Recently published research from Business Monitor International, "Argentina Petrochemicals Report 2014", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 12/12/2013 -- The Argentine petrochemicals industry will struggle to compete against imports from Brazil and the US as competitiveness declines amid feedstock shortages. While the situation could turn around if domestic gas resources are tapped, this scenario is not expected over the next five years, according to BMI's Argentina Petrochemicals Report.
Renationalisation of YPF has failed to stop the annual winter crisis of gas supply, which has caused feedstock shortages for the petrochemicals industry. Argentina has been a net gas importer since 2008 and has prioritised supplies to the residential power sector over the needs of the petrochemicals industry.
Cutbacks in gas supplies have undermined performance and deterred investment and renationalisation has provided no new feedstock. Moreover, the fall in the value of the peso, which has raised the cost of imports, coupled with a price cap on consumer prices for electricity and natural gas has made natural gas unprofitable. There is the possibility of policy reversal if shale proves to be commercially viable for extraction, as in the US. If so, the Argentine petrochemicals industry could undergo the transformation seen in North America. Nevertheless, it is unlikely to make any impact on capacity over the medium-term with BMI anticipating 2020 as the earliest date for any new cracker construction in Argentina.
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Throughout 2013, Argentine chemical output stabilised while rubber and plastic production showed a clear down trend having made something of a recovery in 2012. The trends were indicative of the difficulties faced by producers. Plastics and rubber production showed a notable seasonal downturn in the winter, showing that feedstock shortages were exacerbating the situation. Nevertheless, in spite of a decline in supply and high inflation, prices were on the downside due to the effect of imports, particularly from Brazil.
BMI has revised the following forecasts/views:
- PVC has fared well in recent years, retaining stable output levels in spite of the contraction in construction in 2009. However, there were signs that PVC was coming under pressure again in 2013 amid weakening demand. As a result, Solvay is planning to divest its PVC assets with Braskem and Mexichem likely to compete in a bidding process for Argentina's PVC plants.
- Ethylene and polyethylene have remained depressed with output remaining well down on the 2006 peak with no sign of a full recovery. BMI estimates that the total cracker utilisation rate was around 15% below full capacity as feedstock constraints acted to restrain growth. Dow and other producers will be unable to expand capacity as long as natural-gas production is constrained in Argentina. Dow itself expects no growth in ethylene capacity over the next five years, in spite of the growing shortfall in PE.
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