Latin america – market for US - Canada shale gas based pe

PetroChemicalConsultinggAlliance

Latin America – Market for U.S. and Canada Shale Gas Based PECanada Shale Gas Based PE

byJ O Bühl Vid lJorge O. Bühler-Vidal

SPE Polyolefins 2014 ConferenceHouston, TX

February 23 - 26 2014February 23 26, 2014

North Brunswick Los Angeles México D F Bogotá São Paulo Buenos Aires

Polyolefins Consulting, L.L.C.www.polyolefinsconsulting.com

Polyolefins Consulting, L.L.C.www.polyolefinsconsulting.comPO 2014 February 23 – 26, 2014

North Brunswick – Los Angeles – México D.F. – Bogotá – São Paulo – Buenos AiresBahía Blanca – Mendoza – Santiago – Porto Alegre – Guatemala – Charleston – Houston – New York

P t Ch i l C lti AlliPetroChemicalConsulting

Provides consulting products and services to clients in the

PetroChemical Consulting Alliance gAlliance

worldwide petrochemical and plastics industries, combininglocal insights with a global perspective

Members

– Dr. Alfredo Friedlander, Buenos Aires, Argentina– INovatius ICS, São Paulo, Brazil – Meem Consulting, Costa Mesa, CA, USA– Multidynamics Ltda., Bogotá, Colombiay , g ,– Pipa Consulting, Mexico, D.F., Mexico– Polyolefins Consulting, LLC, North Brunswick, NJ, USA– Unisouth SRL, Buenos Aires, ArgentinaUnisouth SRL, Buenos Aires, Argentina

Th b d t t k f t h i l lt t i th

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The broadest network of petrochemical consultants in the American continent

F ti l d hi lPetroChemicalConsultingFunctional and geographical coverage

Highly experienced consultants located throughout the Americas

A ti

Professionals specialized in:– Project planning

gAlliance

– Argentina• Buenos Aires, Bahia Blanca,

Mendoza– Brasil

– Product development and applications

– Development and selection of production technology

• São Paulo, Porto Alegre– Chile

• SantiagoPeru

production technology– Operations– Logistics– Commercialization, marketing – Peru

• Lima– Colombia

• Bogotá

, gand sales

– Technology and technical service for processors

– Guatemala• Guatemala

– Mexico• Mexico D F

Relationships with related and complementary consulting firms• Mexico, D.F.

– U.S.A.• Los Angeles, Houston,

Charleston, New YorkC i l l fi d th t h i l i d t

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Covering polyolefins and the petrochemical industry functionally and geographically

O tliOutlineIntroduction– Regional situation– Regional demand– Regional supplyg pp y– Country supply and demand– Latin American markets

Doing businessDoing business– Territory segmentation– Market profile

Purchasing habits and supply trends– Purchasing habits and supply trends– Plastics industry growth– Business climate

O t iti d b i t– Opportunities and barriers to successOpportunities

An exploration of potential opportunities

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An exploration of potential opportunities

L ti A i h PE D fi itLatin America has a PE DeficitThe region is short of PE

Mexico, Colombia, Central America, South America’s Pacific coast and have been traditional buyersBrazil has also become an importer

Central America, Caribbean and South America’s Pacific coast ,countries are (almost) not producers

World class capacity in Mexico, Venezuela, Brazil and Argentinap y , , gMore limited capacity in Colombia and Chile

Is it a good destination for excess PE?

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Is it a good destination for excess PE?

PE d PP L l A il bilitPE and PP – Local Availability

Argentina Brazil Chile Bolivia Peru Colombia Venezuela Caribbean Central America

Mexico

LDPE - - - -LLDPE - - - - - -HDPE - - - - - -EVA - - - - - - - - -Acrylate cop. - - - - - - - - - -

PP - - - - High

MediumLow

Source: Polyolefins Consulting

LowVery low

- NoneNo data

Th b i t iti i ll t i

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There are business opportunities in all countries

U S d C d Will H PE S lU.S. and Canada Will Have a PE SurplusPE producers in the U.S. and Canada have announced approximately 6 million tons of new capacity

By 2017 North America capacity would be approximately 25.9 million tons

North America demand would be about 19 million tons by 2017 and 20 million tons by 2019

Surplus will be 5 to 6 million by 2017 – 2018 diminishing by 2025

A perfect match?

