Petro
Chemical
Consultingg
Alliance
Latin America – Market for U.S. and
Canada Shale Gas Based PECanada Shale Gas Based PE...
P t Ch i l C lti Alli
Petro
Chemical
Consulting
Provides consulting products and services to clients in the
PetroChemical ...
F ti l d hi l
Petro
Chemical
Consulting
Functional and geographical coverage
Highly experienced consultants
located throug...
O tliOutline
Introduction
– Regional situation
– Regional demand
– Regional supplyg pp y
– Country supply and demand
– Lat...
L ti A i h PE D fi itLatin America has a PE Deficit
The region is short of PE
Mexico, Colombia, Central America, South Ame...
PE d PP L l A il bilitPE and PP – Local Availability
Argentina Brazil Chile Bolivia Peru Colombia Venezuela Caribbean Cent...
U S d C d Will H PE S lU.S. and Canada Will Have a PE Surplus
PE producers in the U.S. and Canada have announced
approxima...
Latin America PE Supply and Demand
N C itNew Capacity
Company Location Capacity
[kt/ ]
Product Start Up
[ ][kt/yr] [year]
...
Latin America PE Supply and Demand
N C itNew Capacity
Company Location Capacity Product Start Upp y p y
[kt/yr]
p
[year]
B...
Polymers Consumption – 2012
[k ][kg per person]
Colombia Venezuela Mexico Chile USA Europep
PE 6.8 5.3 16.9 9.7 59.3 33.2
...
Approximate Market Size
S L ti A i M k tSome Latin American Markets
SOUTHERN CONE NORTH SOUTH
AMERICA
ARGENTINA – 688
LDPE...
Colombia – PE Market
Hi t i l D d [kt/ ]Historical Demand [kt/yr]
orldFactbook
Year LDPE LLDPE HDPE Total Growth
ce:CIA-Th...
Not Such a Thing as a Latin American
M k t
MEXICO
CENTRAL AMERICA & CARIBBEAN
Market
CENTRAL AMERICA & CARIBBEAN
(Guatemal...
M iMexico
• Belonging to NAFTA, Mexico is very
orldFactbook
influenced by the U.S. economy
• Local production deficit supp...
C t l A i d C ibbCentral America and Caribbean
• Individually, small economies but, seen as a block, they are
relevant for...
N th S th A iNorthern South America
orldFactbook
• Colombia, Venezuela, Peru and Ecuador
• Complex supply situation: U.S.,...
S th CSouthern Cone
• Chile, Argentina, Bolivia, Uruguay and Paraguay
• The last four together with Brazil and Venezuela
o...
B ilBrazil
• Local production for practically 100 % of the
needs and demand of their plastic industry
orldFactbook
p y
• D...
O ll M k t P filOverall Market Profile
With some exceptions, today's customers are less loyal to their
traditional supplie...
P h i H bitPurchasing Habits
Customers had to adapt themselves to the continuous changes
Depending on the activity, they a...
S f S lSources of Supply
A highly dynamic situation but in general sources are
Mexico: U.S.
Central America & Caribbean: U...
Pl ti I d t G thPlastics Industry Growth
Traditionally, this industry has grown at 2 points above GDP
The main markets for...
B i Cli tBusiness Climate
Latin America presents a very good business climate in general
Despite differences among countri...
O t itiOpportunities
C iti l l t fCritical elements for success are:
– Deciding to maintain long term presence
– Committin...
PO 2014 February 23 - 26, 2014
Polyolefins Consulting, L.L.C.
www.polyolefinsconsulting.com
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Latin america – market for US - Canada shale gas based pe

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During the 2015 to 2017 period an additional 16 to 18 PE production lines are expected to start up in the United States and Canada with a cumulative total over 6,800 kt/yr. This supply will exceed the local demand and much will necessarily have to be exported. Areas being targeted are Asia, and somewhat lightly Latin America. Achieving substantial sales in Latin America will not be a trivial undertaking.

Latin America is far from being a single, monolithic market; there are many markets in Latin America. Some are virtually self sufficient regions or countries, while others import all their plastic resin needs. Some areas source their imports from the U.S.; while others supplement them with regional or Asian imports; and the rest purchase regionally, and from the Middle East and the rest of Asia. Many markets have sophisticated applications, many of which are virtually unknown in the U.S. and Canadian markets. Nonetheless, there are interesting opportunities for U.S. and Canadian importers that are willing to understand the markets.

