
Reliance on Pemex leads to credit downgrade for Braskem Idesa

Mexican petrochemicals firm Braskem Idesa has had its credit rating downgraded further into junk territory, mostly due to its ties to Pemex.
The inability of Pemex to supply Braskem Idesa with sufficient ethane has meant the company’s petrochemical operations at its Etileno XXI plant in Veracruz state are operating well below capacity.
“Pemex's lack of investments has resulted in a decline in the production, including ethane and natural gas,” Fitch Ratings said in its downgrade notice on April 22.
“Braskem Idesa and Pemex's ethane contract considers 66,000b/d of supply of ethane, which the company has not been able to deliver: it is currently able to only provide about 49,000b/d,” Fitch said.
Fitch cut Braskem Idesa’s local currency issuer default rating to ‘BB-' from ‘BB’. It also revised the company’s outlook from stable to negative.
Fitch explained that the outlook on Braskem Idesa’s credit rating “could be revised to stable if, during the next 12-18 months, Pemex's supply [of] ethane remains consistently above 74%.”
This, Fitch said, would allow utilization rates at Braskem Idesa’s plant “to remain above 86% and to maintain healthy profitability and operating cash flow levels.”
BRASKEM IDESA’S PLAN FOR EXPANDING IMPORTS FROM US
As Mexico’s polyethylene market came under pressure in 2019, due both to lower fuel supplies from Pemex and shrinking industrial demand amid an economic slowdown, Braskem Idesa quickly worked out what Fitch referred to as a “fast-track operation to import ethane” from the US.
Source: BNamericas project database
The US$4mn capex project, which resulted in the first fuel imports to Mexico in February, initially enabled Braskem Idesa to import 12,800b/d of ethane.
Fitch forecasts that ethane imports may “reach up to 16,000b/d by 2022,” amounting to 24% of the company’s total needs.
Operationally, Fitch sees the company as healthy in many respects, with high margins compared to Latin American petrochemical peers Alpek and Orbia Advance.
However, the company is currently snared by insufficient supplies from Pemex. And, as Fitch noted, “Braskem Idesa has a higher exposure to supply/contract risks compared to its peers.”
CONTRACT UNDER POLITICAL PRESSURE
Soon after Braskem Idesa began importing ethane, Mexican President Andrés Manuel López Obrador (AMLO) implied that the company, which is a spinoff of Brazilian conglomerate Odebrecht, had won its 20-year contract with Pemex by illicit means.
Braskem Idesa responded that the company obtained its Pemex contract through “an international and transparent auction held by the Mexican government.”
The spat stirred rumors that AMLO could try and nix the agreement with Pemex, going against his longstanding pledge that all contracts will be honored. Braskem Idesa’s were bonds sold over the following days, among other signs of growing anxiety.
Even under the currently depressed COVID-19 environment, Fitch indicates that, based on the success of the company’s US ethane imports, it could raise the utilization rate at Etileno XXI to “around 91% by 2021.”
But, Braskem Idesa operates from “a weaker position” than other petrochemical firms, Fitch noted, due in part to its “exposure to a single asset and product [lack of] geographic diversification.”
Photo credit: Braskem Idesa
Subscribe to the most trusted business intelligence platform in Latin America. Let us show you our solutions for Suppliers, Contractors, Operators, Government, Legal, Financial and Insurance.
News in: Petrochemicals (Mexico)

Reliance on Pemex leads to credit downgrade for Braskem Idesa
Petrochemical producer Braskem Idesa has had its credit downgraded, due to its dependence on Pemex for ethane.

Despite COVID-19, Latin America has plenty of project opportunities
Our editorial team is highlighting project tenders, concession auctions, privatizations and other opportunities set to take place in the next few w...
Subscribe to Latin America’s most trusted business intelligence platform.
Other projects in: Petrochemicals
Get critical information about thousands of Petrochemicals projects in Latin America: what stages they're in, capex, related companies, contacts and more.
- Project: E-methanol plant (eFuels Project)
- Current stage:
- Updated:
3 weeks ago
- Project: Ethane Maritime Terminal in Coatzacoalcos/Nanchital
- Current stage:
- Updated:
1 month ago
- Project: Cellulosic ethanol plant (E2G) in Bonfim
- Current stage:
- Updated:
1 month ago
- Project: Coking Plant at the Salina Cruz Refinery
- Current stage:
- Updated:
1 month ago
- Project: Production capacity maintenance of ethane II derivatives of Morelos petrochemical complex
- Current stage:
- Updated:
2 months ago
- Project: Operational Adequacy of the Tailings Deposit and Optimization of the Sierra Gorda Project
- Current stage:
- Updated:
2 months ago
- Project: Polo GasLub (ex Comperj)
- Current stage:
- Updated:
3 months ago
- Project: Tambor Green Hydrogen Hub
- Current stage:
- Updated:
4 months ago
- Project: Ácido Acrílico Camaçari Plant
- Current stage:
- Updated:
4 months ago
- Project: Methanol to Polyolefins Project
- Current stage:
- Updated:
4 months ago
Other companies in: Petrochemicals (Mexico)
Get critical information about thousands of Petrochemicals companies in Latin America: their projects, contacts, shareholders, related news and more.
- Company: Pochteca de Costa Rica, S.A.
- Company: Grupo Kuo S.A.B. de C.V.  (Kuo)
-
Grupo Kuo S.A.B. de C.V. is a Mexican chemical, automotive and food conglomerate founded in 1973. Its chemicals area comprises the operations of Industrias Negromex, Resirene, N...
- Company: RETER Comercializadora de Productos Petroquímicos S.A. de C.V.  (RETER Comercializadora de Productos Petroquímicos)
-
RETER Comercializadora de Productos Petroquímicos started operating in 1966 México under the name of Derivados Maleicos S.A. de C.V. with the purpose of fabricating maleic anhyd...
- Company: MES Tecnología en Servicios y Energía S.A. de C.V. (BP México)  (MES Tecnología en Servicios y Energía)
-
Mexican company MES Tecnología en Servicios y Energía S.A. de C.V., is a subsidiary of multinational oil & gas company BP plc, and undertakes the marketing activities and distri...
- Company: Nova Chemicals
- Company: Grupo Infra
-
Grupo Infra is a mexican conglomerate of companies engaged in the production, sale and distribution of different kind of gases, such as cryogenic, industrial, high-purity, speci...
- Company: Eucomex, S.A. de C.V.  (Euclid Mexico)
-
Euclid México provides chemical products for uses in civil engineering projects and industrial sites. Euclid México has been operating in Mexico for over 22 years and its produc...
- Company: ProMexico
-
ProMexico serves as the bridging entity between the Mexican market and the world regarding both imports and exports. Through its network of 48 offices in 31 countries, ProMexico...
- Company: Proyectos Industriales Independientes Nuevo Milenio  (Proyectos Nuevo Milenio)
-
Proyectos Nuevo Milenio designs, makes and sells equipment and comprehensive systems for the management of fluids. Its experience in engineering and construction allows it to pr...