Peruvian markets continue to offer EPS food containers despite ban; Venezuela´s PDVSA calls any U.S. Citgo equity sale illegal; Global polyethylene market to expand 5% until 2027

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Peruvian authorities confiscate EPS material in Lima. Sep. 2022. (Image courtesy Andina

Peruvian markets filled with EPS food containers despite ban

Nearly 11 months after a ban on expandable polystyrene (EPS) packaging went into effect, and four years after EPS-banning legislation was enacted but a three-year adjusting period was granted, wholesale and retail markets across Peru continue to openly offer EPS food packaging for sale even with large front-door displays.

Peruvian media have showed images of markets in Peru where 10-feet-high piles of disposable EPS food trays and other such products nearly cover the entrances of some cash-and-carry wholesalers. Law 30884 had supposedly made sales illegal starting in 2022 of all products made with expandable polystyrene (EPS), which is bulky due to its high air content. State officials have carried out raids and confiscations, as reported by Peruvian state news agency Andina in late September.

Tracing the EPS product now illegally sold is difficult because in most cases the bagged EPS food trays and drink containers do not identify any producer or carry any label. When labels are present, they are from legal companies from abroad like PlastiUtil from Ecuador.

The EPS smuggling was ongoing before the ban. Tons of EPS material were being smuggled from Ecuador and Bolivia, Infobae reported on Oct. 6, 2021, citing at the time officials from the local association of plastic converters, part of the Peruvian National Society of Industries.

The intention of the ban was to cut waste and promote easier-to-recycle materials, including cardboard.

The start of the ban´s application came after efforts to once again delay its enforcement were defeated in Congress in the fourth quarter of 2021.

A bill from Oct. 2021 to support converters and resin importers with continuing production of EPS products for two more years before complying with the law was presented and supported without success by legislator Jorge Morante of Fuerza Popular, a party led by the three-times former Peruvian presidential candidate Keiko Fujimori.

Fujimori, who was favorite ahead of the 2021 runoff vote, lost in an upset defeat the presidential elections for a five-year term that were won by Peruvian President Pedro Castillo. Castillo started his five-year term on July 28, 2021. The party that took him to the presidency, Peru Libre, also obtained one of the largest blocks in Congress, along with Fuerza Popular, in those elections. This changed the Congress balance traditionally more dominated by Fujimori and her political allies, or most of the Peruvian if not all the traditional parties.

Fujimori´s groups have long had a strong presence in the Peruvian Congress as she narrowly lost the 2011 and 2016 elections but managed to get many legislators from her groups elected that have had a strong influence in Peruvian legislation related to the downstream in the past decade. Peru Libre is a relative newcomer group.

The Fuerza Popular-backed bill was defeated in December 2021 at the level of commissions at the Peruvian legislature which had started session in July 2021.

The bill was defeated in a very tight vote, 6-5 and with two abstentions, on Dec. 15, 2021, for the ban to begin on Dec. 20, 2021 without extensions. The legislators that voted against the extension argued producers had had already the extension to adjust they requested. 

Besides Morante, other legislators that voted to support the defeated bill to extend EPS sales two more years included Silvia Monteza of Accion Popular, and Rosangella Barbaran, Juan Lizarzaburu and Patricia Juarez of Keiko Fujimori´s Fuerza Popular where Morante is also a member. 

A large Peruvian converter said in a press release earlier in 2022 that it wasn´t ready to make the change to other materials, and added that Covid-19 related supply-chain delays had prevented the timely arrival of new equipment.

Peru does not have any plastic resin production. All plastic resin is imported.

Figures from local customs agency Sunat show that early in 2022 Peruvians were importing fewer plastic but paying much more than in the previous year.

According to the Lima Chamber of Commerce´s La Camara magazine, that in turn cited customs, Peruvian polyethylene imports during January-March 2022 were 77,143 tonnes. This was a 5%, on-year volume decline but fetched 34% more in hard currency paid.

Peruvians imported 53,018 tonnes of polypropylene during the first quarter of 2022, a 3% decrease in volume but a 27% increase in cost.

In the case of PVC, first quarter purchases added to 40,834 tonnes, a 12% decrease in volume but a 28% increase in its cost to Peruvians compared with a year earlier.

While companies based in Peru do not produce PVC resin, there is however chlorine production. Chlorine, which uses as raw materials electricity and brine, is an intermediate for PVC. The chlorine can be exported to PVC producers elsewhere that process it with ethylene and later export PVC resin or finished tubes to Peru. PVC is made from chlorine and ethylene.

