Asian resin imports gain larger influence in Mexican market as ocean freight costs ease; LyondellBasell sees soft demand, new supply capping polyolefins average North American run rate at 85% in Q3 2023

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LyondellBasell refining assets in Houston. Image courtesy of LyondellBasell

Asian resin imports gain larger influence in Mexican market as ocean freight costs ease

Imports from Asia into Mexico and the Americas of virgin plastic resin such as polyethylene terephthalate (PET) and expandable polystyrene (EPS), two of the most commonly seen plastics mostly in water bottles or packaging foam, respectively, have increased as a result of price softness in Asia as well as after a reduction in ocean freight rates, Monterrey, Mexico-based Alpek´s top official said.

“From an industry perspective, as China’s economy continues to be softer than originally expected and ocean freight costs have returned to historical levels, there is currently greater influence from Asian imports in the Americas, mainly for the PET and EPS businesses,” said Jorge Young Cerecedo, CEO of the Monterrey-based Alpek, in a message along with the second quarter results publication.

Alpek has production capacity for expandable polystyrene in Chile as well as in the U.S., according to its website. Alpek announced in Oct. 2020 the purchase of the expandable styrenics business of Canada-based NOVA Chemicals including a plant in Painesville, Ohio and another in Monaca, Pennsylvania. EPS has many applications in construction as well as in packaging.

As for PET, the company has production capacity for PET and the intermediate that helps produce it called Purified Terephthalic Acid (PTA). AlpekPolyester has over 4,000 employees in nine countries with a total of 18 manufacturing locations.

Alpek produces polypropylene in Mexico through Indelpro, a partnership with LyondellBasell. It produces over 159 products for markets including crude oil production, water treatment, cosmetics, detergents, and paints and cleaning products, through Polioles.

Lowering guidance

“Consumers primarily in the Americas are moderating certain expenditures impacting the packaged goods and construction industries, thereby affecting purchases during what is normally the start of the peak season,” Young Cerecedo said.

As a result, the company now “has a more conservative view for the second half of 2023,” he said.

Asian integrated polyester reference margins decreased to an average of $332 per ton for the quarter, 3% lower than in the first quarter, the company said.

The reduction in Asian prices occurred as shipping across continents became easier compared with the pandemic and post-pandemic period.

“As ocean freight costs have returned to normal levels, EPS reference margins have also been returning to previous levels,” Young said.

For the quarter ended June, the Alpek posted a volume of 213,000 tons “(-4% QoQ), as there was lower consumer spending for both PP & EPS.”

Alpek operates two segments with one being polyester (PTA, PET, rPET, and polyester fibers), and then the other is Plastics & Chemicals, which includes polypropylene, expandable styrenics, and other specialty and industrial chemicals.

Alpek describes itself in its website as a leading producer of all PTA, PET Resin and PET Sheet worldwide, in addition to being "a leading rPET producer in the Americas, the third-largest expandable polystyrene manufacturer worldwide, and the only producer of polypropylene in Mexico."

Along with Mexico City-based Orbia, Alpek is one of the biggest plastic-related conglomerates in the country.

LyondellBasell sees soft demand, new supply capping polyolefins average North American run rate at 85% in Q3 2023

Refining and petrochemical company LyondellBasell, which on Aug. 4 posted $715 million net income for the quarter ended June, and this after recognizing $65 million in costs “incurred from plans to exit the refining business,” said its April-June 2023 margins improved as feedstock costs declined but that it anticipates challenges from softer demand and new resin supply.

“In the third quarter, the company expects typical benefits from summer seasonality to be more than offset by soft demand due to ongoing economic uncertainty,” it said in a statement. It had announced back in May plans to exit the refining business by 2025.

Stagnant demand, volatile feedstock costs and new capacity in North America and China are challenging petrochemical margins, the company added.

LyondellBasell projects average operating rates of 85% for North American olefins and polyolefins (O&P) assets and 75% for European O&P as well as Intermediates & Derivatives assets in line with global market demand. Current market conditions will persist amidst challenging economic conditions and a slower than expected recovery in China, it said.

Oxyfuels margins remained strong, supported by low butane costs and robust demand for fuels. Refining margins declined from first quarter 2023 highs but remained above long-term averages, the company said.

Of the earnings, $300 million was reinvested in the business and $508 million was returned to shareholders through dividends and share re-purchases.

“During the second quarter, LyondellBasell issued its inaugural green bond for $500 million to support investments advancing the company's strategy for leadership in sustainability,” the company statement said.

Exiting refining

“In May, LyondellBasell announced the decision to extend refining operations to no later than the end of the first quarter of 2025, as the company develops options to redeploy the site's workforce and assets in support of the company's sustainable growth strategy,” the company said.

LyondellBasell announced additional acquisitions and partnerships during the quarter to advance its so-called "Circular & Low Carbon Solutions" business.

"We are committed to becoming the leader in fulfilling the rapidly increasing demand for sustainable solutions from our customers and society," said Peter Vanacker, LyondellBasell Chief Executive Officer, according to a statement published along with its second quarter results.

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