2009-11-25 15:23:02 -
Argentina Petrochemicals Report 2010 - a new market research report on companiesandmarkets.com www.companiesandmarkets.com/Summary-Market-Report/argentina-petr ..
Argentinas petrochemical industry is currently experiencing only incremental increases in capacity, with very little growth in recent years, according to BMIs latest Argentina Petrochemicals Report.
The countrys combined ethylene plant capacity of 800,000tpa adds up to just one contemporary sized cracker facility. Argentina also possesses 355,000 tonnes per annum (tpa) of propylene that feeds 310,000tpa of PP capacity. Total polyolefins capacity
is just over 1.49mn tpa, including 636,000tpa of polyethylene capacity located at PBBPolisurs complex in Bahía Blanca. Bahía Blanca is also the location of Solvay Indupas 220,000tpa PVC plant, which is fed by an associated 240,000tpa VCM plant.
PET production capacity totals 245,000tpa. Argentina also hosts three small-scale polystyrene plants with a combined capacity of just 81,500tpa. Benzene capacity of 140,000tpa supplies feedstock for the production of a number of aromatic hydrocarbon compounds, including ethylbenzene (185,000tpa), styrene monomer (160,000tpa) and toluene (170,000tpa). In the fertiliser sector, Argentina has capacities of 1mn tpa of ammonia and 1.31mn tpa of urea with Profertil dominating the sector.
Investment in new production capacity in Argentina has been limited due to existing energy, feedstock, salary and tax uncertainties. This has been the case despite rising demand for petrochemicals and the emergence of capacity constraints; in the first eight months of 2009, basic chemicals output was up 12.2% y-o-y and plastic and synthetic rubber output were up 13.2% y-o-y. Price controls are increasingly squeezing the margins of local petrochemicals producers, particularly further downstream. Producers of end products complain that they face the greatest pressure from the government to keep prices down. The indefinite nature of price caps has created uncertainty in the market. While some producers are operating at full capacity, uncertainty over feedstock availability inhibits new investment in the industry.
In the short-term, Argentinas petrochemicals market is likely to experience a downturn with main consumers experiencing zero or negative growth. BMI is forecasting a 5.3% contraction in the construction industry in 2010, followed by a very modest recovery of 0.2% real growth in 2011. Despite significant plans for infrastructure investment by the government, there are doubts as to how far such plans are viable, given the negative impact of the economic downturn on an already strained fiscal situation. There were already signs of a downturn in the petrochemicals industry in Q309, when output reported declines both on a monthly and annual basis, which was in sharp contrast to the strong growth reported in H109.
The most immediate impact of the slump in construction will be on Solvay Indupas PVC production facility, which will have to rely on increasing exports to Brazil and other South American countries; the deterioration in domestic market conditions comes at a time when it is raising PVC capacity from 220,000tpa to 260,000tpa. Petrochemicals output is therefore going to be more sensitive to exchange rate fluctuations. Over the longer term, we continue to see steady depreciation, owing to the current economic model of export promotion and fiscal expansion. However, signs that the government may shift away from this model could lead us to adopt a more bullish long-term stance. Argentine PP producers Petroquimica Cuyo and Petroken have proved to be more competitive on the domestic market; although Brazilian PP has duty-free entry its prices are higher than Argentine prices, while imports from the US and Asia have a 15% import tariff which prices them out of the market.
Apart from a 700,000tpa methanol plant in Tierra del Fuego which should be onstream by 2011, BMI does not expect any new capacity additions over the forecast period due to the countrys natural gas shortages and a relatively unfavourable investment climate. Investment will remain subdued until producers can secure their feedstock supplies in the long run. However, some expansion work on existing plants is likely, as suppliers would be keen to expand their operations, helped by the countrys improved credit rating. On the consumption front, polyolefins consumption is likely to increase to around 2.17mn tpa in 2014 from an estimated 1.45mn tpa in 2005, driven by the process of industrialisation.
