FocusVenezuela resins stay tight, demand grows

15 July 2008 23:45  [Source: ICIS news]

By Jasmina Kelemen

CARACAS (ICIS news)--Venezuelan transformers remain unable to meet the nation's growing demand for plastic goods despite the state's efforts to supply them with resins, an industry leader said on Tuesday.

"We can attest to the many efforts done by Pequiven to import resins in the quantities needed by our industry," said Carlos Celis, president of the local plastics association, AVIPLA.  But "those efforts have not fulfilled demand".

Also, much of the product is being imported at high international prices, raising prices for local transformers and further undercutting their competitiveness.

"Pequiven has had to import a big chunk of [the resins] at prices that do not reflect the best commercial and price conditions; far from it," said Celis, who is also president of a local food packaging firm.

"At this precise moment in time, the Venezuelan plastics industry is paying the highest price in the region for high and low-density polyethylene," he said.

Despite an uptick in imports, local resins supplies are still falling short. Supplies of high-density polyethylene (HDPE) are about 5-10% short of demand, said Celis.

Low-density polyethylene (LDPE) is running a deficit of almost 20%. Polypropylene (PP) supplies are getting tighter, "becoming increasingly scary," he said.

Many transformers are trying to substitute LDPE with linear polyethylene (LPE) and other linears, which remain in strong supply, "but you can only go so far with it," said Celis.

Polyvinyl chloride (PVC) is also well supplied but the government's programme to build low-cost, plastic homes, referred to locally as the Petrocasa initiative, is rapidly eating into that market's spare capacity.

Celis's sobering outlook differs from one presented earlier this month by Pequiven president Saul Ameliach.

At a meeting with the plastics industry in early July, Ameliach said much of the industry's growth in recent years has been supported by the company's commitment to supply the local industry.

In 2008, demand for plastic resins is expected to grow to 630,000 tonnes, a 26% increase from last year, said Ameliach.

Breaking it down by market, PVC demand is expected to reach 98,000 tonnes, polyethylene (PE) demand is foreseen at 384,000 tonnes, and PP at 148,000 tonnes.

"This reality has been [supported] by Pequiven policies, which aligned with the state,  has allowed the national transformer sector to obtain the best commercial conditions and prices and generated 20% growth in polymer consumption over the years," said Ameliach.

Celis attributed his sector's "explosive growth" to expansionist government policies that have increased internal consumption for just about everything and agreed the state petrochemical producer has played an important role in fostering growth.

But Celis disagreed with Ameliach's assessment of market conditions.

"The plastics industry at this moment does not have the best commercial and price conditions. At a certain moment in the recent past we did… but that is not the case anymore," he said.

Beset with operational problems and lacking capacity to satisfy local demand, Pequiven has increasingly had to rely on imports to fill the gap, causing more exposure to international price shifts.

Braskem, South America's largest supplier of petrochemicals, announced last month it would supply Pequiven with 60,000 tonnes a year of PE and PP until their joint industrial project in Venezuela comes online.

Celis said the agreement is a "step in the right direction," but that Venezuela's heavily regulated market would continue to constrain imports. Easing currency and import controls is the "only way" to overcome the tight supply situation, he said.

"Overall, we do not foresee the end of shortages in the short term."

To discuss issues facing the chemical industry go to ICIS connect
For more on the Braskem/Pequiven joint project visit ICIS plants and projects
For more on PP, PE and PVC visit ICIS chemical intelligence

By: Jasmina Kelemen
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