Market Report, "Chile Petrochemicals Report 2011", published

Nov. 8, 2010 - PRLog -- The petrochemicals outlook has been clouded by the inability of Argentina to deliver contractual GAS supplies, according to BMI's latest Chile Petrochemicals Report.

Problems in securing adequate domestic gas supplies to operate Methanex's Chilean methanol complex and limited refining capacity mean it is unlikely that Chile will see any increase in petrochemicals capacity over the medium term. With Argentina facing its own restrictions on gas supplies and restricting supply to its western neighbour, Chile needs to develop its domestic feedstock sources in order to support production at existing plants. The supply deficit is only likely to widen over the medium term and import levels may even fall short of the level required to sustain both the petrochemical industry and Chile's energy needs. Consequently, raw material prices will rise in an increasingly tight market, with knock-on effects for downstream industries and the competitiveness of Chilean petrochemical producers.

The shortfall has particularly problematic for the petrochemicals industry at times of high energy demand during the winter months. In Q110, Methanex's Cabo Negro complex reported its best production rate in two years owing to improved gas supply, helped by gasfield development in southern Chile. Output in the quarter reached 304,000 tonnes, up from 265,000 tonnes in Q409, following the start up of a second plant and a rise in capacity utilisation to 60%. However, in Q210, operating rates fell as Chilean state oil company Enap diverted natural gas tor residential purposes during the winter, with expectations that the two plants would return to production in Q310. Methanex believes that output will increase in 2011 and 2012 as hydrocarbons production steps up and feedstock becomes more available, but BMI doubts its ability to put all four methanol plants back into operation over the medium term. We estimate methanol production of around 3.8mn tonnes in 2010, with the Cabo Negro complex operating at little over 30% capacity. Output is unlikely to exceed 1.5mn tonnes, or around 40% total capacity, in 2011 based on two plants operating at an average of 78% capacity.

Energy shortages also plague polymer production. A lack of propylene feedstock has meant that Petroquim has failed to produce near the 150,000tpa capacity at its PP plant. As such, BMI forecasts that capacities will not be increased over the forecast period, with ethylene capacity at 60,000tpa, propylene at 100,000tpa, PE at 46,000tpa and PP at 150,000tpa. Petroquim's PP facilities were closed following the earthquake that hit Chile in February 2010, although they were not directly damaged. The PP unit came back online in July although initially producing at a rate of just 7-10% capacity. BMI believes that the plant was back to operational capacity by the end of 2010.

Much more will need to be done to reduce risk and secure long-term feedstock supplies if the Chilean petrochemical sector is to grow. Yet Chile does offer some advantages. Methanex has shown that Chilean methanol production costs can be at least half those in China, provided feedstock is available. For Chile, as for most other exporters, the demand from China should enable the Methanex plants to run at maximum capacity.

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Report Table of Contents:

Executive Summary
SWOT Analysis
- Chile Petrochemicals Industry SWOT
- Chile Political SWOT
- Chile Economic SWOT
- Chile Business Environment SWOT
Global Petrochemicals Overview
- Petrochemicals Market Overview
- Table: World Ethylene Production By Country, 2009 And 2014 ('000 tonnes capacity)
- Financial Results
- Table: Financial Results Of Major Petrochemicals Companies, 2009
- Global Oil Products Price Outlook
- Table: Oil Product Price Assumptions, Q409-Q410 (US$/bbl)
- Table: Oil Product Price Data And Forecasts, 2007-2014 (US$/bbl)
Latin America Overview
Chile Market Overview
- Table: Chile Petrochemicals Facilities, 2009
- Regulatory Structure
- Exports And Imports
Industry Trends And Developments
Business Environment
- Petrochemicals Business Environment Ratings
- Limits Of Potential Returns
- Risks To Realisation Of Returns
Industry Forecast Scenario
- Table: Chile's Petrochemicals Sector, 2007-2015
- Macroeconomic Outlook
Company Monitor
- ENAP
- Methanex
- Petroquim
- Petroquimica Dow
Country Snapshot: Chile Demographic Data
- Section 1: Population
- Table: Demographic Indicators, 2005-2030
- Table: Rural/Urban Breakdown, 2005-2030
- Section 2: Education And Healthcare
- Table: Education, 2002-2005
- Table: Vital Statistics, 2005-2030
- Section 3: Labour Market And Spending Power
- Table: Employment Indicators, 2001-2006
- Table: Consumer Expenditure, 2000-2012 (US$)
- Table: Average Annual Wages, 2000-2012
BMI Methodology
- How We Generate Our Industry Forecasts
- Chemicals And Petrochemicals Industry
- Cross Checks
- Business Environment Ratings
- Table: Petrochemicals Business Environment Indicators And Rationale
- Weighting
- Table: Weighting Of Indicators

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