two most important PE players in South America are the Brazilian firms OPP Petroquimica SA of Sao Paulo and Ipiranga Petroquimica SA of Porto Alegre, with capacities of 1.87 billion pounds and 1.1 billion pounds, respectively.
"With all these new and expanded units [in Argentina], we'll be substituting the resins we import from Dow plants in the United States and Europe for local production," Quiroga said. "Our strategy is to sell as much as possible in Argentina, then in Mercosul and in South America."
Quiroga estimated 70-80 percent of the PE produced in the Bahia Blanca complex will be sold in the Mercosul trade region and Chile.
Dow has invested much effort in market development in the past four years to penetrate Latin America, including Mexico and the Caribbean. Those efforts involve promoting LLDPE use in Chile, installing a product development lab in Bahia Blanca and promoting technical seminars for clients in Argentina, Brazil and Mexico.
"In 1999, roughly 900 representatives from 500-600 clients attended our technical seminars in Latin America," Quiroga said.
This year, Dow expects to sell about 1.43 billion pounds of PE resins in Latin America.
He said PE demand in 2000 will reach 4.41 billion pounds in Mercosul, a region that possesses a 5.29 billion-pound production capacity. In Latin America, the expected figures are 9.63 billion pounds for consumption, and 7.45 billion pounds of supply capacity.
To guarantee raw material and competitiveness for its South American PE business, Dow has partnered with Petroquimica Bahia Blanca SA, an ethylene source that expects to more than double capacity to 1.54 billion pounds by early 2001, via a $300 million investment. PBB is a joint venture between Dow (62 percent), Repsol YPF (28 percent) and Itochu Corp. (10 percent).