Battle for PE market share heats up in Mexico

Marianela Toledo

12-Nov-2015

MEXICO CITY (ICIS)–Forget about the “currency war” in Latin America. The newest battle is among polyethylene (PE) market players and it focuses on Mexico, for now.

The fight is an offshoot of the market changes expected to be wrought by Braskem Idesa’s Ethylene XXI project, set to start up in late December 2015. The project will comprise a 1.05m tonne/year ethane cracker, two high density PE (HDPE) units totaling 750,000 tonnes/year of capacity, and one low density PE (LDPE) unit of 300,000 tonnes/year.

Before Ethylene XXI, Pemex was Mexico’s sole local PE producer, providing 600,000 tonnes/year amid a total demand estimated at 2m tonnes/year.

Mexico’s local converters in the past have had to buy from many different foreign sources to fulfill their production needs. Most of those resins usually came from US PE producers, with Dow Chemical as one of the biggest players, followed by ExxonMobil, Formosa, Chevron Phillips and others, according to market sources.

But the PE production from Ethylene XXI is already starting to change the market. Some are fighting to gain market share and others are ready to defend their long-term business arrangements.

“The market campaign started last year, and has increased now,” a market source said. One US PE producer has been offering specialised resins such as linear exenos, octenes, exenos metallocene and ultra-low density, the source added.

Specialised resins are usually more expensive than commodity resins, but, for now, those products have been offered at the same prices as the commodity grades, the source said.

“The expectation of many people was that Braskem Idesa would sell in pesos and not in US dollars,” the source added, but that is unlikely to happen.

Right now, only the local producer, Pemex, sells resins in Mexican pesos.

The market challenge, said another source, is that traders have long-standing relationships with processors, and some have served as financiers for transactions, as well.

The market source spoke earlier this week on the sidelines of the Latin American Petrochemical Association (APLA) conference in Cancun, Mexico.

According to the source at APLA, domestic and international PE producers in Mexico will have to focus on technical quality, service and financing to gain market share.

“Training adequate numbers of workers is basic,” the source added. “There are not enough skilled workers.”

Both sources agreed that, next year, the battle for market share will continue to heat up and become more sharply focused on price.

“There will be a buyer’s market,” the first source said.

As for the rest of Latin America, it is expected that significant volume of the new Braskem Idesa production will be made available for exports.

This additional volume will have to compete with imports from the US, Middle East and Asia.

Focus story by Marianela Toledo

Photo: Cracking towers and chemical storage tanks dote the Pemex refinery in Tula, Mexico. (KD/Keystone USA/REX Shutterstock)

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