Global economy drives uncertainty in Latin American PVC markets

23 September 2011 23:14  [Source: ICIS news]

HOUSTON (ICIS)--Uncertainty prevailed in Latin American polyvinyl chloride (PVC) markets on concerns over the global economy, as turbulent financial markets around the world plunged during the week, sources said on Friday.

A weaker Mexican peso and Brazilian real (R) added to market fears in the region. Capital flight to the US, which is still perceived as a safe haven, is driving currency devaluations in Latin America.

Meanwhile, participants were taking a wait-and-see stance until the instability settles.

Direction was mixed in early in September, when prices rose in Colombia, dropped in Brazil, Mexico and Argentina and remained flat in Venezuela.

In Brazil, PVC domestic prices are at a minimum of $1,300/tonne (€962/tonne) DEL (delivered) for pipe-grade because of the weaker real, according to input from market sources. The current exchange rate stands at R1.89/$1 versus R1.60/$1 earlier in August.

Suppliers said pipe-grade PVC domestic prices were in a R2,400-2,500/tonne ($1,270-1,323/tonne) DEL range, although buyers heard prices as low as R2,200/tonne DEL for large volumes. Pipe-grade PVC prices were assessed at a minimum of $1,400/tonne DEL in early September, according to ICIS.

Brazilian antidumping duties for US material stand at 16% in addition to 14% import duties, with Colombian product subject to no antidumping and import duties, giving the latter a substantial competitive advantage.

Sources projected higher PVC prices in Brazil for October, as a result of the antidumping duties and the devaluation of the real against the US dollar. A producer was heard aiming for a 15% hike effective in October.

In Mexico, no decision has surfaced regarding October domestic prices, as participants monitor global financial uncertainties and crude oil volatility. However, higher prices are expected next month to at least partially offset the currency devaluation.

Meanwhile, demand has slowed as a result of market unrest, expectations of lower prices and inflationary pressures. The currency has devalued from Mexican pesos (Ps) 12.24/$1 on 19 August to Ps13.98/$1 on 23 September.

($1 = €0.74)
($1 = R1.89)

For more on PVC visit ICIS chemical intelligence

By: Ron Coifman
+1 713 525 2653

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