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A perfect match?

Latin America PE Supply and DemandN C itNew Capacity

Company Location Capacity[kt/ ]

Product Start Up[ ][kt/yr] [year]

YPFB Bolivia 250 HDPE 2H 2017Basic Eng. an

d

YPFB Bolivia 350 LD/LLDPE 2H 2017Basic Eng.

Braskem Brazil 450 to 500 Bio Under study efin

s C

onsu

lting

Braskem Brazil 450 to 500 Bio LL/HDPE

Under study

Braskem Itaboraí, RJ, Brazil

960 PE Post 2018Under study or

ts a

nd P

olyo

le

Brazil Under studyEcopetrol Cartagena,

Colombia1,000 LL/HDPE 2017

Under study

: Com

pany

repo

Braskem IDESA

Mexico 1,050 HDPE, LDPE, EVA

3Q 2015

Some uncertainty Bolivia and Brazil projects very

Sou

rce

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Some uncertainty… Bolivia and Brazil projects very likely… Mexico well under way

Latin America PE Supply and DemandN C itNew Capacity

Company Location Capacity Product Start Upp y p y[kt/yr]

p[year]

Braskem Petroperu

Ilo, Peru 1,200 PE 2018Under study an

d

Petroperu Under studyPolinter Maracaibo,

Venezuela300 LDPE 2017

Financing

efin

s C

onsu

lting

Polinter Maracaibo,Venezuela

300 HDPE 2017Financing

Polimerica Jose, 400 HDPE On hold orts

and

Pol

yole

Venezuela 300430

LDPELL/HDPE

Pequiven Paraguaná, 600 HDPE Under study : Com

pany

repo

Pequiven Paraguaná, Venezuela

600 HDPE Under study

Peru and Polinter projects likely to take place

Sou

rce

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Peru and Polinter projects likely to take place

Polymers Consumption – 2012[k ][kg per person]

Colombia Venezuela Mexico Chile USA EuropepPE 6.8 5.3 16.9 9.7 59.3 33.2PP 4.6 3.5 7.6 5.6 32.3 18.1PS 1.5 0.7 2.6 1.7 9.1 6.2PVC 4.8 2.9 8.3 4.5 38.9 24.6Other 1 1 0 7 0 9 1 6 4 8 3 8Other 1.1 0.7 0.9 1.6 4.8 3.8Total 18.8 13.1 36.3 23.1 144.4 85.9

Source: Multidynamics

Potential for growth

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Potential for growth

Approximate Market Size S L ti A i M k tSome Latin American MarketsSOUTHERN CONE NORTH SOUTH

AMERICA

ARGENTINA – 688 LDPE 164

COLOMBIA – 319 LDPE 87

MEXICO – 1,736LDPE 404LLDPE 535

LLDPE 259HDPE 265

LLDPE 100HDPE 132

PERU 343

HDPE 797

CHILE – 345 LDPE 87LLDPE 93

PERU – 343 LDPE 132LLDPE 89HDPE 122 BRAZIL – 2,190

HDPE 165

URUGUAY – 36 LDPE 13

HDPE 122

VENEZUELA – 274 LDPE 35

,LDPE 543LLDPE 825HDPE 822

Approximately 5 931 kt In 2012

LDPE 13LLDPE 9HDPE 14

LDPE 35LLDPE 109HDPE 130 Source: APLA and Polyolefins Consulting

Note: Some figures are estimated

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Approximately 5,931 kt In 2012

