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June 01, 2016 02:00 AM

Latin America expected to be in the market for PE exports

Frank Esposito
Senior Staff Reporter
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    Here's some good news for all those North American resin makers adding polyethylene capacity: Latin America needs all the PE it can get.

    That's the conclusion of a new study released by Houston-based IHS Chemical. Demand for the material is growing in Latin America — including Mexico, Central America and South America — because of an expanding middle class, but the region's current and planned PE capacity will continue to fall short of demand, driving the region to import approximately 50 percent of its PE needs by 2025.

    Annual demand for high density, low density and linear low density PE in Latin America currently exceeds 15 billion pounds, according to IHS. But the region currently has a net PE deficit of almost 7 billion pounds. By 2025, the region's net PE deficit will approach 11 billion pounds, as reported in the IHS Chemical Special Report: Latin American Polyethylene Market: Supply Shortfalls, the Growing Opportunity. IHS partnered on the report with Brazilian consulting firm MaxiQuim.

    The lack of future PE capacity expansion in Latin America “has been caused by the lack of competitiveness of regional feedstock resources compared to U.S. shale-based production,” IHS senior director of consulting Raul Arias Alvarez said in a news release.

    As a result, the PE imbalance will be sustained and will increase as the economy starts to improve, further driving plastics demand in the region, added Arias Alvarez, the lead author of the report. PE imports will have to increase to meet demand, he said.

    Latin America is home to more than 630 million people, including a large, youthful population, but is expected to see its GDP decline 0.7 percent in 2016, according to IHS officials. The region should recover, they added, driving greater consumer demand for a host of durable goods that are made from plastics.

    North America can help meet this PE appetite, as almost 18 billion pounds of new capacity is set to come online there in the next five years. In 2017 alone, 6 billion pounds of new capacity is expected to arrive from projects by Dow Chemical, ExxonMobil Chemical and Chevron Phillips. All three of those projects are located on the Gulf Coast of Texas. 

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