"While being local offers the advantage of swiftly managing stock shortages, the real key is staying close to the client and providing top-tier support."

Jorge García

GENERAL MANAGER, PETROQUIM

September 13, 2024

Can you remind our audience of Petroquim's history?

In 1988, Petroquim started as the first partnership between a state-owned company and a private entity in Chile to develop the country's petrochemical industry, a completely new sector at the time. By 2000, we were already producing polypropylene (PP); however, as Chilean refineries shifted their focus toward fuel production, especially cleaner fuels, their investment prioritized environmental quality improvements over increasing volume. Consequently, we had to adapt to this new reality and the limited availability of raw materials.

Until 2014, Petroquim sourced ethylene from the State Refinery, enabling the production of homopolymers and copolymers. However, following the closure of ENAP's ethylene plant, we were forced to focus exclusively on producing homopolymers. Today, we are the sole PP producer in Chile, with a plant in Concepción, the eighth region, with a nominal capacity of 130,000 t/y but a current production of between 80,000 and 90,000 t/y. Most of our output stays in Chile, but a portion is exported.

What unique value can a local polypropylene producer offer to the region?

While being local offers the advantage of swiftly managing stock shortages, the real key is staying close to the client and providing top-tier support, ensuring they maximize the potential of the resins. At the same time, Chile is probably one of the most open markets to international trade in the region, making polypropylene, especially from Asia, widely available. However, many companies, particularly those from Southeast Asia, view the region as marginal, offloading excess production at dumping prices without providing consistent support.

The value of technical support and the ability to work closely with clients in their native language is substantial—something that Asian petrochemical companies often can't match.

What is the key to staying competitive in current market conditions?

We are at the mercy of international prices and logistical challenges. While we may be near the lowest point, I do not foresee a quick recovery. Current prices and margin levels could persist for a few more months as the excess capacity in the market is taking longer to balance out than anticipated. Plastic consumption in Chile has grown minimally. Despite a rise in recycled plastic resins to about 8-9% of the total, this has come at the expense of virgin resins. Consequently, growth has been more noticeable in regional markets such as Ecuador, Colombia, Peru, Argentina, Brazil, and Paraguay.

Protectionism is rarely the answer. It is crucial to work closely with clients. In times of significant oversupply, you cannot ignore international prices. Even though the initial low offers may come from Asia, many regional producers eventually adjust their prices downward—not to the same extent, but they still adjust. This affects everyone, but the key is to learn how to navigate these situations by optimizing as much as possible.

How does Petroquim's flexibility as a small plant benefit its ability to adapt to changing client needs?

We have been operating with the license of LyondellBasell's Spheripol technology. What has evolved is our collaboration with chemical and additive suppliers to develop new products and more cost-effective options that deliver the best performance in terms of properties and productivity for our clients. Our products' formulas have a lifespan of less than two years, giving us frequent opportunities to innovate. Just like in cooking, the right combination of chemicals allows us to fine-tune the properties of our product, and as a relatively small plant, flexibility is a key strength. We can carry on industrial trials and tests, which has been vital in sustaining our role as a leading homopolymer supplier.

What is your perspective on single-use plastics and the negative perception surrounding them?

The focus of sustainability has been on the manufacturing industry. In Chile, for instance, we lead the way in imposing restrictions on single-use plastics. This has led to the disappearance of several companies and an increase in plastic imports. It is important to carefully evaluate well-intentioned policies, as their broader impacts may need closer examination to understand their effects fully. While alternatives exist, they are not necessarily economically and environmentally more efficient. For instance, the shelf life of food products is significantly extended by plastics, which is crucial for high-turnover supply chains in supermarkets.

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