Peru, a nation of just over 30 million, exports gas from its Camisea fields that includes about 7% ethane that only adds calories to the mostly methane mix frozen to reduce size 600 times and shipped to power generators, with all stages from upstream run by private consortia under long-term concession. Ethylene can be obtained through cracking ethane.

In Peru ethane is not fractioned from gas that has been extracted from its Camisea fields since early in the 2000s decade nor does the country have any production of ethylene, a basic petrochemical product that supports the industry´s multiple derivatives. Camisea is by far the main gas production region of Peru. Areas in the world that did develop an ethane-based petrochemical industry, like the U.S. Gulf Coast, have an advantage in plastic products pricing relative to regions that manufacture ethylene based on naphtha, derived from relatively more expensive crude oil.

Peru has not had in recent decades import restrictions, duty, tariffs or nothing on resin and most other goods.  Government policies starting in the 1990s have openly favored keeping an open market to imports to be perceived as investor friendly.  The import policies are a revearsal of high duties and other policies in place during the 1970s meant to promote the development of national industries and manufacturing.

Brazil-based Braskem, and other regional players with presence in the region, export to Peru. Players with a strong presence in the region include Dow, which reported strong demand in Latin America in the third quarter of 2022 and has plants including in Salvador de Bahia, Brazil and Bahia Blanca, Argentina. Braskem, majority owned by the Odebrecht group, is also a leading plastic exporter worldwide with the core of its strenght and influence in South America.

The Peruvian territory has natural gas reserves but the country has seen relatively little downstream development. 

The country has insufficient fuel production, depends on imports and is very vulnerable to fuel price volatility or a strenghtening of U.S. dollar currency in which its gasoline and diesel imports are denominated.  

Peru lacks any hydrocarbon-based fertilizer industry and in 2022 has struggled to import urea from abroad.

Peruvians are facing problems with smuggling of other downstream oil and gas products, most notably the case of LPG from Bolivia. Unlike the case with the ban on EPS, the motive behind the LPG cooking fuel smuggling from Bolivia is because it is more than five times cheaper in Bolivia compared with Peru. 

Venezuela´s PDVSA calls any U.S. Citgo equity sale illegal

Venezuelan state oil company PDVSA said in a statement on Oct. 12 that an order by a judge in the U.S. Delaware District related to an equity sale in U.S.-based refinery Citgo, owned by Petroleos de Venezuela S.A. (PDVSA), is “illegal.”

Venezuelans won´t renounce thair claim to the full company, will seek to defend their rights and consider taking international actions in case of any sale, PDVSA said.

The release came after in Delaware a calendar was approved in relation to a potential asset sale of Citgo, the seventh biggest refiner in the U.S. Proceeds would finance compensation payments for Venezuelan expropriations, according to Caracas dateline report from Reuters news agency on Oct. 12

Citgo was bought over three decades ago by the state oil Venezuelan company PDVSA with the intention to vertically integrate by acquiring downstream assets in the U.S., the traditional export market for Venezuelan crude.

Citgo, with about 3,300 employees and 769,000 bpd of total crude processing capacity, is led by CEO Carlos Jorda, a native of Venezuela.

Citgo hasn´t been able for the past several years to process Venezuelan grades at its plants. Former U.S. President Donald Trump imposed sanctions against Venezuelan crude oil exports during his term.

Despite the sanctions, Citgo recently posted record earnings and reported safety recognitions.

Global polyethylene market to expand 5% until 2027

The global polyethylene market was valued at $140 billion in 2021 and may reach $186 billion by 2027, Dublin-based ResearchAndMarkets said on Oct. 13.

Growth and global expansion of industries like electrical and electronics, packaged food and beverages, and automotive will help, it said.

Over the next five years, the polyethylene market may see 4.9% annual growth on the back of increased income and spending along with population growth, it estimated.

Global production was nearly 109 million tonnes and projected to grow to 135 million tonnes by 2027, it said.

The HDPE grades (high-density) represented about 43% of the market with other grades being the LLDPE (linear low) and the LDPE (low-density).

As for end use, polyethylene has applications in packaging, construction, household, agriculture and others. Packaging represents about 60%.

Asia represents about 51% of the global market, according to ResearchAndMarkets.

By Reuters Events Downstream