05-11-2016

Taking Things Slower: Latin American Products Imports

Clarkson

After the global economic downturn in 2008-09, fast growth in Latin American products imports provided a welcome support to oil products trade volumes, and between 2008 and 2015 imports into the region rose from 1.4m bpd to 2.4m bpd. However, the honeymoon period of this budding romance looks to be over and Latin America is now taking things more slowly with regards to its products imports.

A Lustful Latin Affair

Products imports into Latin American nations (including Mexico, Central American and Caribbean) have been an important driver of seaborne products trade growth in recent years. Imports into the region represented 9% of global imports in 2014, but accounted for around 30% of the increase in global products imports in the previous six years. This was supported by increased oil demand in the region, which rose by 0.9m bpd between 2008 and 2014, and a sharp decline in refinery throughput during the same period. However, more recently growth in Latin American products imports has slowed, to an average of 2% p.a. in 2015-16, compared to 10% p.a. in 2009-14.

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Swooning In Sao Paulo

The major Latin American importers of oil products are Brazil and Mexico, who accounted for around 50% of total Latin American products imports in 2015. The key driver of slower growth in the region’s imports in recent years has been weak demand in Brazil. Following an average increase of 30% p.a. in 2010-14, Brazilian products imports have recently come under pressure. This is partly due to the weak oil price placing pressure on the Brazilian economy, and subsequently oil demand (which fell 2% in 2015). As a result, Brazilian products imports fell by 15% in 2015 to stand at 0.6m bpd. However, this decline may have been even more acute if Brazilian refinery throughput had not fallen by 3% in 2015, despite additional capacity coming online.

By contrast, growth in Mexican product imports has picked up in recent years, reaching 15% in 2015, with further expansion expected in full year 2016. This has been largely supported by firm gasoline demand and weakening refinery throughput due to lack of investment, which has suppressed utilisation levels to around 60% in the first eight months of 2016. Meanwhile, products imports into the rest of Latin America have continued to expand firmly, by an expected 6% p.a. in 2015-16 to stand at 1.3m bpd in 2016.

A Regional Romance?

While overall growth in Latin American imports was limited in 2015, this was not the case across all routes. Trade on the key US-Latin America route, which accounts for the vast majority of Latin American products imports, rose by around 10% to 2.1m bpd. However, volume growth on this route is expected to be more limited this year.

So, although on an aggregate level Latin American products imports have grown at a more limited pace in recent years, largely due to softer Brazilian imports, weak refinery activity has limited some of the downside. Nevertheless, with oil demand growth in the region expected to remain limited next year, it seems unlikely that in the short-term things will heat up for Latin America’s products imports.

Source: Clarksons

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