Braskem Idesa ethane supply more stable, PE prices to recover in H2 2025 – exec

MADRID (ICIS)–Supply of ethane from Pemex to polyethylene (PE) producer Braskem Idesa is now more stable after a renegotiation of the contract – but the global PE market remains in the doldrums, according to an executive at the Mexican firm.

Sergio Plata, head of institutional relations and communications at Braskem Idesa, said a recovery in global PE prices could start in the second half of 2025 as the market is expected to remain oversupplied in the coming quarters.

Plata explained how Braskem Idesa had to renegotiate the terms of an agreement with Pemex, Mexico’s state-owned crude oil major, for the supply of natural gas-based ethane, one of the routes to produce PE, to its facilities in Coatzacoalcos.

Supply is now more stable and in the quantities agreed, he said.

Braskem Idesa operates the Ethylene XXI complex in Coatzacoalcos, south of the industrial state of Veracruz, which has capacity to produce 1.05 million tonnes/year of ethylene and downstream capacities of 750,000 tonnes/year for high-density polyethylene (HDPE) and 300,000 tonnes/year for low-density polyethylene (LDPE).

Braskem Idesa is a joint venture made up of Brazil’s polymers major Braskem (75%) and Mexican chemical producer Grupo Idesa (25%).

ETHANE FLOWING, TERMINAL IN Q1 2025
Pemex agreed with Braskem Idesa to supply the PE producer with a minimum volume of 30,000 barrels/day of ethane until the beginning of 2025, when Braskem Idesa plans to start up an import terminal in Coatzacoalcos to allow it to tap into exports out of the US Gulf Coast.

However, both parties sat to renegotiate that agreement after Pemex’s supply proved to be unstable, with credit rating agencies such as Fitch warning in 2023 of the “operational risk” such a deal with the state-owned major represented for Braskem Idesa.

The outcome of the renegotiation is starting to bear fruit, explained Plata diplomatically, without providing any details. He conceded, however, that to outsiders, Pemex’s businesses could look rather odd.

“We understand the positions of a public entity such as Pemex, and we understand its methods could look questionable to eyes outside our relationship,” said Plata.

“However, at Braskem Idesa we were confident that if we sat down with them to renegotiate, clearly stating what we require from each other, we could reach a point in the renegotiation which worked for us as a company and for the Mexican petrochemicals sector as a whole.”

Together with more stable supply from Pemex, Braskem Idesa also adopted the so-called Fast Track to import ethane while its own import terminal starts up. The terminal, known as Terminal Quimica Puerto Mexico (TQPM), closed the last financing details at the end of 2023.

Plata said the terminal would start up “without a doubt” by the beginning of 2025, adding that construction was 70% complete by the beginning of July.

According to Plata, with Pemex’s more stable ethane supply and the Fast Track system, Braskem Idesa is operating at 70-75% capacity utilization.

PE MARKET WOES
As a PE producer, Braskem Idesa remains exposed to the global downturn in polymers prices due to oversupplies. Plata said the downturn has been a “very hard” period for polymers producers, who may still face 12 more months of downturn.

In its latest financial statement for the first quarter, Braskem Idesa’s sales fell by 2%, year on year, and the company posted a net loss. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose.

Braskem Idesa (in $ million)	Q1 2024	Q1 2023	Change	Q4 2023	Change Q1 2024 vs Q4 2024
Sales	229	234	-2%	199	15%
Net profit/loss	-85	1	N/A	-101	-16%
EBITDA	36	26	36%	26	39%
PE sales volumes (in tonnes)	205,500	195,100	5.4%	174,500	17.8%

“We have had a very complex environment, with increased capacities in the US or China and with the war in Ukraine raising our production costs. We are undoubtedly in a down cycle and as a company we have tried to take care of our margins by controlling our costs and look closely at our investments,” said Plata.

He said he “would not have the answer” about what to do with China’s dumping of product around the world, a fact that in Brazil, the largest Latin American economy, has prompted chemicals trade group Abiquim to lobby hard for higher import tariffs in polymers, as well as dozens of other chemicals.

“Market analysts predict the current cycle may come to an end in the second half of 2025. Let’s hope so… This has been such a long crisis, aggravated by external factors such as wars and global convulsions, which undoubtedly also affect the industry, and the environment remains very uncertain.”

Front page picture: Braskem Idesa’s facilities in Coatzacoalcos
Source: Braskem Idesa

Interview article by Jonathan Lopez

Next week, ICIS will publish the second part of the interview with Plata, with his views on the challenges and opportunities for the chemicals and manufacturing sectors under the upcoming Administration led by President-Elect Claudia Sheinbaum amid the nearshoring trend