APLA ’08: Rocky road for Latin American petchems

16 November 2008 21:58  [Source: ICIS news]

By Greg Holt

RIO DE JANEIRO (ICIS news)--Latin America has potential for growth in the petrochemical sector, but the next few years will be a challenge as the world enters a period of global recession, an industry consultant said on Sunday.

Abundant crude oil reserves, a large and fast-growing population, and increasingly stable economic and political systems will combine to strengthen Latin America’s place in the petrochemical industry, said CMAI’s Mark Eramo during the opening address at the 28th Latin American Petrochemical Association meeting.

In Mexico, privatisation of the energy sector will increase efficiency and production, while natural gas exploration in Chile and Argentina will allow their petrochemical industries to be more feedstock self-sufficient, Eramo said.

Meanwhile, regional leader Brazil will prove more effective at responding to the rapidly-changing business environment through industry consolidation, and newly discovered crude reserves will ensure the sustainability of its petrochemical sector far into the future, Eramo said. 

However, he said Latin America and the rest of the world must first endure a cyclical downturn as demand slows and prices in many markets enter a period of freefall.

Capacity expansions that are now coming online around the world, funded by the cyclical upturn in petrochemical prices, will be certain to exacerbate an already-grim demand climate, Eramo said.

For example, he said more than 9m tonnes/year of new ethylene production capacity will come online in the Middle East in the fourth-quarter 2008 and the first-quarter 2009 and accelerate the decline of ethylene prices around the world.

“It couldn’t be timed worse in terms of the global recession,” Eramo said.

Capacity expansions in ethylene and other markets will cause producers to reduce their production rates, Eramo said, adding that plant closures are likely in slower-growing markets such as North America.

Yet North American and European producers will continue to find export opportunities in developing markets, and the Middle East plant construction boom will be limited over time by the availability of feedstocks, Eramo said.

“Eventually the tidal wave of capacity added in the Middle East will slow and investment will be needed in other markets, such as Brazil and Mexico,” Eramo said.

The conference opened on Sunday and ends on Tuesday.

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By: Greg Holt
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