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

  1. 1. Petro Chemical Consultingg Alliance Latin America – Market for U.S. and Canada Shale Gas Based PECanada Shale Gas Based PE by J O Bühl Vid lJorge O. Bühler-Vidal SPE Polyolefins 2014 Conference Houston, 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 Aires Bahía Blanca – Mendoza – Santiago – Porto Alegre – Guatemala – Charleston – Houston – New York
  2. 2. P t Ch i l C lti Alli Petro Chemical Consulting Provides consulting products and services to clients in the PetroChemical Consulting Alliance g Alliance worldwide petrochemical and plastics industries, combining local 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com The broadest network of petrochemical consultants in the American continent
  3. 3. F ti l d hi l Petro Chemical Consulting Functional and geographical coverage Highly experienced consultants located throughout the Americas A ti Professionals specialized in: – Project planning g Alliance – Argentina • Buenos Aires, Bahia Blanca, Mendoza – Brasil – Product development and applications – Development and selection of production technology • São Paulo, Porto Alegre – Chile • Santiago Peru production technology – Operations – Logistics – Commercialization, marketing– Peru • Lima – Colombia • Bogotá , g and 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 York C i l l fi d th t h i l i d t PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Covering polyolefins and the petrochemical industry functionally and geographically
  4. 4. O tliOutline Introduction – 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 success Opportunities An exploration of potential opportunities PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com An exploration of potential opportunities
  5. 5. L ti A i h PE D fi itLatin America has a PE Deficit The region is short of PE Mexico, Colombia, Central America, South America’s Pacific coast and have been traditional buyers Brazil 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 , , g More limited capacity in Colombia and Chile Is it a good destination for excess PE? PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Is it a good destination for excess PE?
  6. 6. 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 Medium Low Source: Polyolefins Consulting Low Very low - None No data Th b i t iti i ll t i PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com There are business opportunities in all countries
  7. 7. U S d C d Will H PE S lU.S. and Canada Will Have a PE Surplus PE 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? PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com A perfect match?
  8. 8. Latin America PE Supply and Demand N C itNew Capacity Company Location Capacity [kt/ ] Product Start Up [ ][kt/yr] [year] YPFB Bolivia 250 HDPE 2H 2017 Basic Eng. and YPFB Bolivia 350 LD/LLDPE 2H 2017 Basic Eng. Braskem Brazil 450 to 500 Bio Under study efinsConsulting Braskem Brazil 450 to 500 Bio LL/HDPE Under study Braskem Itaboraí, RJ, Brazil 960 PE Post 2018 Under study ortsandPolyole Brazil Under study Ecopetrol Cartagena, Colombia 1,000 LL/HDPE 2017 Under study :Companyrepo Braskem IDESA Mexico 1,050 HDPE, LDPE, EVA 3Q 2015 Some uncertainty Bolivia and Brazil projects very Source PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Some uncertainty… Bolivia and Brazil projects very likely… Mexico well under way
  9. 9. Latin America PE Supply and Demand N C itNew Capacity Company Location Capacity Product Start Upp y p y [kt/yr] p [year] Braskem Petroperu Ilo, Peru 1,200 PE 2018 Under study and Petroperu Under study Polinter Maracaibo, Venezuela 300 LDPE 2017 Financing efinsConsulting Polinter Maracaibo, Venezuela 300 HDPE 2017 Financing Polimerica Jose, 400 HDPE On hold ortsandPolyole Venezuela 300 430 LDPE LL/HDPE Pequiven Paraguaná, 600 HDPE Under study :Companyrepo Pequiven Paraguaná, Venezuela 600 HDPE Under study Peru and Polinter projects likely to take place Source PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Peru and Polinter projects likely to take place
  10. 10. Polymers Consumption – 2012 [k ][kg per person] Colombia Venezuela Mexico Chile USA Europep PE 6.8 5.3 16.9 9.7 59.3 33.2 PP 4.6 3.5 7.6 5.6 32.3 18.1 PS 1.5 0.7 2.6 1.7 9.1 6.2 PVC 4.8 2.9 8.3 4.5 38.9 24.6 Other 1 1 0 7 0 9 1 6 4 8 3 8Other 1.1 0.7 0.9 1.6 4.8 3.8 Total 18.8 13.1 36.3 23.1 144.4 85.9 Source: Multidynamics Potential for growth PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Potential for growth
