Polymer markets in Latin America: Market Prospects and Growing Opportunities Polymer Sourcing and Distribution 2016 Philadelphia, October 2016 Esteban Sagel, Principal Esteban.sagel@chempmc.com
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Latin America: A Great Market 617 million consumers With a few exceptions, politically stable Large economy 5.8 trillion GDP* Economy expanded by 20% between 2000 and 2015 Commodities fueled growth *World Bank s World Development Indicators Database, 2010 Dollars
Latin America: A Great Market? Really? Fragmented South America concentrates 68% of the population and 74% of the economic output World Bank s World Development Indicators Database 2015 estimates (Population light color, GDP dark color)
Latin America: A Great Market? Really? 5.0% 4.0% 3.0% 2.0% 2015 Latin American GDP vs AAGR 11-15 Uneven growth The largest economic block (South America) has shown the poorest growth rate in Latin America; commodity exports impacted the most by global economic woes 1.0% 0.0% $- $2.00 $4.00 $6.00 Trillions World Bank s World Development Indicators Database; ChemPMC estimates 2010 Dollars
$14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 Latin America: A Great Market? Really? Latin American Per Capita GDP Constant 2010 Dollars $- 2000 2003 2006 2009 2012 2015 2018 Caribbean Mercosur Northern South America Central America Mexico Pacific Coast Even within South America, economic growth uneven Mercosur dragged down by Brazil s recession; Northern South America affected by Venezuela World Bank s World Development Indicators Database; ChemPMC estimates
More than one market Mexico Central America Caribbean Northern South America Uneven economic growth, logistical barriers & differentiated trade pattern call for a different slicing of the region Pacific Coast Mercosur Polymer price patterns and consumption trends track closely these unofficial regions within the region
Polymer S & D 101: P+I-D-E=Δi Next The key equation for polymer markets D=P+I-E-Δi Demand Consumption No finished/semifinished goods considered We are talking pellets Δi typically assumed to be zero; changes D to be apparent consumption Per Capita Demand and Per Capita GDP follow a logistic curve relationship Net Import (I-E) is key for this audience, as it takes out intraregional trade
Logistic Curve Demand Per Capita Vs. GDP Per Capita 25 20 15 10 5 0 0 5000 10000 15000 20000
Logistic Curve Demand Per Capita Vs. GDP Per Capita (RSq: 89%) 14 12 10 8 6 4 2 0 9000 9100 9200 9300 9400 9500 9600 Demand Per Capita Forecast Versus Actual 16 14 12 10 8 6 4 2 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Model Actual Data BACK
What about production? Mexico: PE, PP, PVC, PS, PET Colombia: PE, PP, PVC, PS, PET Chile: PP Venezuela: PE, PP, PVC, PS Argentina: PE, PP, PVC, PS, PET Brazil: PE, PP, PVC, PS, PET Only a few countries with installed capacity Hydrocarbon availability is a risk for traders & distributors Failure to push projects forward in the past expected to continue Projects in U.S. discourage investment (polyolefins) Argentina most likely location for new investments
Trade Where s the beef? 2015 Polymer Net Imports by Region Vs. AAGR 11-15 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% 0 2000 4000 6000 8000 10000 Thousand Tons DESA/UNSD, United Nations Comtrade Database, ChemPMC estimates
Trade Where s the beef? 2015 Polymer Net Imports by Region Vs. AAGR 11-15 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% Pacific Coast Central America Caribbean Mercosur Northern South America Mexico Total Latin America 0 2000 4000 6000 8000 10000 2015 Net Imports by Polymer Vs. AAGR 11-15 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Acrylic Polymers Polymers of Styrene Polymers of Propylene Polymers of VAM Polymers of VCM Polymers of Ethylene Polyacetals, Polyesters & Polycarbonates Total All Polymers 0 2000 4000 6000 8000 10000 DESA/UNSD, United Nations Comtrade Database, ChemPMC estimates
Polyethylene: New Capacity Impact Net Imports, Polymers of Ethylene Mexico Net Imports, Polymers of Ethylene 4000 2500 3000 2000 2000 1000 0-1000 2011 2012 2013 2014 2015 2016 2017 2018 Central America Mercosur Mexico Pacific Coast 1500 1000 500 0 2011 2012 2013 2014 2015 2016 2017 2018 Potential Net Imports, No Domestic Capacity Additions Latin America Forecast World Bank s World Development Indicators Database ; DESA/UNSD, United Nations Comtrade Database; ChemPMC estimates
Polypropylene: Cost Competitiveness Helps Net Imports, Polymers of Propylene 2015-2018 Net Import Change 1500 1000 120 100 Mexico Latin America 500 0-500 2011 2012 2013 2014 2015 2016 2017 2018 Central America Mercosur Mexico Pacific Coast Latin America 80 60 40 20 0-20 Caribbean Central America Mercosur Pacific Coast Northern South America World Bank s World Development Indicators Database ; DESA/UNSD, United Nations Comtrade Database; ChemPMC estimates
Vinyls - Economic Downturn Impact Net Imports, Polymers of VCM 1200 1000 800 600 400 200 0-200 2011 2012 2013 2014 2015 2016 2017 2018 Central America Mexico Latin America Mercosur Pacific Coast Brazilian economic downturn affecting growth prospects Mexico expands, due to production issues related to recent accident in the country Steady but not strong growth World Bank s World Development Indicators Database ; DESA/UNSD, United Nations Comtrade Database; ChemPMC estimates
Growth: Central America & Pacific Polyethylene: down but not out 2015 to 2018 Polymer Import Growth Polymer Imports Latin America 300 200 100-100 0-200 -300-400 -500 Caribbean Central America Mercosur Mexico Northern South America Pacific Coast Latin America 10000 8000 6000 4000 2000 0 2011 2012 2013 2014 2015 2016 2017 2018 Polymers of Ethylene Polymers of Propylene Polymers of Ethylene Polymers of Propylene Polymers of Styrene Polymers of VCM Polymers of Styrene Polymers of VCM Polymers of VAM Acrylic Polymers Polymers of VAM Acrylic Polymers Polyacetals, Polyester & Polycarbonate Polyacetals, Polyester & Polycarbonate World Bank s World Development Indicators Database ; DESA/UNSD, United Nations Comtrade Database; ChemPMC estimates
Who s poised to take advantage of the opportunities? Changes in the Horizon US projects Asian oversupply Middle East looking for new markets Change in trade patterns Opportunities?
How to position to take advantage Key Ingredients Local presence In today and out tomorrow does not work well Relationships are key - Trust Price driven, but service needs to be there
In Summary Latin America: attractive market, but not without issues Fragmented from an economic/population and trade standpoint Affected by global economic malaise; largest economic block (Mercosur) drags down the region Capacity stagnant, with few exceptions. U.S. expansions discourage investments in gas-based projects Mexico, Central America and Pacific Coast largest & fastest in net import growth Polyethylene key component of regional deficit; investment in Mexico dragging down growth Polypropylene: cost competitiveness and lack of investments fueling growth PVC: affected by economic growth in Brazil Changing trade patterns present opportunities; local presence and trust key ingredients for success
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