Colombia – PE MarketHi t i l D d [kt/ ]Historical Demand [kt/yr]

orld

Fac

tboo

k

Year LDPE LLDPE HDPE Total Growth

ce: C

IA -

The

W

[%]2007 87.3 80.0 90.0 257.3 3.212008 84 5 78 3 93 0 255 8 0 06

Sou

rc

2008 84.5 78.3 93.0 255.8 -0.062009 98.0 89.0 102.1 289.1 13.02010 86.8 92.5 106.3 285.6 -1.212011 83.1 96.2 119.1 298.4 4.442012 87.0 99.5 132.2 318.7 6.80

Only local production is 56 kt/yr of LDPE

2013 e 90.0 102.0 135.0 327.0 2.60

Source: Acoplásticos

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Only local production is 56 kt/yr of LDPE

Not Such a Thing as a Latin American M k t

MEXICOCENTRAL AMERICA & CARIBBEAN

Market

CENTRAL AMERICA & CARIBBEAN(Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, etc.)

NORTHERN SOUTH AMERICA(Venezuela, Colombia, Ecuador & Peru)

BRAZIL

SOUTHERN CONE(Argentina, Chile, Uruguay, Paraguay & Bolivia)Source: Unisouth

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There are many markets in Latin America

M iMexico• Belonging to NAFTA, Mexico is very or

ld F

actb

ook

influenced by the U.S. economy

• Local production deficit supplied from the

ce: C

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U.S. with low barriers and low complexity • Prices reflect similarity to U.S. domestic levels

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rc

• Raw materials are shipped mainly in bulk by rail and road• Plenty of distributors, resellers and agents

N i i l i i• Negotiation style varies across regions• Still influenced by personal relationship, but trend is towards

getting the “best deal” and more cost-driven aggressivenessL lt i i hi• Loyalty is vanishing

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Mexican market becoming even more competitive

C t l A i d C ibbCentral America and Caribbean• Individually, small economies but, seen as a block, they are

relevant for volume adjustment for U.S. Gulf producers

• Very short lead times from U.S. Gulf coast

• Many brokers and agents offering material from Miami or Houston Agents with long term presence have small offices with local• Agents with long term presence have small offices with local representatives

• While this was a natural territory for U S suppliers during the last ctbo

ok

• While this was a natural territory for U.S. suppliers, during the last 10 years customers opened to additional sourcing from Asia

• Broker negotiation style, aiming for low cost and quick service -The

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CIA

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Very interesting customers

N th S th A iNorthern South America

orld

Fac

tboo

k

• Colombia, Venezuela, Peru and Ecuador

• Complex supply situation: U.S., Brazil, Argentina, Asia and Middle East plus local production in some ce

: CIA

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Asia and Middle East, plus local production in some cases

• Prices under continuous pressure due to high offer

Sou

rc

• Logistics cost have a relevant impact depending on sourcing

• Peru and Colombia are stars in terms of growth and stability• While personal relationship is a must to do business decisions• While personal relationship is a must to do business, decisions

are made in a professional manner

• Ecuador and Venezuela uncertain reliability on negotiations, t d i t tpayments and investments

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Logistically simple but competing against everyone

S th CSouthern Cone• Chile, Argentina, Bolivia, Uruguay and Paraguay• The last four together with Brazil and Venezuela or

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ook

The last four, together with Brazil and Venezuela conform Mercosur

• Strong production base in Argentina, largest player, ce: C

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g p g , g p y ,but mainly focused on domestic market

• Other countries supplied from Brazil, Argentina, U.S., Asia, and Middle East

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• Negotiation styles vary in each country, but strongly influenced by personal relationship and ability to establish trust

ff• Difficult access to hard currency in Argentina is hurting supply

• Chile is the exception, not in MercosurS ll i t l d d ith d ti t• Small internal demand, open economy with productive system structured for export markets

• Negotiation style is direct and clearA h lf d fli ht f H t f t f t t ill

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A half a day flight from Houston, face to face contact will be appreciated

