APLA '01: LatAm petchems adjusting to impact of 11 Sep

12 November 2001 17:10  [Source: ICIS news]

RIO DE JANEIRO (CNI)--The petrochemical industry in Latin America is adjusting to the global economic impact of the 11 September attacks on the US and appears stable, petrochemical executives told CNI here Monday.

Crude oil prices rose in September primarily in response to the threat of reduced supply related to military conflict in the Middle East, executives noted, and that crude oil increase affected prices for Latin American petrochemical feedstocks naphtha and natural gas.

But the situation appears to have stabilised, with attention now focussed on Opec’s plans to reduce output rather than on the direct impact of war in the region, they said.

Among industry executives attending the annual Latin American Petrochemicals Association (APLA) here today, Dow Chemicals' global vice president for olefins and feedstocks, Christopher Gann, said it is difficult to predict where feedstock prices might be going in the future.

"The market has appeared to react to the stance of Russia and other countries on Opec supply," he said.

He said that the uncertainties over feedstock prices are worrisome from the point of view of cost volatility, and that the industry has been forced to adjust by using futures and derivatives products and other hedge mechanisms.

"In the case of Dow, we always seek to have the capability to adjust to changing market conditions," Gann said.

Vice President Eduardo Praselj of Petroleos de Venezuela SA (PDVSA) said: "It is too early to tell what the impact of 11 September will be on the industry, but short term volatility has increased."

According to Praselj, the industry by and large in Latin America has adopted a "wait and see" approach to the impact of military conflict on the price of fuels and on the global economic situation. That approach has included building in safeguards and hedges as well as a review of longer term plans for investment, which in general have become more cautious.

"September 11 brought to the forefront something that was already underway, namely a recession in the US and economic troubles in Asia," he said. The US and Asia represent some of the largest centres of demand for petrochemical products in the world, and lower consumption there is worrisome to some sources in the Latin American chemicals industry.

"The attacks also introduced a new element of uncertainty which might have an impact, but people will overcome that," Praselj said.

He cautioned that one consequence of the adjustments taking place in the industry, which include a greater emphasis in the short term on financial performance rather than operational performance, is that such an approach tends to detract from good long term management of the petrochemical business.

"The industry at the core must always depend on its products and its clients," he said.

The APLA conference continues through tomorrow.

By: Jack Waggoner
+1 713 525 2653

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