The plastic equipment, materials and resins sector in Colombia has excellent growth potential for three reasons: it is an untapped market, it is competitive internationally and it has low investment barriers. The plastics sector is one of the most important Colombian industrial clusters because it is a value added export segment. Including equipment, materials and resins, the plastics sector represented US$2.2 billion in 2008, with a growth rate of 14.2 percent. This market represents approximately one percent of the total Colombian GDP.
The sector reflects the growth of the Colombian economy which peaked in 2007 at 7.7%, showing steady increases in 2005 of 4.7% and 6.8% in 2006. This positive growth was due to improved security conditions and high commodity prices for principal exports such as oil and coal, which attracted greater Foreign Direct Investment (FDI) and stimulated internal demand for goods and services. The global financial crisis began to affect the Colombian economy in 2008 when GDP growth dropped to 2.5% despite FDI reaching a record level of US$10.5 billion dollars. The outlook for GDP growth in 2009 is flat or even negative one percent and FDI is expected to decline sharply as well.
The United States is the market leader followed by Mexico, South Korea and Brazil. The implementation of the U.S.-Colombia Trade Promotion Agreement (TPA) will have a positive effect on the industry as costs related to U.S. imports will decline and thereby make these products even more competitive internally and externally. Colombia will eliminate tariffs on 60 percent of resin and manufactured plastic exports immediately upon implementation of the agreement. Tariffs on another four percent of exports will be eliminated over five years, and tariffs on 30 percent will be eliminated over seven years. Only six percent of U.S. plastics exports will be subject to ten-year staging in Colombia.
In Colombia the plastics industry uses a wide variety of resins. Domestic producers account for 92% of the resins consumption. Resins produced in Colombia and imported include:
• Low Density Polyethylene (LDPE)
• Linear Low Density Polyethylene (LLDPE)
• Medium Density Polyethylene (MDPE)
• High-Density Polyethylene (HDPE)
• Some Methallocenes
• Homopolymer of Propylene
• Copolymers of Propylene
• Suspensions and Emulsion PVC’s
• All purpose and high impact Polystyrenes
• Polyethylene Terephtalate resins for films and sheets (PET)
Colombian industry consumed 714,000 tons of plastic resins in 2005. In 2006, consumption grew 10% reaching 785,000 tons and in 2007 it reached 876,000 tons which represents an annual growth rate of 11.6%. The demand for resins in Colombia in 2007 was concentrated in Polyethylene (34%), Propylene Polymers (25%), Vinyl Polychlorides (21%), Polystyrenes (6.6%) and PET (5.8%).
Colombia’s local production of conventional Polyethylene (LDPE) is supplied by a single plant with a production capacity of 56,000 tons per year. Imports cover the balance of the demand. Local production of resins such as Polyvinyl Chloride (PVC) is sufficient to fulfill most of the domestic demand that reached 182,000 tons in 2007. The same is true for Polystyrenes. Likewise, Polyethylene Terephtalate (PET) resins used to manufacture disposable and non-disposables containers are manufactured in Colombia in sufficient quantity to cover market demand. The total local production figures increased marginally each year and were approximately US$1.6 billion (2008), US$1.4 billion (2007) and US$1.2 billion (2006). In sum, between 2006 and 2008, Colombia’s local industry supplied 50% of the market demand. The other 50% was covered by imports, which creates a significant market opportunity for U.S. suppliers.
By Juan Antía