Milestone Plant Could Help Shift Export Ratio

Q: What were the 2016 highlights for Grupo IDESA’s petrochemicals business?

A: The biggest success during 2016 was the beginning of Braskem IDESA. This was an idea that was formed in 1999 but launched in 2008. That was the year we decided to enter an ethane auction and in 2009 we won with Braskem. From 2010 we started selecting the technology and constructing the plant, called Etileno XXI. Just over US$5 billion was invested in this project and operations finally began at the site in April 2016. The design and technological decisions have turned out to be very successful and we have been operating at 95 to 100 percent capacity.

We produced the equivalent of 15 million tons of ethylene and polyethylene in the last four months of 2016 and we are selling about 3,000 tons per day. Our sales are split equally between international exports and national clients in Mexico. Over the next three years this ratio will shift, with the objective of selling 80 percent to the Mexican market and exporting the remaining 20 percent. Etileno XXI is a huge milestone for IDESA, and the culmination of many years of dreaming and planning.

Another historic moment for IDESA occurred in September 2016, when we began a new partnership called CyPlusIDESA with the launching of two plants we invested in during the last few years. These plants, which are located in Coatzacoalcos, are still in the adjustment stage.

Q: To which countries does the company export products produced at the Etileno XXI plant?

A: The destinations for our products are quite varied. For example, Asia took a large share at the beginning. Asia is an enormous market where companies can sell what they want in whatever volume they wish but the returns are not always the best due to the distance and the price levels. For us Europe is very important. It is a more permanent and stable market than Asia, where it is more difficult to establish a permanent presence. We are interested in Europe’s ethylene market. Most of the production of this product happens in North America. We produce 1 million tons of ethylene a year but in the next two years 8 million tons will be added to the market.

Our national focus will be on the Gulf of Mexico and our international focus will be on Europe since it does not have its own natural gas and ethylene market. Additionally, Mexico does not pay taxes when exporting ethylene to Europe.

Q: How is the ethylene market evolving and what role is Braskem IDESA playing in this?

A: The development of the US shale industry means that ethylene is abundant in that region. IDESA was lucky because we initiated Etileno XXI in 2016 before the American market took off. Braskem IDESA added a little more than a million and a half tons of ethylene to the market in 2016.

By the end of 2018, a number of new US plants should be finished, adding around 8 million tons to the market. It sounds like a lot but the polyethylene market is enormous and global. The interesting thing to note is that North America used to be a net importer of ethylene. Now the region has a surplus of this product and is an exporter.

Q: How is IDESA approaching the changing political panorama between the US and Mexico?

A: Besides the free trade agreements, it would be difficult for the links between the North American market to be untangled in any way. It could be that NAFTA will be renegotiated, which after a few decades would be a normal development. Today, every dollar of Mexican exports to the US contains 40 cents of American content. Every dollar that China exports to the US has four cents of US content. This shows a huge imbalance. If you look at the deficit between the US and Mexico, which is often discussed, it amounts to US$60 billion. But Mexico has a US$40 billion deficit with China, so indirectly that is where the US deficit really is.