APLA ’23: Global PE market to see real recovery in 2025 – Braskem Idesa CEO
SAO PAULO (ICIS)–It’s clear as day that the global polyethylene (PE) market is oversupplied and that it will take some time for the industry to crawl out of the trough. 2024 looks to be a transition period coming out of the bottom with a more robust recovery expected in 2025, said the CEO of Braskem Idesa.
“We are dealing with a very complex moment in the global petrochemical business. There’s been a huge impact on the industry because some new capacity, especially in the US, that was postponed during the pandemic, started up last year and this year. There was also new capacity in Asia and especially in China,” said Stefan Lepecki, CEO of Braskem Idesa, in an interview with ICIS.
“We have oversupply, and we don’t see economies reacting as expected. China, the US and Europe – demand from these regions is really not growing as expected,” he added.
Thus, today’s “moment of disequilibrium” is putting pressure on PE spreads around the world. In this global business, weak demand in China impacts the US and Latin America and vice versa, he pointed out.
Braskem Idesa’s Ethylene XXI ethane cracker in Coatzacoalcos, Mexico, is feedstock advantaged, however, with ethane at around $170/tonne in Mexico and below $3/MMBtu in the US, from where it imports a portion of its feedstock requirements.
Downstream from the 1.05m tonne/year cracker are capacities of 750,000 tonnes/year of high density PE (HDPE) and 300,000 tonnes/year of low density PE (LDPE).
The bottom in PE prices was likely seen in July 2023 as there has been improvement since on stronger demand, said the CEO.
2024 EXPECTED TO BE BETTER THAN
“And we also see a better 2024 than 2023 but still that transition is from the downcycle to mid-cycle by H2 2024. And then we see that 2025 will be a much better year for the industry,” said Lepecki.
“We don’t have for the next two years, new capacities in the US. We still have new capacity in Asia but because we won’t have new capacity in the US in the short- to mid-term, we should be able to have a better supply-demand balance in the [Latin America] region. This will be important to the recovery,” he added.
Mexico’s PE market is facing more competition from imports from the US, he noted.
“The good thing is that we have a good base of clients and have developed a lot of important relationships by developing products, processes and services. We continue to believe we are a stronger player in the country and region,” said Lepecki.
Braskem Idesa typically sells around 60% of production in the local Mexico market with 40% for exports but this varies depending on where netbacks are most attractive, he said.
“We send to Central America, South America, to the US, to Europe and also to Asia. We take advantage of Mexico’s very competitive logistics network to export. On top of that we have in Mexico, free trade agreements [FTAs] with most of these countries,” said Lepecki.
“That means we have very competitive exports compared to other countries and can balance internal and external markets. In some moments, we even have better netbacks to the US and Europe than in Mexico,” he added.
Mexico’s presidential elections coming in June 2024 offers the potential for better relations between the government and private sector, the CEO said.
“What we see from the two main candidates are good speeches on energy and especially for sustainability – access to renewable energy. We see from both candidates prioritizing better dialogue with the private sector,” said Lepecki.
“We have tremendous potential in Mexico for wind and solar energy and we need to take advantage of this in a pragmatic way. The government and private sector have to work together to develop this alternative energy in Mexico,” he added.
Interview article by Joseph Chang
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