B ilBrazil• Local production for practically 100 % of the

needs and demand of their plastic industry orld

Fac

tboo

k

p y

• Due to the size of economy, Brazil shows many processors working at world scale

ce: C

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• However, most industrial sectors are not competitive on a global scale and are protected with high import taxes

Sou

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• High domestic prices facilitated an important growth of imported raw materials and finished goods

• Brazilian producers reduced their presence in Southern Cone, with the exception of Argentina (main Mercosur co-member)

• Negotiation styles vary from region to region, in general the ability to establish trust, service and long term commitment are essential

• Strong preference for local regional suppliers

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g p g ppNeed strong local presence

O ll M k t P filOverall Market ProfileWith some exceptions, today's customers are less loyal to their traditional suppliers than in the pastUrgent need to gain competitiveness, specially in open-market economies

Most countries and customers show a lower or similar risk than customers in the rest of the world

A high proportion of the processors are family owned, with the decision making in the hands of very few peopleOverall trend to consolidation into large corporations (multilatinas)Overall trend to consolidation into large corporations (multilatinas)

In general, customers give high value to long term supplier presence and to the personal relationshipp p p

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Opportunistic sales will not earn loyalty

P h i H bitPurchasing HabitsCustomers had to adapt themselves to the continuous changes

Depending on the activity, they avoid continuous product changes

Customer “would” pay some premium if supplier can give good technical support

In countries with no local production customers prefer quarterlyIn countries with no local production, customers prefer quarterly volume negotiations

Strong rejection to the request of L/C´s prefer direct credit withStrong rejection to the request of L/C s, prefer direct credit with terms according to transit times

I t i ith t l l d ti

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In countries without local production processors are very flexible and creative

S f S lSources of SupplyA highly dynamic situation but in general sources are

Mexico: U.S.

Central America & Caribbean: U.S., Korea

South America (Pacific Coast): U S Korea Argentina BrazilSouth America (Pacific Coast): U.S., Korea, Argentina, Brazil

Mercosur Countries: Argentina, Brazil, Korea, China, Middle East

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Geography and logistics matter

Pl ti I d t G thPlastics Industry GrowthTraditionally, this industry has grown at 2 points above GDPThe main markets for plastics are “recession proof” as they respond to basic human needs: agriculture, food, beverages, clothing, housewares, housing and furniture

We’ve seen an impressive 25% annual growth in applications related to infrastructure (i.e.: piping for water, gas and communications) in some countriescommunications) in some countries

Top per capita consumption is found in Argentina and MexicoThe biggest potential is found in Brazil combining market sizeThe biggest potential is found in Brazil, combining market size, growth of the economy and a lower starting point

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Follow the growth

B i Cli tBusiness ClimateLatin America presents a very good business climate in generalDespite differences among countries, economies look healthy and stable

Many countries have entered into or remain in a virtuous circle (Mexico, Peru, Colombia, Chile, Uruguay, Brazil), while others with more turbulence, like Argentina and Venezuela are managing to keep the plastic industry healthykeep the plastic industry healthy

No racial or religious problems, wars, nor economic collapses are expected in any country of Latin Americae pec ed a y cou y o a e ca

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Speak the customer’s language!

O t itiOpportunities

C iti l l t fCritical elements for success are:– Deciding to maintain long term presence– Committing only to realistic market possibilities– Establishing local or regional presenceEstablishing local or regional presence– Having local inventory when possible– Providing technical support and stable product portfolio– Reasonable credit risk

H i titi l i ti– Having competitive logistics

Acknowledgements– Many ideas and concepts from:

• Kevin Allen – PlattsO L R b G d J G l• Oscar Lopez, Roberto Guzman and Jorge Gonzalez –PetroChemical Consulting Alliance

M i t t t iti th h t th l h i

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Many investment opportunities throughout the value chain

PO 2014 February 23 - 26, 2014


Latin america – market for US - Canada shale gas based pe

Engineering

Transcript of Latin america – market for US - Canada shale gas based pe