VINACHEM

An interim trade accord between Chile and the EU kicked off on 1 February and the 27-country bloc is not shy about its main objective: get preferential access to the Latin American nation’s vast resources of raw materials.

Chemicals players on both sides have welcomed the trade deal, although trade in chemicals is likely to remain limited as Chile’s natural trading partners in the sector have always been the US and Asia.

Under the terms of the free trade agreement (FTA), 99.9% of EU exports will enter Chile duty-free, whilst EU firms gain equal treatment with domestic companies across Chilean service sectors, including finance, telecommunications, maritime transport, and delivery services.

European businesses bidding for government contracts in Chile, Latin America’s fifth-largest economy, will receive enhanced market access through streamlined procurement procedures.

CHEMICALS: COLATERAL WINNERS?

While chemicals companies in Chile and the EU may not feel much of an impact from the trade deal, chemicals players in the 20-million population Latin American economy showed relief that closer ties are being developed with the EU, rather than China.

In 2023, the EU enjoyed a trade surplus in chemicals with Chile of €120 million, the result of EU exporting €770 million worth of chemicals to Chile, while the latter’s exports to the EU stood at €649 million, according to figures from Europe-wide chemicals trade group Cefic.

In a written response to ICIS, a spokesperson for Cefic said three quarters of the EU exports to Chile were consumer chemicals and specialties. In the case of Chile’s exports to the EU, 80% of them were of inorganic chemicals.

Cefic said that while chemicals are not at the center of the trade deal, lithium and other minerals as well as metals are, and that could ultimately benefit the chemicals industry if the EU was to achieve a (green) industrial revival.

In fact, the interim deal which came into effect on 1 February, which replaced a previous association agreement, included changes and updates to energy and raw materials: the association agreement came into force in 2002: hydrogen and lithium existed already then, but were little spoken about.

On the one hand, EU chemicals firms cannot wait to see their energy bills fall, and more so following the 2022 energy and natural gas shock after Russia invaded Ukraine.

Chile’s prime position to produce green hydrogen – strong sunlight and winds for the renewable energy, and abundant water – could turn the country into an exporter of the gas upon which most hopes to decarbonize the industrial sectors have been placed.

Green energies such as hydrogen have the potential to lower the EU’s high energy bill. Several European companies have announced plans to build green hydrogen plants in Latin America – where costs are lower than at home – aiming to export to Europe most of the hydrogen produced.

On the other hand, EU manufacturers are anxious to secure stable supply of the minerals they require to make the green transition the EU itself is pushing them to implement. By having access to those minerals, manufacturing in the EU could see a revival and indirectly push up demand for chemicals.

“While EU-Chile chemicals trade is not major in comparison with other trade relationships, trade with Chile is important, especially due to Chile’s leading position in the supply of certain raw materials,” said the Cefic spokesperson.

“Chile is a key supplier of lithium and copper for the EU, two metals that are key for the EU chemicals industry in applications like cathode active materials for EVs [electric vehicles] or catalysts. In the future, Chile’s hydrogen exports can also become even more relevant due to the EU’s green transition.”

In terms of polymers, Chile’s annual consumption stands at around 1.3 million tonnes, and the country’s output is far from covering even half of that, according to figures by the country’s plastics trade group Asipla.

Local production of polymers, said Asipla, stands at 260,000 tonnes, comprising 200,000 tonnes from recycling and approximately 60,000 tonnes of virgin material. Some company names include Petroquim, Chile’s sole producer of polypropylene (PP), or Styropec producing polystyrene (PS) and expandable polystyrene (EPS).

Magdalena Balcells is Asipla’s CEO, and one of the most no-nonsense lobbyists this correspondent has met in almost two years in Latin America. In June last year, her straight talk at an industry event captivated the audience – although that audience was, of course, friendly terrain.

“Despite China’s transition from petrochemical importer to exporter in the past few years, producers like Petroquim have been able to maintain their market position through established client relationships built on trust, certification, and rigor: advantages which are less predictable with Chinese suppliers,” said Balcells.

In this interview, like in a previous one in 2024, Balcells insisted Chile’s policymakers tended to think the country is a developed economy where recycling policies could be easy to implement. This push, however, has prompted many plastic companies to get a grip with sustainability, she said, and that can only be a good thing.

On trade relations, Asipla’s CEO is crystal clear on her feelings about China. Asked whether a deal with the EU, any deal, will always be preferable to one with China, she said:

“Always preferable. The EU and Chile share a common language, a common way of doing business and trade. Chile’s OECD membership facilitates European trade relations. With China, everything becomes… very difficult,” said Balcells.

“Chinese exports of industrial goods imports continue to present a significant challenge in terms of price competition, across many industrial sectors, in Chile and the wider Latin America. But for Chile, the EU is a very important commercial partner and one with which it is still relatively easy to operate. This FTA should be a positive.”

In a written response to ICIS, the head of logistics at Petroquim, Jorge Gaete, confirmed the company does not expect a great impact from the EU-Chile trade deal, but welcomed it nevertheless as it should benefit the Chilean economy as whole and partly protect it from the new protectionist wave.

“This FTA is not of great importance for the chemical industry, and we don’t expect it to represent major benefits for Petroquim. This trade deal, however, is important for the issue of minerals such as lithium and copper, which are the great reserves Chile has,” said Gaete.

“Moreover, now with the [US President Donald] Trump government and all the reforms he is implementing or planning to implement, including the increases in import tariffs, I believe that we as a country will benefit from the agreement with the EU.”

Last week, Trump mentioned tariffs on metals, including copper, which would hit the Chilean economy hard: the country is the second largest producer of copper globally, and its exports are a key employment- and foreign reserves-generator.

Chile’s chemicals trade group Asiquim did not immediately respond to a request for comment.  – Source: ICIS