Jorge de Zavaleta, Executive Director,

Argentine Chamber of the Chemical and Petrochemical Industry (CIQyP)

"Argentina is markedly competitive in petrochemicals, performance chemicals and fertilizers, as well as raw materials for agrochemicals."

How have Argentina’s chemical and petrochemical sectors performed in the second half of 2020 and first half of 2021?

If we compare January to May 2021 with the same period in 2020, keeping in mind that the pandemic did not impact the first months of 2020, we can observe that production rates have not fully recovered yet. Local income is much higher now, but exports have not been linear. There was a verbal agreement with the Argentinian Government that companies should sell to the local markets as much as possible to reduce imports. The Government imposed strict policies on trade management in order to control imports which slowed down the importation process. Additionally, comparing June to December 2020 with January to June 2021, production has been slowly recovering, rising by 3%.

The best performing products in this period have been agrochemicals, nitrogen and phosphorus fertilizers due to higher international prices of agricultural commodities, record planting and reap of corn and wheat, therefore, the local demand for chemical fertilizers was higher than previous periods. As for performance chemicals, plastics and plastic resins maintained their levels of production. In terms of basic and intermediate chemicals, there was less production in refineries and less oil consumption.

What are the main priorities of the chamber in 2021 and the main concerns of your members?

There is a considerable challenge regarding Mercosur as it shows a deficit of chemicals in the international trade balance. For the Argentinian chemical industry, Brazil is the target market as Argentina is markedly competitive in petrochemicals, performance chemicals and fertilizers, as well as raw materials for agrochemicals. Argentina is trying to implement a smart and coordinated balance reduction, that is, an agreement with other countries and conglomerates so that final commodities suffer less due to the reduction. Other challenges are minimizing the impact of the pandemic, the climate change and sustainability of plastics.

To what extent do you think political factors have impacted the sector?

The Argentinian Government was always focused first on the pandemic and then on the economy, consequently, there were various restrictions. The chemicals and petrochemicals sectors were declared essential, so staff working in these sectors did not suffer any mobility restrictions as we were able to demonstrate that the related continuous processes could not undergo any alterations, and that pausing the production of mass consumption chemical products was not plausible.

How have low natural gas prices impacted Vaca Muerta?

In 2019 and the beginning of 2020 there was a lot of well drilling and development at Vaca Muerta, then, due to the pandemic, in 2020 there were not as many people available to work there. Furthermore, imports slowed down, which led to a downfall in oil and gas production and consumption. However, things are looking up. The Vaca Muerta oil is non-conventional and light, therefore, the biggest refinery has been investing money to mix that oil with heavier types of oil. In terms of gas, the Argentinian Government has launched a 4-year program called Plan Gas, so that gas prices stay at US$3.50 on average which is why the drilling and fracking costs are accessible. In the US the price is between US$2.50 and US$3.

What are the key themes you see impact Argentina’s chemical industry in the medium term?

As gas prices are competitive and can be kept at US$3.50 and analyzing the existing trade balance, there are opportunities to monetize the Vaca Muerta gas. Given that Brazil is the world’s biggest urea importer and Argentina has a world-class urea plant, there is a possibility to double its production facilities. Ethane content in non-conventional gas is two times higher compared to conventional gas, and there is an opportunity there to monetize ethane to produce ethylene derivatives, mainly PE. LPG is commonly used in Argentina which means more propane and butane will be produced. The excess of propane could be used in a dehydrogenation plant to produce polypropylene.