Could you remind our audience of the role that Braskem Idesa plays in Mexico?

The “Etileno XXI Project,” as it was known, is one of the most significant private investments made in Mexico in the last two decades. We started operations in 2016 with a clear objective to fill a gap in the polyethylene (PE) market in the country, a market where there was only one local producer, Pemex. Braskem Idesa became an important anchor for the development of the downstream plastics value chain, triggering subsequent investments from our clients and their clients. How is Braskem Idesa planning to expand PE outputs in the future?

Braskem Idesa supplies about 20% of the PE market, but we intend to increase our participation. Braskem Idesa has a total capacity of 1 million t of PE per day, but due to a lack of feedstocks (ethane), we experienced setbacks in our production. To produce 1 million t of PE, we require 63-64,000 barrels of ethane per day, of which Pemex supplies about half. To overcome these constraints, we developed two solutions: A temporary one is our “fast-track” strategy to import ethane from the US, but this is an imperfect solution because of the lack of inventory capacities which does not allow us to absorb potential instabilities. In Q2 of this year, we achieved 86% operating rate, the highest since 2017, thanks to our fast-track solution. A permanent solution is the development of an ethane terminal, which will start operating at the end of 2024 and will allow us to import the remaining 50% of ethane to achieve our maximum capacity on a consistent basis. The terminal, with two tanks, gives us 12 days worth of stock to mitigate disruptions. Moreover, with this terminal, we will be able to boost our capacity by 20% at a very low investment. What is your outlook on the current downcycle seen in the polyolefins markets globally?

The entire petrochemical spectrum is going through a downcycle, because of converging supply and demand conditions. In a capital-intensive industry like this, investments are planned 6-7 years in advance in line with consumer demand projections, but the pandemic interrupted the finalization of many of these plants for about two years. Then, in 2022, they all came onstream simultaneously, inundating the market. But the overcapacity is also a result of slow recovery in China, which is the largest importer of PE and many other polyolefins. Higher energy costs caused by the war in Ukraine also pushed natural gas (and ethane) prices to levels never seen before, which made it very hard for the industry. My view is that we reached the bottom of this cycle and we are slowly heading towards a better 2024, when margins will be recovered. Growth, however, may not come until 2025. What competitive advantages does Braskem Idesa have in the current market?

As producers of PE from ethane, we have a very important competitive advantage against naphtha crackers, which represent about 70% of all global crackers. Mexico is also a very competitive country, with a talented labour force, and key logistics advantages to export to the US, Central America, and even Asia and Europe, on top of free trade agreements with most partner countries.

Do you think Mexico’s lack of a renewable energy policy could harm its competitiveness in the long run?

Braskem Idesa has committed to reducing GHG emissions by 15% by 2028, for which we are optimizing our production through automation and digitalization. However, this is not enough if we cannot access green energy. Together with ANIQ, we have raised this issue to public officials, and we see the topic has been picked up by the main candidates for the upcoming election. Braskem Idesa is exporting about 40% of its products to Europe, where regulations and customer requirements are becoming more stringent. Mexico will be challenged unless it can find a solution. Do you have a final message?

The petrochemical industry has a substantial role in Mexico, as the generator of 346,000 jobs, and supplying plastics to 80% of industrial segments. We are at an important junction, with elections next year, so it is really time for a visionary policy to encourage dialogue between the private and public sectors, and capture the huge upside that the country offers for the benefit of all.