Dow to raise Brazil October PE prices by $100/tonne

26 September 2012 23:20  [Source: ICIS news]

HOUSTON (ICIS)--Dow Chemical is seeking to increase October polyethylene (PE) prices in Brazil by reais (R) 200/tonne ($100/tonne, €77/tonne), a company source said on Wednesday.

The increase is in addition to a R450/tonne price increase pushed through August and September for all grades of PE.

Several reasons were given to justify the increase.

The ethane-propane cracker in Rio de Janeiro is running at lower rates because of reduced availability of feedstock.

Petrobras's nearby refinery in Rio de Janeiro is down, reducing the supply of feedstock to the cracker and reducing the production of PE at the site.

In Rio de Janeiro, Braskem produces high density PE (HDPE), linear low density PE (LLDPE) and Metapol, the source said.

Braskem did not immediately answer inquiries about the status of its Rio de Janeiro PE plant.

Transformers catering to the automotive industry, household products and food packaging are operating at high rates and are believed to hold low inventory levels.

Dow’s own inventories have been reduced by unexpected events in some of its production sites and the effects of Hurricane Isaac.

Furthermore, the price of naphtha has increased significantly in the last 90 days, and the impact on Brazil’s Braskem costs is estimated to be about 9%, the source said.

However, naphtha prices have lost some of those gains in September after peaking in late August, according to ICIS data.

Other reasons cited include PE imports falling by 24% year on year. Market share of imported (non-Dow) product into Brazil is less than 10%, the source said.

In the US, PE producers have announced October price increases amounting to $110/tonne, although it remains to be seen how much of that increase will take hold.

There are fewer offers from overseas markets as a result of lower domestic prices, the removal of tax credits and a weaker local currency versus the US dollar, the source said.

Brazilian buyers have seen an onslaught of PE price increases in the last couple of months, but lack viable alternatives to contest them.

As a result, producers are having a strong month in September and would like to continue improving margins in October.

It is unclear whether Braskem will seek additional price increases in October, but Dow’s announcement makes this possibility more likely.

($1 = R2.03)
($1 = €0.77)

By: George Martin
+1 713 525 2653

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