Braskem Idesa Partially Restarts Mexico PE Output, Starts Legal Action Over Ethane
2021-01-08    [Source:]

Braskem Idesa has partially resumed production of polyethylene (PE) at its Ethylene XXI complex in Mexico, after it shut down operations when its supply of natural gas was cut off, one of the partners of the joint venture said on Thursday.

The partner, Braskem, said it resumed partial production based on an experimental business model. It did not provide any details about the business model, and it did not disclose the operating rate of Ethylene XXI.

Braskem said it does not know when Ethylene XXI could resume full operations.

Back on 2 December, Braskem Idesa said it had started to shut down operations at the complex because Mexico notified the joint venture that it would be cutting off its natural gas.

The joint venture subsequently declared force majeure on PE.

Braskem Idesa is the main domestic producer of PE in Mexico, and Ethylene XXI produced high-density PE (HDPE) and low-density PE (LDPE). The cracker at the complex relies on ethane to produce the ethylene needed for the plastic plants.

Braskem Idesa has an ethane supply contract with the Mexican state producer Pemex, and that contract has become the centre of a dispute between the joint venture and the president of Mexico, Andres Manuel Lopez Obrador.

Lopez Obrador, known as AMLO, alleges that the contract obliges Pemex to sell ethane to Braskem Idesa at a steep discount, costing the country millions. He has repeatedly called for the cancellation of the ethane contract.

During a press conference in December, AMLO said Mexico ended the gas shipments because of the ethane contract.

Braskem said it has started legal measures in regards to the ethane contract to enforce the joint venture's legal and contractual rights and to protect the investment it made in Ethylene XXI.

Braskem did not specify the nature of the legal measures nor their venue. The company did say that the measures include a remediation and negotiation period.

The company reaffirmed its commitment to find a way to resolve Mexico's ethane shortage, which it says is at the root of the dispute between the joint venture and the Mexican president.

Braskem owns a 75% stake in Braskem Idesa. The remaining stake is owned by the Mexican producer Grupo Idesa.

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