Braskem sees global resin markets undersupplied in 2026-2027

Braskem, Latin America´s biggest petrochemical company and the top polypropylene producer in North America, projects that within about three years what are now excess of supply of basic resins including polyethylene will turn by that time into tightness.

Image courtesy of Braskem Idesa

“The expectation of a recovery trend in the petrochemical cycle in coming years is a consequence of the fundamentals of the petrochemical industry,” according to information in page 17 of a company presentation to analysts on March 23, 2023.

The company management said that the outlook for the first half of 2023 will compare poorly with the previous year in part due to a glut of new plastic resin plants in North America that were recently started up and are now ramping up operations.

Those plants include InterPipeline and ExxonMobil facilities in Alberta, Canada and Louisiana, respectively. In addition, Shell has started polyethylene production in Monaca, Pennsylvania while NOVA is also set to start by mid-year expanded capacity in Ontario, Canada.

The concentration of startups of new capacities of production is “a consequence of delays related to Covid,” according to the analysis shared by the company in slides during the earnings presentation, available in the company´s website. 

The pandemic that started to spread in the U.S. in March 2020 and resulted in lockdowns and restrictions also affected construction projects, raising costs causing delays. Some were canceled and not retaken, like for example the Pembina Pipeline project in the province of Alberta, Canada.

Polyethylene oversupply

According to information on graphs shared by the Sao Paulo-based company, Braskem estimated that in 2020, in the case of global polyethylene fundamentals, there was an “excess of demand” of 0.2 million tonnes globally.

By 2021, that “excess of demand” of polyethylene had turned into a global “excess of offer” of 3.4 million tonnes. By 2022 the “excess of offer” of polyethylene globally had reached 5.1 million tonnes.

Braskem projections shared in the presentation indicate that the company believes that such an excess of offer of polyethylene globally will be reduced by nearly half in 2023 compared with 2022.

Braskem expectations on global polypropylene

Braskem, which had started in Sept. 2020 a polypropylene plant in Texas, indicated in its graph that back in that year there was about 1.9 million tonnes of “excess of offer” in the global polypropylene market. A market analyst had indeed at the time noted the plant would add oversupply in the medium term.

In 2021 the global excess of offer of polypropylene remained about flat at 2.1 million tonnes but it was in the following year, in 2022, when that global “excess of offer” of polypropylene doubled to 4.1 million tonnes, according to Braskem projections.

New recent polypropylene capacity additions in North America as of early 2023 have included by InterPipeline in Alberta as well as by ExxonMobil in Louisiana. However, the company also sees an “excess of demand” returning in 2024 and beyond.

PVC market changes

According to Braskem, the global PVC market went from an “excess of offer” of 2.8 million tonnes in 2020 to an “excess of demand” of 1.4 million tonnes in 2023.

The global PVC market as of 2022 had an “excess of offer” of 3.2 million tonnes and remains oversupplied in 2023, Braskem projects, according to the information shared.

By 2026 and 2027 Braskem sees relatively large “excess of demand” back again in the PVC resin market. The PVC resin is much demanded in the construction sector for tubes and home fixtures.

Braskem tightens spending

According to Braskem, the company has started initiatives that aim to help get through the “petrochemical low cycle.”

Braskem anticipates up to $600 million in efficiencies resulting from “optimization in management of capital (…) in all the cycle of integrated operations planning” that will account for $200 million.

Braskem anticipated an impact of $200 million coming from reductions in capital spending “without impacting maintenance capex.”

Braskem’s projections for 2023

Braskem anticipated that for the first quarter ethylene production in Brazil (ethylene is the basic petrochemical block) will be maintained.

It also anticipated polypropylene production in the U.S. will increase while the polyethylene production of its Mexican subsidiary Braskem Idesa will be maintained in the first quarter in relation to the last quarter of 2022.

Braskem said it expects it will be able to improve its spreads for polypropylene, polyethylene and PVC in Brazil in 2023 with similar improvement in the case of its ethylene to polyethylene spreads in the case of Mexico.

The company officials said they expect Braskem may see a better first half of this year compared with the second half of last year but not so compared with the first half of last year.

 By Renzo Pipoli