Corrections in petrochemical prices have been long coming, yet the speed and sharpness of the relapse surprised the industry. A reduction in margins had started in 2019, but the pandemic distorted the cycle, putting on hold the construction of world-scale petrochemical plants and playing with consumption behaviors as economies closed and re-started. Today, those capacities in Asia and the US that have been years in the making have come onstream, oversupplying the market.
As a net importer of chemicals, Latin America (Latam) is absorbing a fair share of that product, putting pressure on its own domestic producers. In the competition with Asian and American products, Latam producers are at a disadvantage due to a shortage of feedstocks, as well as more expensive feedstocks. To traverse this difficult part of the cycle, players must leverage their best attributes. In Brazil, chemical producers and distributors focus on scale in one of the world’s biggest markets, while Mexico is all about location, as a proxy investment destination to its powerful neighbor.
If there is a light at the end of the long, winding tunnel of the petrochemical downcycle, it flickers green. Or at least, this is what every petrochemical player we interviewed for this edition seems to think. For every negative figure in the sales of olefins, aromatics, and other basic chemicals, there is a ray of hopeful growth in products with a green component. The availability of renewable generating sources like wind, solar, or biomass is also identified as a significant opportunity for the growth of green chemistries. Meanwhile, the traditional chemicals are not in a bad spot either in the context of the energy transition, as they become a more prominent outlet for oil use. In Latam growth in bio-based, recycled or green-powered products parallels growth in oil and gas production. Most of our interviewees concede both are necessary.