FocusVenezuelan currency controls hamper resin imports

19 October 2012 22:33  [Source: ICIS news]

HOUSTON (ICIS)--Venezuelan plastic processors who need to import raw materials continue to face long delays to get US dollars to make their purchases, market participants said.

The allocation of dollars to pay for imports is controlled by a government agency, the Comision de Administracion de Divisas (Cadivi).

Cadivi has taken several weeks to grant authorisation to disburse dollars, and those delays are affecting domestic polystyrene (PS) producer Estirenos del Zulia (Estizulia).

Estizulia imports styrene and butadiene rubber (BR) because Venezuela does not produce the feedstock locally.

Initially, poorly timed shipments of raw materials caused the PS plant to stop production several times. The system has improved in the last year with better timed arrivals of raw materials and larger emergency stocks.

Meanwhile, Estizulia found a way to bypass Cadivi by relying on state-owned Pequiven to supply feedstock.

However, going through Pequiven has done little to reduce costs. As a result, Venezuela's PS prices are nearly twice as high as international levels.

The high PS prices can persist because Venezuela's market is relatively closed.

Buyers of other plastic resins also have encountered delays in dealing with Cadivi. The delays have affected mostly imports of linear low density polyethylene (LLDPE) and low density polyethylene (LDPE), two grades that are chronically in short supply.

Venezuela's sole LLDPE plant is currently down, a transformer said, and market participants are being supplied from existing inventories. However, orders routinely produce short deliveries.

The Cadivi delays have extended to other industries beyond petrochemicals.

Companies that make products whose prices are controlled by the state are also complaining about currency delays, according to the local newspaper El Universal.

Cadivi is taking more than 200 days to grant authorisation to disburse dollars, with some delays extending 250 days, according to the manager of a company covered by the state price controls, according to media reports.

Currently, there are shortages of toilet paper, sanitary towels, diapers and some cleaning products, according to media reports.

Meanwhile, Venezuela continues to contend with a shortage of resins. Venezuelan demand has grown in the last five years, while production has mostly remained stagnant.

Only polypropylene (PP) production has increased − by 34,000 tonnes/year to 144,000 tonnes/year.

However, occasional technical problems have kept production levels below pre-expansion levels.

Ambitious projects to build a cracker and new polyolefin plants have been pending for years.

Unless Venezuela increases capacity, industrial users and transformers will continue to face shortages of plastic resins and delays in their dollar purchases.

By: George Martin
+1 713 525 2653

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