How has Etileno XXI performed during 2018?

2018 has been a very positive year, even if we had certain capacity limitations due to the feedstock restrictions from Pemex. We continue to build relationships with our clients, helping them with the development of products. Also, from the industrial perspective, the plants are working really well. We have learnt a lot over the last couple of years, in terms of the logistics, the country and our sales strategies. We have also had good international margins, which has helped our results. As mentioned, the only issue is the limitation in terms of capacity, due to Pemex’s production decline in oil, gas and related products. Pemex has started to import some ethane, around 10,000-11,000 barrels per day, to feed Pemex Etileno and Braskem Idesa, who are the largest consumers. Pemex Etileno produces polyethylene as well as other products, while we only produce polyethylene.

Do you think the energy reform will help solve the feedstock issue?

We have a permanent dialogue with Pemex to overcome this problem. Mexico has the same geology as Texas, so there is an opportunity to take production back to healthier levels. The energy reform was a very positive move for the country, and Braskem Idesa’s investment in Etileno XXI, while it took place before the energy reform, was already an example of the joint efforts between the government, Pemex and the private industry to develop the value chain.

The energy reform is not a simple task; it takes time to transform the framework from a 70-year old monopoly to an open market. We are currently in that transition, so the rules are not very clear yet. Even during this transition, Pemex remains the main provider of feedstock for the petrochemical industry, and Pemex’s lack of investment has made the reform more difficult. Now, we have a new government that appears to be really focused on strengthening Pemex as a key player. This is very important. Independently from the energy reform, Pemex needs to maintain a strong role.

Is the country’s infrastructure ready to feed the industry with imports?

There is already infrastructure to import natural gas to certain regions, and in 2019 there is an underground marine pipeline project that will reach our area in the southeast. With that infrastructure in place, we can decide whether to buy natural gas from Pemex or to import from other players. In terms of ethane, we need more infrastructure development as well. Pemex is limited to import more volumes due to infrastructure issues, so we need more investment in infrastructure to meet the demand during this transition period, until the country’s production increases again.

How do you see the global dynamics in the polyethylene market?

Globally, there are many challenges for the petrochemical industry, with geopolitical and economic factors, including the tariff war between the United States and China, which has changed the dynamics of the polyethylene market. Before, the United States was a significant exporter of polyethylene to China, but this is no longer happening. Moreover, the United States is bringing new capacity to the market. All of this is creating new dynamics in trade flows, with an excess of polyethylene inventories here in the region, which is a challenge in the short term. Having said that, the long-term fundamentals are very positive, because global demand for plastics continues to be very strong.

I think that Trump and China will reach an agreement at some point, because the current situation is not positive for either country. Mexico has great strengths due to its location – it is easy to export from here to the United States, Europe and Latin America. Mexico also has free trade agreements with many countries, and the deal for USMCA with the United States and Canada was very positive. So, Mexico has important competitive advantages.

Could you give us some figures in terms of the impact of Etileno XXI on the local economy?

Before Braskem Idesa, 70% of the polyethylene consumed in Mexico was imported from the United States, and only 30% was produced locally. We managed to stabilize that, by replacing some imports and also doing some exports. In terms of employment, we created 26,000 jobs during the construction period, and now we have 800 employees in Braskem Idesa. The operation has also created at least 2,000 more jobs across the plastics value chain. With revenues of more than US$1 billion annually, we contribute with very important tax revenues for the State.  

Would you like to add a final message for the APLA members and delegates?

The industry faces many challenges, because society is changing very rapidly, in terms of consumption patterns, sustainability issues, digital transformation, diversity, etc. Traditionally, the petrochemical industry has been more conservative than that, so as companies we need to become more proactive and agile, and have a close eye on these developments.