Mexico Petrochemicals Report 2010

The effective collapse of the Phoenix mega project due to disputes over ethane pricing mean that there will be little substantial additions to Mexico’s petrochemicals industry over the next five years, forcing the country to depend increasingly on imports, according to BMI’s latest Mexico Petrochemicals Report.

In 2009, Mexico’s olefins capacities included 1.58mn tpa of ethylene and 660,000tpa of propylene. These fed downstream capacities of 875,000tpa PE, 590,000tpa PP, 667,000tpa PVC and 310,000tpa PS. It is widely recognised that these capacities are not enough to cover domestic demand, let alone utilise Mexico’s strategic position as a supplier to the US market.

The Mexican petrochemicals industry has suffered from years of under-investment, despite its abundance in feedstock. The country is likely to be increasingly dependent on imports over the medium-term with current and planned capacities unable to keep up with the volume of demand. The national chemical association ANIQ has suggested that Mexico required investment of around US$34bn over 2009-25 to meet the country’s demands and maximise its potential in chemicals and petrochemicals. If it did not, the annual petrochemical and chemical trade deficit would rise to US$25bn by 2025. The report forecasts that Mexico’s deficit in polyolefins will reach 2.2mn tonnes in 2012, with the HDPE deficit reaching 800,000 tonnes, LD/LLDPE deficit at about 600,000 tonnes and the PP deficit reaching 800,000 tonnes.

The planned Ethylene XXI project, which is set to replace Phoenix as the focus of Mexico’s efforts to build its petrochemicals industry, is to include ethylene and downstream units and is targeted to come fully onstream by 2014. However, BMI believes that delays are likely. The deadline for the submission of bids for ethane supply has already been pushed back several times, mainly as a result of the global economic downturn. As such, we foresee completion no earlier than 2015, if indeed it gets off the ground.

The collapse of the Phoenix project over the pricing of feedstock demonstrates the problems the Mexican petrochemicals industry has had in starting up large projects, although the exclusion of Pemex means that Ethylene XXI has better prospects for success. If Ethylene XXI goes the same way as Phoenix, it is unlikely that investors will take any future project proposal seriously. Domestic petrochemicals producers may instead decide to invest in South American states, particularly Peru where there is ample potential in its largely untapped gasfields.

In terms of major capacity additions over the next five years, Pemex Petroquimica (PPQ) is moderising its aromatics production facilities at the Cangrejera complex at Cosoleacaque with plans to double paraxylene production to 500,000tpa at Cangrejera by 2012. At the same time, PPQ is closing some capacity, with a planned shut down three plants announced in August 2009, including the 55,000tpa LDPE plant at Poza Rica petrochemical complex (Escolin plant), the Independencia complex in San Martin Texmeluca, Puebla, which produces methanol, lubes and acrylonitrile; and the 50,000tpa acrylonitrile unit at the Tula complex. In February 2009, Celanese Corporation shut down its 115,000tpa vinyl acetate monomer (VAM) unit in Cangrejera, Mexico. The shut down was attributed to the current global economic crisis, the expected decline in customer demand and the unit’s cost structure. However, the company’s Cangrejera plant continues to produce acetic anhydride, ethyl acetate, methylamines, acetone derivatives and mesityl oxide.