FocusLatin American Sept PE poised to rise on supply, feedstock

24 August 2012 16:15  [Source: ICIS news]

HOUSTON (ICIS)--Tight supplies of polyethylene (PE) and rising feedstock costs are paving the way for price increases in South America, effective on 1 September, market sources said.

Dow Chemical plans to increase prices in Chile, Peru and Argentina by $100/tonne (€80/tonne), effective on 1 September, a company source said.

The company is also pushing a reais (R) 150/tonne ($74/tonne) increase in Brazil to take place in September.

In Chile, domestic PE production provides only low density PE (LDPE) at the 46,000 tonne/year plant in Talcahuano.

Dow has seen production diminished this year by shortages of ethylene from ENAP, the local refiner in Chile.

Domestic prices of LDPE in Chile are currently in the range of $1,600-1,750/tonne DEL (delivered), according to ICIS.

Supply has tightened in the US Gulf bringing, a 5 cent/lb ($110/tonne) price increase to August negotiations in the US and Mexico.

Some buyers have negotiated a split of the increase, accepting part in August, with the remainder to take hold in September.

Offers from Asia and the Middle East to South American destinations have declined in recent weeks, but are still a viable possibility for the region.

Another factor that is supporting September price increases is tight availability of HDPE grades caused by plant turnarounds.

The 120,000 tonne/year HDPE plant in Argentina is currently down until the end of the week on programmed maintenance.

In Brazil, HDPE offers have declined as unscheduled maintenance has taken place at one of the country's plants, a source said.

The plant can supply customers in Brazil and the southern cone of South America, the source said. However, it will not be able to supply overseas and Andean customers.

Producer sources have not returned calls inquiring about the status of HDPE production.

In addition, Mexico’s Pemex will stop the 100,000 tonne/year Asahi HDPE injection plant on 25 August for programmed maintenance. The procedure is expected to last 30 days, affecting two production trains at the facility.

Higher feedstock costs are also pressuring producers to increase September polymer prices to restore margins.

Ethylene prices have increased by 7 cents/lb in the last two weeks and had reached 57.75 cents/lb.

This could potentially generate additional price increases before September is over.

Production of ethylene has diminished in Argentina because, as happens every winter, supplies of natural gas to industrial users was cut to ensure supplies for residential heating. The drop in ethylene production has caused shortages in polymer production.

Brazil’s Braskem is implementing steep increases in August, part of which may see implementation in September, as the Brazilian market struggles to absorb the hike.

Demand is stable in the region because inventories throughout the chain are low, and September is historically a busy month for PE sales.

But transformers caution that there is no growth in demand, and they are working hard to maintain sales levels.

Mexico’s Pemex had a large price increase in August, and it has not yet announced plans for September. Import prices have also gone up, and producers may seek an additional increase in September, buyers said.

Prices are stable in Venezuela and likely to remain unchanged until the presidential elections in October.

Colombian PE prices follow benchmarks of international markets. As a result, they are expected to follow suit.

However, considering that PE demand is not strong in international markets, price trends for October remain vague.

($1 = €0.80)
($1 = R2.02)

By: George Martin
+1 713 525 2653

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