  11. 11. Approximate Market Size S L ti A i M k tSome Latin American Markets SOUTHERN CONE NORTH SOUTH AMERICA ARGENTINA – 688 LDPE 164 COLOMBIA – 319 LDPE 87 MEXICO – 1,736 LDPE 404 LLDPE 535 LLDPE 259 HDPE 265 LLDPE 100 HDPE 132 PERU 343 HDPE 797 CHILE – 345 LDPE 87 LLDPE 93 PERU – 343 LDPE 132 LLDPE 89 HDPE 122 BRAZIL – 2,190 HDPE 165 URUGUAY – 36 LDPE 13 HDPE 122 VENEZUELA – 274 LDPE 35 , LDPE 543 LLDPE 825 HDPE 822 Approximately 5 931 kt In 2012 LDPE 13 LLDPE 9 HDPE 14 LDPE 35 LLDPE 109 HDPE 130 Source: APLA and Polyolefins Consulting Note: Some figures are estimated PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Approximately 5,931 kt In 2012
  12. 12. Colombia – PE Market Hi t i l D d [kt/ ]Historical Demand [kt/yr] orldFactbook Year LDPE LLDPE HDPE Total Growth ce:CIA-TheW [%] 2007 87.3 80.0 90.0 257.3 3.21 2008 84 5 78 3 93 0 255 8 0 06 Sourc 2008 84.5 78.3 93.0 255.8 -0.06 2009 98.0 89.0 102.1 289.1 13.0 2010 86.8 92.5 106.3 285.6 -1.21 2011 83.1 96.2 119.1 298.4 4.44 2012 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Only local production is 56 kt/yr of LDPE
  13. 13. Not Such a Thing as a Latin American M k t MEXICO CENTRAL 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com There are many markets in Latin America
  14. 14. M iMexico • Belonging to NAFTA, Mexico is very orldFactbook influenced by the U.S. economy • Local production deficit supplied from the ce:CIA-TheW U.S. with low barriers and low complexity • Prices reflect similarity to U.S. domestic levels Sourc • 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 aggressiveness L lt i i hi• Loyalty is vanishing PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Mexican market becoming even more competitive
  15. 15. 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 ctbook • 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 -TheWorldFac g y , g q Source:CIA PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Very interesting customers
  16. 16. N th S th A iNorthern South America orldFactbook • Colombia, Venezuela, Peru and Ecuador • Complex supply situation: U.S., Brazil, Argentina, Asia and Middle East plus local production in some ce:CIA-TheW Asia and Middle East, plus local production in some cases • Prices under continuous pressure due to high offer Sourc • 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Logistically simple but competing against everyone
  17. 17. S th CSouthern Cone • Chile, Argentina, Bolivia, Uruguay and Paraguay • The last four together with Brazil and Venezuela orldFactbook The last four, together with Brazil and Venezuela conform Mercosur • Strong production base in Argentina, largest player, ce:CIA-TheW g p g , g p y , but mainly focused on domestic market • Other countries supplied from Brazil, Argentina, U.S., Asia, and Middle East Sourc • 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 Mercosur S 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 clear A h lf d fli ht f H t f t f t t ill PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com A half a day flight from Houston, face to face contact will be appreciated
  18. 18. B ilBrazil • Local production for practically 100 % of the needs and demand of their plastic industry orldFactbook p y • Due to the size of economy, Brazil shows many processors working at world scale ce:CIA-TheW • However, most industrial sectors are not competitive on a global scale and are protected with high import taxes Sourc • 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com g p g pp Need strong local presence
  19. 19. O ll M k t P filOverall Market Profile With some exceptions, today's customers are less loyal to their traditional suppliers than in the past Urgent 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 people Overall 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Opportunistic sales will not earn loyalty
  20. 20. P h i H bitPurchasing Habits Customers 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com In countries without local production processors are very flexible and creative
  21. 21. S f S lSources of Supply A 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Geography and logistics matter
  22. 22. Pl ti I d t G thPlastics Industry Growth Traditionally, this industry has grown at 2 points above GDP The 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 Mexico The 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Follow the growth
  23. 23. B i Cli tBusiness Climate Latin America presents a very good business climate in general Despite 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Speak the customer’s language!
  24. 24. 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 – Platts O 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 PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com Many investment opportunities throughout the value chain
  25. 25. PO 2014 February 23 - 26, 2014 Polyolefins Consulting, L.L.C. www.polyolefinsconsulting.com
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